Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ACCOUNTING STANDARDS :: cpt :: VAT Audit :: form 3cd :: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TAX RATES - GOODS TAXABLE @ 4% :: TDS :: due date for vat payment :: empanelment :: ACCOUNTING STANDARD :: list of goods taxed at 4% :: VAT RATES :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company
 
 
ICAI »
 Extension of last date for submission of application forms for Information Systems Audit-Assessment Test (ISA-AT), upto 10th December 2016.
 Four Weeks Residential Programme to be held from 28th January, 2017 to 24th February, 2017 at Centre of Excellence, Hyderabad for Women Participants only.
 CPE Events 5th December - 10th December 2016
 Here's how your employer can help you save tax
 Introduction of facility for online submission of requests for issue of duplicate mark sheets/pass certificates.
 ICAI invites suggestions on revised Model GST Law
 Guidance Note on Reports in Company Prospectuses (Revised 2016) issued by the Auditing and Assurance Standards Board
 President's Message - December 2016
 Ind AS Transition Facilitation Group (ITFG) Clarification Bulletin 6
 Announcement regarding registration as an Insolvency Professional with the Indian Institute of Insolvency Professionals of ICAI
 CPE Events 28th November - 3th November 2016

Exposure Draft of the proposed Accounting Standard for Local Bodies (ASLB) 3, 'Accounting Policies, Changes in Accounting Estimates and Errors'
April, 28th 2014
                EXPOSURE DRAFT
   Accounting Standard for Local Bodies (ASLB) 3


Accounting Policies, Changes in Accounting
          Estimates and Errors
   (Based on corresponding IPSAS 3)


     (Last date of comments: June 10, 2014)




                      Issued by
 The Committee on Accounting Standards for Local Bodies
         The Institute of Chartered Accountants of India
                  (Set up by an Act of Parliament)
                         New Delhi
                                             Exposure Draft
           Accounting Standard for Local Bodies (ASLB)
Accounting Policies, Changes in Accounting Estimates
                      and Errors
Contents
                                                                                                               Paragraphs
Objective ..................................................................................................... 1­2
Scope .......................................................................................................... 3­6
Definitions .................................................................................................. 7­8
        Materiality ......................................................................................... 8
Accounting Policies .................................................................................... 9­36
        Selection and Application of Accounting Policies ............................. 9­15
        Consistency of Accounting Policies .................................................. 16
        Changes in Accounting Policies ....................................................... 17­36
                  Applying Changes in Accounting Policies .......................... 24­32
                             Retrospective Application ....................................                       27
                             Limitations on Retrospective Application ......                                      28­32
                  Disclosure ............................................................................... 33­36
Changes in Accounting Estimates .............................................................. 37­45
        Disclosure .......................................................................................... 44­45
Errors .......................................................................................................... 46­54
        Disclosure of Prior Period Errors ....................................................... 54
Impracticability in Respect of Retrospective Application ............................ 55­58
        Effective Date ..................................................................................... 59­60

Appendices:
Annexure 1: Difference with corresponding IPSAS 3, `Accounting Policies, Changes in
Accounting Estimates and Errors'

Annexure 2: Difference with corresponding existing AS 5, `Net Profit or Loss for the
Period, Prior Period Items and Changes in Accounting Policies'
                                            Exposure Draft

                  Accounting Standard for Local Bodies (ASLB) 3

    Accounting Policies, Changes in Accounting Estimates and Errors

                              INVITATION TO COMMENTS
The Committee on Accounting Standards for Local Bodies of the Institute of Chartered
Accountants of India invites comments on any aspect of this Exposure Draft of the
Accounting Standard for Local Bodies (ASLB) 3, `Accounting Policies, Changes in
Accounting Estimates and Errors'. Comments are most helpful if they indicate the
specific paragraph or group of paragraphs to which they relate, contain a clear rationale
and, where applicable, provide a suggestion for alternative wording.
Comments should be submitted in writing to the Secretary, Committee on Accounting
Standards for Local Bodies, The Institute of Chartered Accountants of India, ICAI
Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi ­ 110 002, so as to be
received not later than June 10, 2014. Comments can also be sent by e-mail at
caslb@icai.in.

