20,21,22

ACCOUNTING STANDARD

ACCOUNTING STANDARD (AS) 20EARNINGS PER SHARE

Objective

The objective of this Standard is to prescribe principles for the

determination and presentation of earnings per share which will

improve comparison of performance among different enterprises for

the same period and among different accounting periods for the

same enterprise. The focus of this Standard is on the denominator of

the earnings per share calculation. Even though earnings per share

data has limitations because of different accounting policies used for

determining ‘earnings’, a consistently determined denominator

enhances the quality of financial reporting.

Scope

1. This Standard should be applied by all companies. However, a

Small and Medium Sized Company, as defined in the

Notification, may not disclose diluted earnings per share (both

including and excluding extraordinary items).

2. In consolidated financial statements, the information

required by this Statement should be presented on the basis of

consolidated information.

Definitions

For the purpose of this Standard, the following terms are used with the meaningsspecified:

1. An equity share is a share other than a preference share.

2. A preference share is a share carrying preferential rights to dividends andrepayment of capital.

3. A financial instrument is any contract that gives rise to both a financial asset ofone enterprise and a financial liability or equity shares of another enterprise.

4. A potential equity share is a financial instrument or other contract that entitles,or may entitle, its holder to equity shares.

5. Share warrants or options are financial instruments that give the holder theright to acquire equity shares.

6. Fair value is the amount for which an asset could be exchanged, or a liabilitysettled, between knowledgeable, willing parties in an arm’s length transaction.

Applicability

• This statement is applicable to the enterprise whose equity

shares or potential equity shares are listed in stock exchange

& It is to be reported by the enterprises on the face of the

statement of profit and loss a/c.

TYPES OF EPS

• Basic Earnings Per Share

• Basic earnings per share should be calculated by dividing the netprofit or loss for the period attributable to equity shareholders bythe weighted average number of equity shares outstanding duringthe period.

• Diluted Earnings Per Share

• For the purpose of calculating diluted earnings per share, the netprofit or loss for the period attributable to equity shareholders andthe weighted average number of shares outstanding during theperiod should be adjusted for the effects of all dilutive potentialequity shares.

ACCOUNTING STANDARD (AS) 21

CONSOLIDATED FINANCIAL STATEMENTS

• OBJECTIVES

The objective of this statement is to present financial statements of parent

and its subsidiaries as a single economic entity. They are treated as one.

Consolidated profit/loss account and consolidated balance sheet are

prepared for disclosing the total profit/loss of the group and total assets

and liability of the group.

PARENT COMPANY:- It is an enterprise that has one or more subsidiaries.

SUBSIDIARY COMPANY:- It is an enterprise that is controlled by other

enterprises known as parent.

Scope

• 1. This Standard should be applied in the preparation and

presentation of consolidated financial statements for a group

of enterprises under the control of a parent.

• 2. This Standard should also be applied in accounting for

investments in subsidiaries in the separate financial statements

of a parent.

FORMAT OF CONSOLIDATED FINANCIAL STATEMENTS

Application of other accounting standards in preparation of

consolidated financial statements would be in the same

manner as they apply in preparing the separate financial

statements.

Consolidated financial statements are no substitutes for

separate financial statements.

Dissimilar activities of parent and its subsidiaries cannot be

the ground for non-consolidation of financial statements.

The parent company has to consolidate the financial

statements of all its subsidiaries, whether domestic or foreign.

CONSOLIDATED FINANCIAL STATEMENTS MEANING

• Consolidated financial statements present an aggregated look

at the financial position of a parent and its subsidiaries, they

enable you to gauge the overall health of an entire group of

companies as opposed to one company's stand alone position.

ACCOUNTING STANDARD – 22ACCOUNTING FOR TAXES ON INCOME

INTRODUCTION

Comes into effect from 1st April, 2001

Mandatory in Nature

Applicable for all enterprises

For accounting periods commencing on or after 1st April 2003

OBJECTIVE

Prescribe accounting treatment for taxes on income in accordance

with the matching concept:

Matching of taxes with the corresponding revenue and expenses since

taxable income significantly varies with the accounting income

Reasons

Difference between items of Revenue and expense as per profit & Loss

account and those considered for tax purpose.

Difference between the amount of the items of Revenue and expenses as per

profit and loss account and those considered for tax purpose.

Scope

Applied For accounting for taxes on income:

Determination of expenses or savings related to taxes on income for a

particular period.

Disclosure of such amount in Financial Statement.

Includes both domestic and foreign taxes.

Tax payable on distribution of dividends and other distribution not

covered.

Definitions

1. Accounting income (loss) is the net profit or loss for a period, as reported in thestatement of profit and loss, before deducting income tax expense or adding income taxsaving.

2. Taxable income (tax loss) is the amount of the income (loss) for a period, determinedin accordance with the tax laws, based upon which income tax payable (recoverable) isdetermined.

3. Tax expense (tax saving) is the aggregate of current tax and deferred tax charged orcredited to the statement of profit and loss for the period.

4. Current tax is the amount of income tax determined to be payable (recoverable) inrespect of the taxable income (tax loss) for a period.

5. Deferred tax is the tax effect of timing differences.

6. Timing differences are the differences between taxable income and accountingincome for a period that originate in one period and are capable of reversal in one ormore subsequent periods.

7. Permanent differences are the differences between taxable income and accountingincome for a period that originate in one period and do not reverse subsequently.