I have some queries regarding IND As. I am practically applying indas to a co. explaining in detail
1. As per Ind AS-2 (Inventory), 16 (PPE), 38(Intangible Assets), If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognized as interest over the period of credit.
In this case, how we can determine actual purchase price in normal credit terms?
2. In Ind AS-16 (PPE) & AS-10 (Revised 2016), a new para (Para No. 8) has been added for spare parts, stand-by equipments and servicing equipments which can be recognized as PPE. No matter they are part of any plant or mahinery, they can be recognized if they meet the definition of PPE.
In this case, external hard disk purchased having material value can be recognized as PPE?
3. Ind AS-1 requires disclosure of judgements & assumptions made by management in books of accounts.
Judgements in relation to any matter that will be material and need to be disclosed?
4. As per Ind AS-8, rectification of material prior period errors should be made on retrospective basis.
Presentation of rectification in books? If it relates to two years then we have to prepare financial statements of two comparative years in the financial statements of F/Y 16-17?
need some guidance
Please note that the following answers are subjective and are as per my own interpretations as per my working:
- So this para is common among all three IndAS on Inventory, Tangible and Intangible assests which is ‘An entity may purchase inventories on deferred payment terms. When the arrangement effectively contains a financing element, that element, for example a difference between the purchase price for normal credit terms and the amount paid, is recognised as interest expense over the period of the financing.’So here we have to see normal credit terms in that industry and at what price any supplier can offer that machinery on such normal credit terms. As you applying this for your company then you might have details of a similar purchase in past from that supplier or from any other supplier and what were the credit terms were then and now and also consider the inflation factor also, alternatively what you can do is ask for another quote from the same supplier if the payment is made upfront or paid within 30/60/90 days and compare with what actually you are paying and recognise the balance as Interest cost.
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Yes, you will have to value and account them separately, do understand major spare parts are usually recognized PPE when an entity expects to use them during more than one period. Thus if you have a separate invoice for the hard disk, the life expected is more than 1 year/period and the original PPE for which such asset is a part of can be used with other hard disks as well you will have to recognise separately.
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All the significant accounting policies followed by the company should be mentioned in the notes to accounts. I am attaching Annual report of Infosys, Please go through from Page 181 onwards. As for judgements involved take an example of all the assumptions which our actuary makes while assessing Employee benefits whether Long term or Post employment also needs to be mentioned in notes to accounts.
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