                                            Exposure Draft

                  Accounting Standard for Local Bodies (ASLB) 3

    Accounting Policies, Changes in Accounting Estimates and Errors

(This Accounting Standard includes paragraphs set in bold italic type and plain type,
which have equal authority. Paragraphs in bold italic type indicate the main principles.
This Accounting Standard should be read in the context of its objective and the Preface to
the Accounting Standards for Local Bodies1)

The Accounting Standard for Local Bodies (ASLB) 3, `Accounting Policies, Changes in
Accounting Estimates and Errors', issued by the Council of the Institute of Chartered
Accountants of India, will be recommendatory in nature in the initial years for use by the
local bodies. This Standard will be mandatory for Local Bodies in a State from the date
specified in this regard by the State Government concerned2.

The following is the text of the Accounting Standard for Local Bodies

Objective
  1. The objective of this Standard is to prescribe the criteria for selecting and changing
      accounting policies, together with the (a) accounting treatment and disclosure of
      changes in accounting policies, (b) changes in accounting estimates, and (c) the
      corrections of errors. This Standard is intended to enhance the relevance and
      reliability of an entity's financial statements, and the comparability of those
      financial statements over time and with the financial statements of other entities.


1
  Attention is specifically drawn to paragraph 4.2 of the `Preface to the Accounting Standards for Local Bodies',
according to which Accounting Standards are intended to apply only to items which are material.
2
  Reference may be made to the paragraph 7.1 of the `Preface to the Accounting Standards for Local Bodies'
providing the discussion on the compliance with the Accounting Standards for Local Bodies.
      2. Disclosure requirements for accounting policies, except those for changes in
         accounting policies, are set out in ASLB 1, 'Presentation of Financial Statements'.

Scope

      3. This Standard should be applied in selecting and applying accounting
         policies, and accounting for changes in accounting policies, changes in
         accounting estimates, and corrections of prior period errors.

      4. [Refer to Appendix 1]

      5. This Standard applies to entities described as local bodies in the Preface to
         the Accounting Standards for Local Bodies3.

      6. [Refer to Appendix 1]

Definitions

      7. The following terms are used in this Standard with the meanings specified:

           Accounting policies are the specific principles, bases, conventions, rules,
           and practices applied by an entity in preparing and presenting financial
           statements.

           A change in accounting estimate is an adjustment of the carrying amount of
           an asset or a liability, or the amount of the periodic consumption of an asset,
           that results from the assessment of the present status of, and expected
           future benefits and obligations associated with, assets and liabilities.
           Changes in accounting estimates result from new information or new
           developments and, accordingly, are not correction of errors.

           Impracticable Applying a requirement is impracticable when the entity
           cannot apply it after making every reasonable effort to do so. For a particular
           prior period, it is impracticable to apply a change in an accounting policy
           retrospectively if:
               (a) The effects of the retrospective application is not determinable
               (b) The retrospective application requires assumptions about what
                   management's intent would have been in that period; or
               (c) The retrospective application requires significant estimates of
                   amounts and it is impossible to distinguish objectively information
                   about those estimates that:
                  (i)   Provide evidence of circumstances that existed on the date(s)
                        as at which those amounts are to be recognised, measured, or
                        disclosed; and
                  (ii)  Would have been available when the financial statements for
                        that prior period were authorised for issue from other
                        information.

           Prior period errors are omissions from, and misstatements in, the entity's
           financial statements for one or more prior periods arising from a failure to
           use, or a misuse of, reliable information that:
                 (a) was available when financial statements for those periods were
                     authorised for issue; and

3
    Refer paragraph 1.3 of the `Preface to the Accounting Standards for Local Bodies'.
             (b) could reasonably be expected to have been obtained and taken
                 into account in the preparation and presentation of those financial
                 statements.
      Such errors include the effects of mathematical mistakes, mistakes in
      applying accounting policies, oversights or misinterpretations of facts, and
      fraud.

      Prospective application of a change in accounting policy, and of recognising
      the effect of the change in the accounting estimate, respectively, are:

              a. applying the new accounting policy to transactions, other events,
                 and conditions occurring after the date as at which the policy is
                 changed;

              b. recognising the effect of the change in the accounting estimate in
                 the current and future periods affected by the change.





      Retrospective application is applying a new accounting policy to
      transactions, other events, and conditions as if that policy had always been
      applied.

      Material Omissions or misstatements of items are material if they could, individually
      or collectively, influence the economic decisions that users make on the basis of
      the financial statements. Materiality depends on the size and nature of the omission
      or misstatement judged in the surrounding circumstances. The size or nature of the
      item, or a combination of both, could be the determining factor.



Materiality

8. Assessing whether an omission or misstatement could influence decisions of users,
   and so be material, requires consideration of the characteristics of those users. Users
   are assumed to have a reasonable knowledge of the local bodies and economic
   activities and accounting and a willingness to study the information with reasonable
   diligence. Therefore, the assessment needs to take into account how users with such
   attributes could reasonably be expected to be influenced in making and evaluating
   decisions.

Accounting Policies
Selection and Application of Accounting Policies

9. When an ASLB specifically applies to a transaction, other event or condition,
   the accounting policy or policies applied to that item should be determined by
   applying the Standard.

10. ASLBs set out accounting policies that result in financial statements containing
    relevant and reliable information about the transactions, other events, and conditions
    to which they apply. Those policies need not be applied when the effect of applying
    them is immaterial. However, it is inappropriate to make, or leave uncorrected,
    immaterial departures from ASLBs to achieve a particular presentation of an entity's
    financial position, financial performance, or cash flows.
11. ASLBs are accompanied by guidance to assist entities in applying their requirements.
    All such guidance states whether it is an integral part of ASLBs. Guidance that is an
    integral part of ASLBs is mandatory. Guidance that is not an integral part of ASLBs
    does not contain requirements for financial statements.

12. In the absence of an ASLB that specifically applies to a transaction, other
   event, or condition, management shall use its judgment in developing and
   applying an accounting policy that results in information that is:
          (a) Relevant to the decision-making needs of users; and
          (b) Reliable, in that the financial statements:
                   i) Represent faithfully the financial position, financial
                        performance, and cash flows of the entity;
                   ii) Reflect the economic substance of transactions, other events,
                        and conditions and not merely the legal form;
                   iii) Are neutral, i.e., free from bias;
                   iv) Are prudent; and
                   v) Are complete in all material respects.

13. Paragraph 12 requires the development of accounting policies to ensure that the
    financial statements provide information that meets a number of qualitative
    characteristics.

14. In making the judgment, described in paragraph 12, management should refer
    to, and consider the applicability of, the following sources in descending
    order:
         (a) The requirements in ASLBs dealing with similar and related issues;
             and
         (b) The definitions, recognition and measurement criteria for assets,
             liabilities, revenue and expenses described in other ASLBs.

15. In making the judgment described in paragraph 12, management may also
    consider the following in descending order (a) the most recent
    pronouncements of the Institute of Chartered Accountants of India e.g.,
    Accounting Standards and Guidance Notes on Accounting. Such
    pronouncements also include `Framework for the Preparation and Presentation
    of Financial Statements' (b) International Public Sector Accounting Standards
    issued by International Public Sector Accounting Standards Board, and (c)
    accepted accounting practices in Local Bodies or in private sector, but only to
    the extent that these do not conflict with the sources in paragraph 14.

Consistency of Accounting Policies

   16. An entity should select and apply its accounting policies consistently for
       similar transactions, other events, and conditions, unless an ASLB
       specifically requires or permits categorisation of items for which different
       policies may be appropriate. If an ASLB requires or permits such
       categorisation, an appropriate accounting policy should be selected and
       applied consistently to each category.

Changes in Accounting Policies

   17. An entity should change an accounting policy only if the change:
             (a) is required by an ASLB; or
             (b) results in the financial statements providing reliable and more
                 relevant information about the effects of transactions, other events,
                 and conditions on the entity's financial position, financial
                 performance, or cash flows; or.
             (c) if the adoption of the different accounting policy is required by a
                 statute.

   18. Users of financial statements need to be able to compare the financial statements
       of an entity over time to identify trends in its financial position, performance, and
       cash flows. Therefore, the same accounting policies are applied within each period
       and from one period to the next, unless a change in accounting policy meets one
       of the criteria in paragraph 17.

   19. A change from one basis of accounting to another basis of accounting is a
       change in accounting policy.

   20. A change in the accounting treatment, recognition, or measurement of a
       transaction, event, or condition within a basis of accounting is regarded as a
       change in accounting policy.

   21. The following are not changes in accounting policies:

      (a) The application of an accounting policy for transactions, other events or
          conditions that differ in substance from those previously occurring; and

      (b) The application of a new accounting policy for transactions, other events,
          or conditions that did not occur previously or that were immaterial.

   22. The initial application of a policy to revalue assets in accordance with ASLB
       5, `Property, Plant and Equipment', is a change in accounting policy to be
       dealt with as a revaluation in accordance with ASLB 5, `Property, Plant and
       Equipment', rather than in accordance with this Standard.

   23. Paragraphs 24-36 do not apply to the change in accounting policy described in
       paragraph 22.

Applying Changes in Accounting Policies

   24. Subject to paragraph 28:

    (a) An entity should account for a change in accounting policy resulting from
        the initial application of an ASLB in accordance with the specific
        transitional provisions, if any, in that Standard; and

    (b) When an entity changes an accounting policy upon initial application of an
        ASLB that does not include specific transitional provisions applying to that
        change, or change an accounting policy voluntarily, it should apply the
        change retrospectively.

    25. For the purpose of this Standard, early application of an ASLB, where permitted,
       is not a voluntary change in accounting policy.

    26. In the absence of an ASLB that specifically applies to a transaction, other event,
        or condition, management may, in accordance with paragraphs 14 and 15 apply
        an accounting policy from (a) the most recent pronouncements of the Institute of
        Chartered Accountants of India e.g., Accounting Standards and Guidance Notes
        on Accounting. Such pronouncements also include `Framework for the
       Preparation and Presentation of Financial Statements' and (b) International Public
       Sector Accounting Standards issued by International Public Sector Accounting
       Standards Board. and (c) accepted accounting practices in Local Bodies or in
       private sector, but only to the extent that these do not conflict with the sources in
       paragraph 14.


Retrospective Application

   27. Subject to paragraph 28, when a change in accounting policy is applied
       retrospectively in accordance with paragraph 24(a) or (b), the entity should
       adjust the opening balance of each affected component of equity for the
       current period. Usually, the adjustment is made in the opening balance of
       accumulated surplus or deficit. However, the adjustment may be made to
       the another component of equity (for example, to comply with an ASLB) as
       if the new accounting policy had always been applied.


Limitations on Retrospective Application

   28. When retrospective application is required by paragraph 24(a) or (b), a
       change in accounting policy should be applied retrospectively, except to
       the extent that it is impracticable to determine the period-specific effect or
       cumulative effect of the change.

   29. When it is impracticable to determine the period-specific effects of
      changing an accounting policy, the entity should apply the new accounting
      policy to the carrying amounts of assets and liabilities as at the beginning
      of the earliest period for which retrospective application is practicable,
      which may be the current period, and should make a corresponding
      adjustment to the opening balance of each affected component of equity for
      current period.

   30. When it is impracticable to determine the cumulative effect, at the
      beginning of the current period, of applying a new accounting policy to all
      prior periods, the entity should apply the new accounting policy
      prospectively from the earliest date practicable .

   31. [Refer to Appendix-1]


   32. When it is impracticable for an entity to apply a new accounting policy
       retrospectively, because it cannot determine the cumulative effect of applying the
       policy to all prior periods , the entity, in accordance with paragraph 30, applies the
       new accounting policy prospectively from the start of earliest period practicable. It
       therefore disregards the portion of cumulative adjustment to assets, liabilities, and
       equity arising from before that date. Changing an accounting policy is permitted
       even if it is impracticable to apply the policy prospectively for any prior period.
       Paragraphs 56-58 provide guidance when it is impracticable to apply a new
       accounting policy to one or more prior periods.
Disclosure

         33. When initial application of an ASLB (a) has an effect on the current
             period or any prior period, (b) would have such an effect, except that it
             is impracticable to determine the amount of the adjustment, or (c)
             might have an effect on future periods, an entity should disclose:
         (a) The title of the Standard;
         (b) When applicable, that the change in accounting policy is made in
             accordance with its transitional provisions;
         (c) The nature of the change in accounting policy;
         (d) When applicable, a description of the transitional provisions;
         (e) When applicable, the transitional provisions that might have an effect
             on future periods;
         (f) For the current period the amount of the adjustment for each financial
             statement line item affected;
         (g) The amount of the adjustment relating to periods before those
             presented, to the extent practicable;
         (h) If retrospective application required by paragraph 24(a) or (b) is
             impracticable for a particular prior period, , the circumstances that led
             to the existence of that condition and a description of how and from
             when the change in accounting policy has been applied; and

Financial statements of subsequent periods need not repeat these disclosures.

         34. When a voluntary change in accounting policy (a) has an effect on the
             current period or any prior period, (b) would have an effect on that
             period, except that it is impracticable to determine the amount of the
             adjustment or (c) might have an effect on future periods, an entity
             should disclose:

               (i) The nature of the change in accounting policy;
               (ii) The reasons why applying the new accounting policy provides
                    reliable and more relevant information;
               (iii)For the current period, to the extent practicable, the amount of
                    the adjustment for each financial statement line item affected;
               (iv)The amount of the adjustment relating to periods before those
                    presented, to the extent practicable; and
               (v) If retrospective application is impracticable for a particular prior
                    period, , the circumstances that led to the existence of that
                    condition and a description of how and from when the change
                    in accounting policy has been applied.

Financial statements of subsequent periods need not repeat these disclosures.

         35. [ Refer to appendix 1]

         36. [Refer to Appendix 1]


Changes in Accounting Estimates

         37. As a result of the uncertainties inherent in delivering services, conducting
             trading, or other activities, many items in financial statements cannot be
             measured with precision but can only be estimated. Estimation involves
   judgments based on the latest available, reliable information. For example,
   estimates may be required of:

   (a) Tax revenue due to government;
   (b) Bad debts arising from uncollected taxes;
   (c) Inventory obsolescence;
   (d) The fair value of financial assets or financial liabilities, where applicable;
       and
   (e) The useful lives of, or expected pattern of consumption of future
       economic benefits or service potential embodied in depreciable assets,
       or the percentage completion of road construction.





38. The use of reasonable estimates is an essential part of the preparation of
    financial statements and does not undermine their reliability.

39. An estimate may need revision if changes occur in the circumstances on
   which the estimate was based or as a result of new information or more
   experience. By its nature, the revision of an estimate does not relate to prior
   periods and is not the correction of an error.

40. A change in the measurement basis applied is a change in an accounting
   policy, and is not a change in an accounting estimate. When it is difficult to
   distinguish a change in an accounting policy from a change in an
   accounting estimate, the change is treated as a change in an accounting
   estimate.

41. The effect of a change in an accounting estimate, other than a change
    to which paragraph 42 applies, should be recognised prospectively by
    including it in surplus or deficit in:
    (a) The period of the change, if the change affects the period only; or
    (b) The period of the change and future periods, if the change affects
        both.

42. To the extent that a change in an accounting estimate gives rise to
    changes in assets and liabilities, or relates to an item of equity, it
    should be recognised by adjusting the carrying amount of the related
    asset, liability, or /equity item in the period of change.

43. Prospective recognition of the effect of a change in an accounting estimate
    means that the change is applied to transactions, other events, and
    conditions from the date of the change in estimate. A change in an
    accounting estimate may affect only the current period's surplus or deficit,
    or the surplus or deficit of both the current period and future periods. For
    example, a change in the estimate of the amount of bad debts affects only
    the current period's surplus or deficit, and therefore is recognised in the
    current period. However, a change in the estimated useful life of, or the
    expected pattern of consumption of economic benefits or service potential
    embodied in, a depreciable asset affects the depreciation expense for the
    current period and for each future period during the asset's remaining useful
    life. In both cases, the effect of the change relating to the current period is
    recognised as revenue or expense in the current period. The effect, if any,
    on future periods is recognised in future periods.
Disclosure

         44. An entity should disclose the nature and amount of a change in an
            accounting estimate that has an effect in the current period or is
            expected to have an effect on future periods, except for the disclosure
            of the effect on future periods when it is impracticable to estimate that
            effect.

         45. If the amount of the effect in future periods is not disclosed because
             estimating it is impracticable, the entity should disclose that fact.

Errors
         46. Errors can arise in respect of the recognition, measurement, presentation,
             or disclosure of elements of financial statements. Financial statements do
             not comply with ASLB if they contain either material errors, or immaterial
             errors made intentionally to achieve a particular presentation of an entity's
             financial position, financial performance, or cash flows. Potential current
             period errors discovered in that period are corrected before the financial
             statements are authorised for issue. However, material errors are
             sometimes not discovered until a subsequent period.

         47. An entity should correct material prior period errors retrospectively in
             the first set of financial statements authorised for issue after their
             discovery by adjusting the opening balance of the assets, liabilities
             and the equity for the current period.

Limitations on correcting errors retrospectively

         48. [Refer to Appendix-1]

         49. [Refer to Appendix-1]

         50. When it is impracticable to determine the cumulative effect, at the
             beginning of the current period, of an error on all prior periods, the
             entity should correct prospectively from the earliest date practicable.

         51. The correction of a prior period error is excluded from surplus or deficit for
            the period in which the error is discovered.

         52. When it is impracticable to determine the amount of an error (eg. mistake in
            applying an accounting policy) for all prior period, the entity in accordance
            with paragraph 50 corrects the error prospectively from the earliest date
            practicable. It, therefore, disregards the portion of the cumulative
            adjustment in respect of assets, liabilities and equity arising before that
            date. Paragraphs 55-58 provide guidance on when it is impracticable to
            correct an error for one or more prior periods.

         53. Corrections of errors are distinguished from changes in accounting
             estimates. Accounting estimates by their nature are approximations that
             may need revision as additional information becomes known. For example,
             the gain or loss recognised on the outcome of a contingency is not the
             correction of an error.
Disclosure of Prior Period Errors

         54. In applying paragraph 47, an entity should disclose the following:

          (a) The nature of the prior period error;

          (b) For the current period, to the extent practicable, the amount of the
              correction for each financial statement line item affected ;

         (c) The amount of the correction at the beginning of the current period.

      Financial statements of subsequent periods need not repeat these
      disclosures beyond.

Impracticability in Respect of Retrospective Application

         55. In some circumstances, it is impracticable to apply retrospectively a change
            in accounting policy or correct a prior period error. For example, data may
            not have been collected in the prior period(s) in a way that allows either
            retrospective application of a new accounting policy (including, for the
            purpose of paragraphs 56-58, its prospective application to prior periods) or
            to correct a prior period error, and it may be impracticable to re-create the
            information.

         56. It is frequently necessary to make estimates in applying an accounting
             policy to elements of financial statements recognised or disclosed in respect
             of transactions, other events, or conditions. Estimation is inherently
             subjective, and estimates may be developed after the reporting date.
             Developing estimates is potentially more difficult when retrospectively
             applying an accounting policy because of the longer period of time that
             might have passed since the affected transaction, other event, or condition
             occurred. However, the objective of estimates related to prior periods
             remains the same as for estimates made in the current period, namely, for
             the estimate to reflect the circumstances that existed when the transaction,
             other event, or condition occurred.

         57. Therefore, retrospectively applying a new accounting policy          requires
             distinguishing information that:

            (a) Provides evidence of circumstances that existed on the date(s) as at
                which the transaction, other event, or condition occurred; and

            (b) Would have been available when the financial statements for that prior
                period were authorised for issue; from other information. For some types
                of estimates (e.g., an estimate of fair value not based on an observable
                price or observable inputs), it is impracticable to distinguish these types
                of information. When retrospective application require making a
                significant estimate for which it is impossible to distinguish these two
                types of information, it is impracticable to apply the new accounting
                policy or correct the prior period error retrospectively.

      58. Hindsight should not be used when applying a new accounting policy to, or
          correcting amounts for, a prior period either in making assumptions about what
          management's intentions would have been in a prior period or estimating the
          amounts recognised, measured, or disclosed in a prior period. For example,
                when an entity corrects a prior period error in calculating its liability for
                employees' accumulated sick leave in accordance with ASLB on, `Employee
                Benefits'4, it disregards information about an unusually severe influenza
                season during the next period that becomes available after the financial
                statements for the prior period were approved for issue. The fact that significant
                estimates are frequently required does not prevent reliable adjustment or
                correction of the error in the current period.


Effective Date

          59.     [Refer to Appendix-1]

          59 A. [Refer to Appendix-1]

          60. [Refer to Appendix-1]




4
    The Accounting Standard for Local Bodies is under formulation.
                                                                        Appendix 1
Note: This Appendix is not a part of the Accounting Standard for Local Bodies. The
purpose of this Appendix is only to bring out the major differences, if any, between
Accounting Standard for Local Bodies (ASLB) 3 and the corresponding International
Accounting Standard (IPSAS) 3, `Accounting Policies, Changes in Accounting Estimates
and Errors'.



COMPARISON WITH IPSAS 3, ACCOUNTING POLICIES, CHANGES IN
ACCOUNTING ESTIMATES AND ERRORS'



  1. Paragraph pertaining to exclusion of the tax effects of correction of prior period
     errors have been deleted from the exposure draft ASLB 3 as the same is not
     relevant for Local Bodies in India. However, paragraph number 4 has been
     retained in order to maintain consistency with IPSAS 3.
  2. Paragraph 6 of IPSAS 3 which provides that Government Business Enterprises
     should use IFRSs, has been deleted, as it is not relevant for the exposure draft
     ASLB 3, which is applicable to Local Bodies in India. However, paragraph number
     has been retained in exposure draft ASLB 3 in order to maintain consistency with
     ASLB 3.
  3. The concept of retrospective restatement has been removed in the exposure draft
     ASLB 3, as it would be difficult for the Local Bodies to apply since Local Bodies in
     India are at very initial stage of implementing accrual accounting. Consequential
     changes due to this change have also been made in the exposure draft.
  4. Exposure draft ASLB 3 provides for an additional condition for change in
     accounting policy by an entity ,i.e., an entity can change its accounting policy if it is
     required by a statute, which is not there in IPSAS 3.
  5. As per IPSAS 3, an entity shall correct the error by restating the comparative
     amounts for prior period(s) presented in which the error occurred and if the error
     occurred before the earliest prior period presented, restating the opening balance
     of assets /equity for the earliest prior period presented whereas according to
     exposure draft ASLB 3, an error is corrected in the current year by adjusting the
     opening balance of assets, liabilities and the equity for the current period.
     Consequential changes have been made. However, paragraph numbers have
     been retained in order to maintain consistency with IPSAS 3.
  6. Paragraphs relating to effective date have been removed as the exposure draft
     ASLB 3 would become mandatory for Local Bodies in a state from the date
     specified by the State Government concerned. Paragraph numbers have been
     retained in order to maintain consistency with IPSAS 3.
                                                                       Appendix 2
Note: This Appendix is not a part of the Accounting Standard for Local Bodies. The
purpose of this Appendix is only to bring out the major differences, if any, between
Accounting Standard for Local Bodies (ASLB) 3 and the existing Accounting Standard
(AS) 5, `Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting
Policies' issued by the Institute of Chartered Accountants o India.



COMPARISON WITH EXISTING AS 5, `NET PROFIT OR LOSS FOR THE
PERIOD, PRIOR PERIOD ITEMS AND CHANGES IN ACCOUNTING
POLICIES'

    1. The objective of the existing AS 5 is to prescribe the classification and disclosure
       of certain items in the statement of profit and loss for uniform preparation and
       presentation of financial statements. The objective of exposure draft ASLB 3 is to
       prescribe the criteria for selecting and changing accounting policies, together with
       the accounting treatment and disclosure of changes in accounting policies,
       changes in accounting estimates and corrections of errors.
    2. The existing AS 5 restricts the definition of accounting policies to specific
       accounting principles and the methods of applying those principles while
       exposure draft ASLB 3 broadens the definition to include bases, conventions,
       rules and practices (in addition to principles) applied by an entity in the
       preparation and presentation of financial statements.

    3. Exposure draft ASLB 3 specifically states that an entity shall select and apply its
       accounting policies consistently for similar transactions, other events and
       conditions, unless an ASLB specifically requires or permits categorisation of
       items for which different policies may be appropriate. Existing AS 5 does not
       specifically requires accounting policies to be consistent for similar transactions,
       other events and conditions.
    4. Certain additional definitions such as `change in accounting estimate',
       `impracticable', `prospective application and `retrospective application' etc. have
       been provided in exposure draft ASLB 3, whereas the same are not provided in
       the existing AS 5.
    5. Exposure draft ASLB 3 requires that changes in accounting policies should be
       accounted for with retrospective effect subject to limited exceptions, viz., where it
       is impracticable to determine the period specific effects or the cumulative effect of
       applying a new accounting policy. On the other hand, the existing AS 5 does not
       specify how change in accounting policy should be accounted for.
    6. The existing AS 5 defines prior period items as incomes or expenses which arise
       in the current period as a result of errors or omissions in the preparation of
       financial statements of one or more prior periods. Exposure draft ASLB 3 uses
       the term prior period errors and relates it to errors or omissions arising from a
       failure to use or misuse of reliable information (in addition to mathematical
       mistakes, mistakes in application of accounting policies etc.) that was available
       when the financial statements of the prior periods were approved for issuance
       and could reasonably be expected to have been obtained and taken into account
       in the preparation and presentation of those financial statements. Exposure draft
   ASLB 3 specifically states that errors include frauds, which is not covered in
   existing AS 5.
7. Exposure draft ASLB 3 requires rectification of material prior period errors with
   retrospective effect subject to limited exceptions viz., where it is impracticable to
   determine the cumulative effect of an error on all prior periods. On the other hand,
   existing AS 5 requires the rectification of prior period items with prospective
   effect.
8. Keeping in view that ASLB 1, Presentation of Financial Statements, is silent about
   the presentation of any items of income or expense as extraordinary items, this
   standard does not deal with the same, which at present is dealt with by the
   existing AS 5.
9. Disclosure requirements given in Exposure draft ASLB 3 are more detailed as
   compared to the disclosure requirements given in the existing AS 5.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Reengineering Software Re-engineering Software Reverse Engineering Software Reverse Development Software Change Modulation Software Conversion Software Re-creation Software Re-development

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions