CA R. Venkata Subramani

CA Sunitha Suri

CA Sunitha Suri Sunitha is a Chartered Accountant with over 10 years’ experience in international taxation She is also a Cost and Management Accountant (India) and Cost Management Accountant (UK) She has co-authored the chapter ’Dispute Resolution’ in the book ‘Transfer Pricing Law and Practice in India’ by Deloitte Prepared a paper on ‘Transfer pricing implications on Group Employee Stock Option Plan’ Handled responses to tax queries for to the column ‘Your taxes’ in the newspaper ‘Hindu Business Line’ for over a year She has conducted seminar and training sessions on ‘International tax’ and ‘Transfer Pricing’
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Secondary Adjustment – transfer pricing

Secondary Adjustment – transfer pricing Introduction As per the OECD’s TP guidelines for Multinational Enterprises and Tax Administrations (OECD TP Guidelines), secondary adjustment may take the form of constructive dividends, constructive equity, or constructive loans.The provisions of secondary adjustment are internationally recognized and are already part of the TP rules of many leading economies in the world., though the approach by various countries vary.India’s secondary adjustment provisions are enshrined in section 94CE of the Act. India had initially taken a position to treat secondary adjustment as constructive loan and thereby imputing interest on the outstanding amount.However, budget 2019 has relaxed the norms …
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Limitation of interest deductions – transfer pricing

Limitation of interest deductions – transfer pricing Introduction Popularly known as ‘Thin Capitalization Rules’, this provision intends to cap the interest that can be paid to the AEs in case of borrowings.Generally, debt is a preferred instrument to provide funds to the subsidiary or group company rather than equity due to the fact that interest on debt is a deductible expenditure for tax and there would be regular cash flow to the lender as well.The DTAAs also provide a favourable tax rate for the interest earned by the non-residentsHigh leverage and excess interest deductions erodes the profitability of the payee. Normally such …
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Penalties for non-compliance – Transfer Pricing

Penalties for non-compliance – Transfer Pricing The Act has prescribed strict penalties for non-compliance in terms of non-disclosure or incorrect disclosure Question International group shall maintain information and documents in Master file when Consolidated group revenue of the International group is (as reflected in Consolidated Financial Statements of the International Group) is More than Rs.500 croresMore than 5500 croresMore than Rs 50 crores Answer a. International group shall maintain information and documents in Master file when Consolidated group revenue of the International group is (as reflected in Consolidated Financial Statements of the International Group) is Rs 500 crores. The form contains Part A and Part B. …
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Additional reporting by Multinational companies – Transfer pricing

Additional reporting by Multinational companies – Transfer pricing The OECD had devised many action plans to combat BEPS. OECD also recommended a three-tier documentation approach for transfer pricing under Action Plan 13. Three tier documentation Advantages of three tier reporting Elements of CbC and Master File reporting requirement and related matters have been incorporated in the Section 286 of the Act.This reporting shall be applicable in respect of an international group for an accounting year if the total consolidated revenue as reflected in the CFS for the accounting year preceding year is above the threshold limit. Key terms to understand There are certain terms which are …
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Fundamentals of Base Erosion and Profit Shifting – Transfer Pricing

Fundamentals of Base Erosion and Profit Shifting – Transfer Pricing Introduction In the past few decades, the world has seen large movement of capital and investment from developed and developing countries.This has resulted in huge economic development, boosted trade and increases foreign direct investment in various countries.Many developing countries (low – cost locations) saw boon in their manufacturing activity and become operation hub for many MNEs.This also accelerated growth, innovation and created jobs.Taxes are the main revenues for the economy. Once cross border activities increased, there were many instances of double-taxation and need to eliminate the same was noticed.Progressively, Governments entered bilateral …
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Mutual Agreement Procedure

Mutual Agreement Procedure Mutual Agreement Procedure (‘MAP’) is a procedure set out in most treaties which permit designated Government representatives to work together to resolve international tax disputes including issues involving double taxation, questions regarding residential status, tax recovery etc. MAP is used to eliminate double taxation that can arise from transfer pricing adjustments. Eligibility for MAP MAP application can be filed by a person when he considers that he has not been taxed in accordance with the Treaty.Even if such person has other remedies such as appeal process under the domestic laws, MAP can be initiated. MAP can be applied in the country …
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Advance Pricing Agreements (APA)

Advance Pricing Agreements (APA) APA objective APA is an agreement between the taxpayer and the taxing authority on an appropriate transfer pricing methodology for a set of transactions over a fixed period of time in future. Section 92CC empowers the Board to enter into APA with any person undertaking an international transaction.Purpose of APA: the APA shall relate to an international transaction to be entered into by such person. The APA shall be entered into for the purpose of determination of ALP or specifying the manner in which ALP shall be determined.The budget 2020 has extended the scope of APA to include …
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Dispute Mitigation strategies in transfer pricing

Dispute Mitigation strategies in transfer pricing Determining ALP is not an exact science and often may lead to different answer depending on many factors.This has resulted in huge litigation leaving the assessee and the income tax authorities often in the loggerheads.The data available at the time of concluding the agreement / work order, the data at the time of preparing documentation and filing return of income, and the data available at the time when the issue is taken up during the assessment would be widely varying.This has resulted in disputes running into crores and uncertainty in the minds of overseas investors.The …
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Transfer pricing adjustment and consequence

Transfer pricing adjustment and consequence Transfer pricing adjustment If the transaction price is not within the ALP range or the tolerance band and if adopting ALP would not reduce the profit or increase losses etc, then the difference between the ALP and the transaction price is added to the income of the assessee.The AO would make the adjustment in the assessment order.The effect of this adjustment would be as under: Penalty for transfer pricing compliance Question Once the TPO passes the order, which of the following is correct The AO has the discretion of incorporating the order of the TPOThe AO has to mandatorily incorporate the …
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Transfer pricing audit cycle

Transfer pricing audit cycle Reference to Transfer Pricing Officer Section 92CA provides for procedure for reference to a Transfer Pricing Officer (‘TPO’) of any issue relating to computation of ALP in an international transaction. The procedure is as under:The option to make reference to TPO is given to the Assessing Officer. He may do it if he considers it necessary or expedient to do so.As per CBDT instruction in 2016, the AO has to make mandatory reference to TPO only under following TP risk parameters assisted by CASS and compulsory manual selection on the basis of earlier non-compliance etc.The AO has to …
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Returns, Audit and other miscellaneous provisions – Transfer pricing

Returns, Audit and other miscellaneous provisions – Transfer pricing Records to be maintained Each person who has entered into international transaction has to maintain certain information and documents in respect thereof as may be prescribed by Central Board of Direct Taxes (‘CBDT’).Apart from that, if the person belongs to an International Group and if the group meets certain monetary threshold, then the person is required to additionally maintain and submit prescribed information and document regarding the international group.Each person undertaking an international transaction has to maintain the following documents in accordance with Rule 10D of the Income Tax Rules, 1962.Ownership structureProfile of …
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Determination of ALP – Transfer Pricing

Determination of ALP – Transfer Pricing Rule 10C deals with the determination of most appropriate method. Under this Rule, the method is best suited to the facts and circumstances, and which provides the most reliable measure of ALP in relation to the international transaction will be considered to be the MAM. Factors that needs to be considered are:Nature or class of transactionThe class or classes of AEs and FARAvailability and reliability of dataDegree of comparability between the transactionsExtent to which reliable and accurate adjustment can be made to account for the differenceThe nature, extent and reliability of assumptions required to be …
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FAR Analysis – Transfer Pricing

FAR Analysis – Transfer Pricing Functional, asset and risk analysis is often referred to as FAR analysis.When transactions between the AEs are examined for the purpose of determining the ALP, one has to analyse the three components closely, namely Functions performed Functions performed by different parties are examined to ascertain which party performs the most significant activities and which one performs the routine activities.Suppose A Inc (US Company) is a manufacturer of a product and B Ltd (Indian Company) is a distributor while A Inc identifies undertakes the manufacturing process, employs intangibles, conducts quality checks etc. and B Ltd is engaged in identifying …
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Economic analysis – Transfer Pricing

Economic analysis – Transfer Pricing Characterization of the transacting parties For applying the above methods, following factors needs to be analyzed with respect to the transactionsSpecific characteristic of the property transferred or services renderedThe functions performed taking into account assets employed and risks assumed by the respective parties.Characterization of entities based on functions performed by each associate enterprise, assets employed by them to carry out the functions and risks assumed by each enterprise in carrying out the functions.Conditions prevailing in the market in which the respective parties operate, laws of the territory, labour and capital markets level of competition etc. are to …
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Arm’s Length Principle – Transfer Pricing

Arm’s Length Principle – Transfer Pricing Why Arm’s length price? The cornerstone of the Transfer Pricing Provision is determining an Arm’s Length Price (‘ALP’) of a transaction between Associated Enterprises.  This course will provide you the methods to be adopted for determining the ALP and factors which needs to be considered in order to identify comparable uncontrolled transactions.ALP is defined in section 92F(ii) to mean price which is applied or proposed to be applied in a transaction between persons other than associated enterprises in uncontrolled conditions.Section 92C deals with the method for determining arm’s length price and the factors which are to …
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Specified Domestic Transactions – Transfer Pricing

Specified Domestic Transactions – Transfer Pricing Introduction The concept of Specified Domestic Transactions (SDT) was introduced in Finance Act 2012. Prior to that the AO were empowered to disallow payments made to related parties which were unreasonable or excessive under section 40A(2)(b) of the Act. Further, TPPs were applicable only for international transactions.SC in the case of Re Glaxo Smithkline Asia P Ltd recognised the complications of arriving at the Fair Market value (FMV) in case of transactions involving related parties and suggested why transfer pricing provisions could not be extended to domestic transactions as wellThis led to introduction of section 92BA …
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International Transaction [Section 92B] – Transfer Pricing

International Transaction [Section 92B] – Transfer Pricing Transfer pricing provisions are applicable to determine the arm’s length price of international transaction and specified domestic transaction. Though, specified domestic transactions are also part of the transfer pricing provisions, it predominantly deals with international transaction. Therefore, it is essential to understand the term which is provided in Section 92B (1) Transaction between two or more AEs either or both are NRs. Summary Question                Which of the following is an international transaction? Nippon USA purchases goods from Nippon Japan amounting to $1 millionInterest of Rs 10 crores paid by K Ltd (India) to Singapore branch of HSBC BankK India …
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Income from transaction with Non-Residents – Transfer Pricing

Income from transaction with Non-Residents – Transfer Pricing Applicability Section 92 is the charging section for Chapter X of the Act. Sec 92 provides that any income arising from an ‘International transaction’ shall be computed having regard to ALP.For this purpose, the allowance for any expense or interest shall be determined on the basis of ALP.Further, where two or more enterprises enter into mutual agreement or arrangement for cost allocation or cost contribution, they would also be covered within sec 92 and would be subject to ALP. This provision will not be applicable – While determining ALP under the provisions of TPR, if the …
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Suspension of capitalization – Ind AS 23

Suspension of capitalization – Ind AS 23 An entity shall suspend capitalization of borrowing costs during extended periods in which it suspends active development of a qualifying assetAn entity may incur borrowing costs during an extended period in which it suspends the activities necessary to prepare an asset for its intended use or saleSuch costs are costs of holding partially completed assets and do not qualify for capitalizationHowever, an entity does not normally suspend capitalizing borrowing costs during a period when it carries out substantial technical and administrative workAn entity also does not suspend capitalizing borrowing costs when a temporary delay …
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Commencement of capitalization – Ind AS 23

Commencement of capitalization – Ind AS 23   When to begin capitalization An entity shall start capitalizing borrowing costs as part of the cost of a qualifying asset on the commencement dateThe commencement date for capitalization is the date when the entity first meets all of the following conditionsit incurs expenditures for the assetit incurs borrowing costs; andit undertakes activities that are necessary to prepare the asset for its intended use or sale Example: Borrowing cost to be capitalized On April 1, 2019, Compassionate Inc. began construction of homes for those families that were hit by the Typhoon and were homeless. The construction is expected …
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Recognition – Ind AS 23

Recognition – Ind AS 23 An entity shall capitalize borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that assetSuch borrowing costs are capitalized as part of the cost of the asset when it is probable that they will result in future economic benefits to the entity and the costs can be measured reliablyAn entity shall recognize other borrowing costs as an expense in the period in which it incurs them Borrowing costs eligible for capitalization: The borrowing costs that are directly attributable to the acquisition, construction or production of …
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Objective and Scope – Ind AS 23

Objective and Scope – Ind AS 23 Objective Ind AS 23 “Borrowing Costs” prescribes the accounting treatment of borrowing costs (which are interest and other costs that an entity incurs in connection with the borrowing of funds), the circumstance in which the borrowing cost will be capitalized and when it will be recognized as expense Scope An entity shall apply this Standard in accounting for borrowing costsAn entity is not required to apply the Standard to borrowing costs directly attributable to the acquisition, construction or production ofa qualifying asset measured at fair value, for example, a biological asset within the scope of Ind AS …
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Introduction to Transfer Pricing

Introduction to Transfer Pricing Transfer Price “Transfer Price” is the price at which an enterprise charges for its transaction within its group entitiesInternational transaction involves more than one tax jurisdiction, and due to disparity in tax rates and method of computing income, the parties may try to adjust the transfer pricesSince the parties are related there is a possibility that the price at which the transactions are carried out can be fixed in such a way that profits can be parked in the country which has less tax and entity in high tax country earns less or no profitsThis would allow the …
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Lease Accounting Software Modification and Termination

Lease Accounting Software Modification and Termination 1. Processing is done on a quarterly basis. 2. Journal entries are passed on a monthly basis always. All entries will be dated the end of each month. Exception is the payment of lease rental and other payments which will be the actual date of such payment. 3. There may be some modifications in the lease term when we receive the data for the next quarter. 4. So every time we process the data, the first job is to check the following: New leasesExisting leases with no modificationExisting leases with modifications For a. New leases, the entire process mentioned in …
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Lease Accounting Software – Deposit Management

Lease Accounting Software – Deposit Management Upload Lease Deposit Deposits with sample data Import ‘Lease advance’ file Click the import data and upload the advance.csv in the given format Deposits uploaded Compute the Lease Deposit Prepare the schedule of dates first. 1. Discount factor is based on the rate given in the Advances file by adding the two fields – Let us call the sum total of these two as ‘Rate for Deposit’ 2. For the first line, where the advance amount is given the discount factor is found by the number of days from the start date to the end date in the formula: 3. For the subsequent lines, the …
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Lease Accounting Software Computation Process

Lease Accounting Software Computation Process Generate cash flows Based on the start date, effective date, end date, frequency of the lease, payable at beginning or end etc, cash flows for the entire period is generated as follows: Change the following data – only start from 1-4-2019 onwards Variable cashflows If you upload lease with Cash flow as “YES” then click the export cash flow. If the Cash Flow field is not ‘YES’ then the ‘Upload Cash Flow’ and ‘Export Cash Flow’ buttons will not be active. The Status of the record for which Cash flows should be updated will be shown as ‘New’. A csv file …
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Lease Accounting Software – Data Input Process

Lease Accounting Software – Data Input Process Creation of Company Super Admin is the administrative contact from RVSBELL Analytics, who will create the company and the user login ids for all the users of the application. Creation of users Three users are created by the Super Admin viz., Accountant, Manager and Auditor. All the three login ids should be created before the user starts to work with the system. If the user wants more ‘Accountant’ logins, it can be requested at additional cost and the Super Admin will create the same. Before the user starts to upload the data etc., all the login ids created …
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Impact of COVID 19 on Ind AS 37

Impact of COVID 19 on Ind AS 37 Onerous Contract Onerous contracts are those contracts for which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Unavoidable costs under a contract are the least net cost of exiting from the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it. As a result of COVID -19, some contracts may become onerous for reasons such as increase in cost of material / labour, etc. Management should consider whether any of its …
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Appendix to Ind AS 37

Appendix to Ind AS 37 Appendix A Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds The purpose of decommissioning, restoration and environmental rehabilitation funds, hereafter referred to as ‘decommissioning funds’ or ‘funds’, is to segregate assets to fund some or all of the costs of decommissioning plant (such as a nuclear plant) or certain equipment (such as cars), or in undertaking environmental rehabilitation (such as rectifying pollution of water or restoring mined land), together referred to as ‘decommissioning’ Contributions to these funds may be voluntary or required by regulation or law It provides guidance onhow a contributor accounts for its interest in …
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Disclosures – Ind AS 37

Disclosures – Ind AS 37 For Provisions For each class of provision, an entity shall disclosethe carrying amount at the beginning and end of the periodadditional provisions made in the period, including increases to existing provisionsamounts used (ie incurred and charged against the provision) during the periodunused amounts reversed during the period; andthe increase during the period in the discounted amount arising from the passage of time and the effect of any change in the discount rate An entity shall disclose the following for each class of provisiona brief description of the nature of the obligation and the expected timing of any resulting …
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Change in Provisions and Use of Provisions – Ind AS 37

Change in Provisions and Use of Provisions – Ind AS 37 Change in Provisions Provisions shall be reviewed at the end of each reporting period and adjusted to reflect the current best estimateIf it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision shall be reversed Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognized as borrowing cost Use of Provisions A provision shall be used only for expenditures for which the provision was originally recognized Only expenditures that …
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Measurement of Provision – Ind AS 37

Measurement of Provision – Ind AS 37 The amount of the provision should be measured at the best estimate of the expenditures required to satisfy the obligation at the end of the reporting periodAs you can see, here’s some judgment and estimates involved. Management should really incorporate all available information in their estimates, and they must not forget about:Risks and uncertainties (like inflation)Time value of money (discounting when the settlement is expected in the long-term future)Some probable future events, etcThere are 2 basic methods of measuring a provisionExpected value method: You would use this method when you have a range of possible outcomes …
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Contingent Liability & Contingent Asset – Ind AS 37

Contingent Liability & Contingent Asset – Ind AS 37 What is a contingent liability? A contingent liability isa possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; ora present obligation that arises from past events but is not recognized becauseit is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; orthe amount of the obligation cannot be measured with sufficient reliability How to deal in books / Financial Statement? A contingent …
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Provisions – Ind AS 37

Provisions – Ind AS 37 What is a Provision? Provision is a liability of uncertain timing or amount The word “uncertain” is very important here, because if timing and amount are certain or almost certain, then you don’t deal with the provision but with a payable or an accrual To understand provisions better, let’s break down the definition of a liability in Ind AS 37A liability is a present obligation arising from past event that is expected to be settled by an outflow of economic benefits from an entityIn other words, if there is no past event, then there is no liability and no provision should be recognized. Past event can create two types of obligation: Legal obligation that arises …
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Objectives and Scope – Ind AS 37

Objectives and Scope – Ind AS 37  Introduction to Ind AS 37 Ind AS 37 Provisions, contingent liabilities and contingent assets outlines the accounting for provisions (liabilities of uncertain timing or amount), together with contingent assets (possible assets) and contingent liabilities (possible obligations)Provisions are measured at the best estimate (including risks and uncertainties) of the expenditure required to settle the present obligation and reflect the present value of expenditures required to settle the obligation when the time value of money is material Objectives of IND AS 37: The objectives of this Standard are to ensure that appropriate recognition criteria is applied to provisions, contingent liabilities …
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Disclosures – Ind AS 40

Disclosures – Ind AS 40 Disclosure – 1 its accounting policy for measurement of investment propertywhen classification is difficult, the criteria it uses to distinguish investment property from owner-occupied property and from property held for sale in the ordinary course of businessthe extent to which the fair value of investment property (as measured or disclosed in the financial statements) is based on a valuation by an independent valuer who holds a recognized and relevant professional qualification and has recent experience in the location and category of the investment property being valued. If there has been no such valuation, that fact shall be …
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Measurement after Recognition – Ind AS 40

Measurement after Recognition – Ind AS 40 Accounting Policy An entity shall adopt as its accounting policy the cost model per Ind AS 16to all of its investment property This Standard requires all entities to measure the fair value of investment property, for the purpose of disclosure even though they are required to follow the cost model An entity is encouraged, but not required, to measure the fair value of investment property on the basis of a valuation by an independent valuer who holds a recognized and relevant professional qualification and has recent experience in the location and category of the investment property being …
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Recognition and measurement – Ind AS 40

Recognition and measurement – Ind AS 40 An owned investment property shall be recognized as an asset when, and only when:it is probable that the future economic benefits that are associated with the investment property will flow to the entity; andthe cost of the investment property can be measured reliably An entity evaluates under this recognition principle all its investment property costs at the time they are incurredThese costs include costs incurred initially to acquire an investment property and costs incurred subsequently (if the recognition criteria are met )to add to, replace part of, or service a property Under the recognition principle, an …
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Objective, Scope and Key terms – Ind AS 40

Objective, Scope and Key terms – Ind AS 40  Objective The prime two objectives of the Ind AS 40 are as follows: to prescribe the accounting treatment for investment property andto prescribe the related disclosure requirements Scope This Standard shall be applied in the recognition, measurement and disclosure of investment propertyThis Standard does not apply to:biological assets related to agricultural activity (Refer Ind AS 41and Ind AS 16); andmineral rights and mineral reserves such as oil, natural gas and similar non-regenerative resources. Key terms Fair value The price that would be received to sell an asset orpaid to transfer a liabilityin an orderly transactionbetween market participantsat the measurement …
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Miscellaneous items – Ind AS 21

Miscellaneous items – Ind AS 21 Intra-group transactions While following the normal consolidation process, intra-group balances and intra-group transactions of a subsidiary are eliminated, thereby incorporating the results and the financial position of the foreign operation with that of the reporting entity. However, when an intra-group monetary item is eliminated against the corresponding intra-group asset or liability, an exchange difference would emerge in the consolidated financial statements.  The entity is exposed to a foreign exchange gain or loss arising on account of converting the monetary items.   All the exchange differences arising on account of consolidation are reported in the profit and loss account only …
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Translation to presentation currency- Ind AS 21

Translation to presentation currency- Ind AS 21 Executive summary of translation to presentation currency Let us see how the financial statements are translated to presentation currency Financial statements should be translated to presentation currency if the currency is different from the functional currency.  The assets and liabilities are translated based on the closing rate at which the balance sheet is prepared.  Income and expenses are translated at the exchange rate at the respective transaction dates.  Sometimes, this could also be based on the average rate for a period where the exchange rates do not fluctuate significantly.  The exchange differences arising on account of translation of the financial …
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Treatment of exchange differences – Ind AS 21

Treatment of exchange differences – Ind AS 21 Executive  summary of treatment of exchange differences Let us examine the treatment of exchange differences in the books of accounts with a practical example. Let us analyse the treatment of foreign exchange differences arising on account of translating the foreign currency balances to the presentation currency in respect of monetary items. The exchange differences arise either on settlement or on remeasurement at the reporting date. In both these cases, the exchange differences are recognised in the profit and loss account.  Let us briefly understand the difference between the FX revaluation entry and the FX translation entry.  The FX revaluation …
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Recognition and measurement – Ind AS 21

Recognition and measurement – Ind AS 21 Executive summary of recognition and measurement Let us see the recognition and measurement of foreign currency transactions in the books of accounts. First we need to understand what is meant by a foreign currency transaction.  Foreign currency transaction is a transaction in a currency other than the functional currency of the entity.  A foreign currency transaction is the one that is denominated in foreign currency that requires settlement in such foreign currency.  Let us look at the requirements for recognising a foreign currency transaction initially.  First, the foreign currency transaction is entered in separate books of accounts.  Then, the same is …
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Presentation Currency – Ind AS 21

Presentation Currency – Ind AS 21 Executive summary of Presentation currency Let us understand what is a presentation currency and how it is different from the functional currency. Presentation currency is the currency in which the financial statements are prepared.  This can be in a currency chosen by the entity as the entity is free to choose its own currency.  This is mainly for the purpose of presenting the financial statements to the stake holders who are located in another geographical area having a different local currency.  The main difference between a functional currency and the presentation currency should be understood very clearly.  Functional currency is determined …
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Foreign operations – Ind AS 21

Foreign operations – Ind AS 21 Executive summary of Foreign Operations Let us see how the functional currency is determined for a foreign operation.  So what are the factors to be considered in determining the functional currency of a foreign operation?  Basically, there are four factors to be considered. Let us see those factors one by one. The first factor to be considered is the degree of autonomy.  The question that needs to be asked is whether the foreign operation is conducted as an extension of the reporting entity. Are the activities in such foreign operation carried out without significant autonomy? If the answer …
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Functional Currency – Ind AS 21

Functional Currency – Ind AS 21 Executive summary of Functional Currency Functional currency is determined based on the primary economic environment in which it operates.  The primary economic environment is determined based on two primary factors as specified in the Standard viz., the currency in which cash is generated and the currency in which major expenses are incurred by the entity.  When there is a conflict between the two primary factors, then the entity should look for further indicators viz., the currency in which funds are generated which could be either equity or debt instruments and the currency in which the receipts from the …
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Uncertainty over Income Tax Treatments – Ind AS 12

Uncertainty over Income Tax Treatments – Ind AS 12 Issue It may be unclear how tax law applies to a particular transaction or circumstance. The acceptability of a particular tax treatment under tax law may not be known until the relevant taxation authority or a court takes a decision in the future. Consequently, a dispute or examination of a particular tax treatment by the taxation authority may affect an entity’s accounting for a current or deferred tax asset or liability. When there is uncertainty over income tax treatments, this Appendix addresses:whether an entity considers uncertain tax treatments separately;the assumptions an entity makes about …
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Changes in the Tax Status of an Entity or its Shareholders – Ind AS 12

Changes in the Tax Status of an Entity or its Shareholders – Ind AS 12 Issue A change in the tax status of an entity or of its shareholders may have consequences for an entity by increasing or decreasing its tax liabilities or assets.This may, for example, occur upon the public listing of an entity’s equity instruments or upon the restructuring of an entity’s equity.It may also occur upon a controlling shareholder’s move to a foreign country. As a result of such an event, an entity may be taxed differently; it may for example gain or lose tax incentives or become subject …
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Presentation and Disclosure – Ind AS 12

Presentation & Disclosure – Ind AS 12 Presentation Tax assets and tax liabilities Offset An entity shall offset current tax assets and current tax liabilities if, and only if, the entity:has a legally enforceable right to set off the recognised amounts; andintends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. An entity shall offset deferred tax assets and deferred tax liabilities if, and only if:the entity has a legally enforceable right to set off current tax assets against current tax liabilities; andthe deferred tax assets and the deferred tax liabilities relate to income taxes levied by …
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Measurement of deferred tax assets and liabilities – Ind AS 12

Measurement of deferred tax assets and liabilities – Ind AS 12 General Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities shall not be discounted. When different tax rates apply to different levels/ slabs of taxable income, deferred tax assets and liabilities are measured using the average rates that are expected to apply to the taxable profit …
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Initial recognition of an asset or liability – Ind AS 12

Initial recognition of an asset or liability – Ind AS 12 General A temporary difference may arise on initial recognition of an asset or liability, for example if part or all of the cost of an asset will not be deductible for tax purposes. The method of accounting for such a temporary difference depends on the nature of the transaction that led to the initial recognition of the asset or liability: in a business combination, an entity recognises any deferred tax liability or asset and this affects the amount of goodwill or bargain purchase gain it recognises (see above)if the transaction affects either …
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Business Combination – Context of Ind AS 12

Business Combination – Context of Ind AS 12 General Generally, the identifiable assets acquired, and liabilities assumed in a business combination are recognised at their fair values at the acquisition date.Temporary differences arise when the tax bases of the identifiable assets acquired, and liabilities assumed are not affected by the business combination or are affected differently.For example, when the carrying amount of an asset is increased to fair value but the tax base of the asset remains at cost to the previous owner, a taxable temporary difference arises which results in a deferred tax liability.In accordance with Ind AS 103, an entity …
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Current Tax & Deferred Tax – Ind AS 12

Current Tax & Deferred Tax – Ind AS 12 Current Tax Current tax, to the extent unpaid, should be recognised as a liability. If the amount already paid exceeds the amount due to be paid, the excess shall be recognised as an asset.In some jurisdictions, tax losses can be carried back to recover taxes paid in previous periods. The benefit relating to a tax loss that can be carried back to recover current tax of a previous period shall be recognised as an asset.An entity recognises the benefit as an asset in the period in which the tax loss occurs because it …
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Ind AS 12 – Income Taxes – Introduction

Ind AS 12 – Income Taxes – Introduction  Balance sheet approach Ind AS 12, as the name suggests, prescribes the accounting treatment for income taxes. Under the accounting standards, the relevant corresponding standard is AS 22 Taxes on Income.AS 22 required entities to account for deferred taxes using the income statement approach. Ind AS 12, on the other hand, requires the balance sheet approach to be followed for accounting for income taxes.The income statement approach focuses on timing differences, whereas the balance sheet approach focuses on temporary differences.Timing differences are differences between taxable profit and accounting profit that originate in one period …
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Objectives, Scope & Benefits Ind AS 21

Objectives, Scope & Benefits – Ind AS  21 Introduction to Ind AS 21 The importance of international trade in any business entity cannot be over-emphasisedWith globalisation, several entities have started to operate in more than one countryEven those entities that do not operate in other countries either buy or sell goods and/or services from their overseas parties or customersSeveral entities have their own overseas branches which could either be in the form subsidiary or an associateThe result of this is that the entities deal with multiple currencies all the timeThere are also requirements for an entity to present its financial statements in …
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Modification of contractual cash flows

Modification of contractual cash flows Modification due to renegotiation When the contractual cash flows of a financial asset are renegotiated or otherwise modified and the renegotiation or modification does not result in the de-recognition of that financial asset, an entity shall recalculate the gross carrying amount of the financial asset and shall recognise a modification gain or loss in profit or loss. The gross carrying amount of the financial asset is recalculated as the present value of the renegotiated or modified contractual cash flows that are discounted at the financial asset’s original effective interest rate (or credit-adjusted effective interest rate for POCI …
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Effective interest Rate

Effective interest Rate Effective interest rate – definition The rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset or to the amortised cost of a financial liability. When calculating the effective interest rate, an entity shall estimate the expected cash flows by considering all the contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) but shall not consider the expected credit losses. The calculation includes all fees and points paid or received between parties to the …
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Message / Review from CA P. R. Ramesh

Message / Review from CA P. R. Ramesh Financial Instruments is by far the most complex and difficult subject in the field of accounting. The varied nature of such instruments with a wide range of derivatives and associated risk makes the task of measuring and reporting extremely challenging even for experts in the subject. A number of books have been written on IFRS and more recently on Ind AS but very few books have dwelt at length on the subject of financial instruments. This book by CA R. Venkata Subramani demystifies the subject of accounting for Financial Instruments and is extremely useful for …
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Main Features of Ind AS 102

Main Features of Ind AS 102 Share based payment transactions Indian Accounting Standard Ind AS 102 deals with Share based payment trans-actions. This is one of the standards announced by MCA IFRS 2 is the corresponding Accounting Standard issued by International Ac-counting Standards Board (IASB).Mandatory requirements – no exceptions:An entity has to recognise share-based payment transactions in its financial statements, including transactions with employees or other parties to be settled in cash, other assets, or equity instruments of the entity. There are no exceptions to Ind AS 102, other than for transactions to which other Ind ASs apply. Measurement principles: There are specific requirements for …
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Accounting treatment for FVOCI Instruments

Accounting treatment for FVOCI Instruments Is there any difference between the accounting treatment for equity instruments and debt instruments classified as Fair Value Through Other Comprehensive Income (FVOCI)?  The answer is ‘yes’. Frequently participants in my class ask me the underlying reason for such a difference in the accounting treatment when both these types of financial assets are classified as FVOCI. Equity instruments The classification criteria for equity instruments and debt instruments are entirely different. Equity instruments can be classified as either Fair Value Through Profit or Loss (FVTPL) or FVOCI. The investor can exercise the choice without undue delay, provided the equity …
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Foreword by Shri T N Manoharan

Foreword by Shri T N Manoharan Mr R. Venkata Subramani, known for his expertise in the field of Financial Instruments accounting, has come up with a new series of books on Financial Instruments as per Ind AS, incorporating all the relevant aspects of accounting for financial instruments. Each book in the series lucidly deals with the various dimensions of presentation, classification, recognition, measurement and derecognition of Financial instruments. The introductory book deals with the nuances of financial instruments which would empower any reader with a conceptual understanding of the subject matter to pursue the study of other books in the series. The …
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Introduction by Shri M P Vijayakumar

Introduction by Shri M P Vijayakumar Almost all business transactions culminate in financial instruments in some form. In the present era of money, money and money, we witness an increasing trend of businesses being done through contractual arrangements which are structured to such an extent that after some time the contracting parties themselves struggle to understand the arrangement – intent vs agreement, substance vs form. Further, with commerce becoming global and developments in any part of the globe affecting us, the movement of financial instruments is the first indicator of direction of impact. The derivatives market is growing, has matured to a …
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Message from Shri Yagnesh Mohanlal Desai

Message from Shri Yagnesh Mohanlal Desai I have gone through the manuscript of Book – 1 viz., ‘Financial Instruments – An Introduction as per Ind AS 109’ in the series ‘Financial Instruments as per Ind AS’. CA R Venkata Subramani (Venkat), has rich and varied experience spanning across the entire gamut of Financial Instruments. He has helped implementation of IFRS / Ind AS especially hedge accounting for several international banks in Europe/APAC region. He is also known for his expertise in computing Expected Credit Loss (ECL) for non-banking financial companies. His hands-on experience has helped him understand the nuances of the subject …
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Financial Instruments Book Series as per Ind AS 109 (indas109)

Financial Instruments Book Series as per Ind AS 109 (indas109) Preface to the Book Financial instruments are probably the most complex topic in the entire literature of accounting standards. Accounting for financial instruments in the Indian context was earlier covered by AS 30, AS 31, and AS 32 issued by the Institute of Chartered Accountants of India (ICAI) in the year 2007/2008. These standards were supposed to become mandatory from April 1, 2011, but did not see the light of the day as these were withdrawn by ICAI, mainly due to the fact that the corresponding accounting standards of International Accounting Standards …
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Debt instrument measured at FVOCI

Debt instrument measured at FVOCI For financial assets that are debt instruments measured at FVOCI, both the amortised cost and the fair value of the instrument are relevant. The reason for this is the objective of categorising a debt instrument as FVOCI is that both the contractual cash flows characteristic and the fair value of the instrument are relevant as the asset is held to receive contractual cash flows as well as to buy or sell such assets. For the contractual cash flow characteristic, amortised cost is relevant as the interest revenue would be based on the effective rate calculated at …
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Accounting for Investments – Volume 1

Accounting for Investments – Volume 1 Accounting for Investments  Volume 1 attempts to give an exhaustive treatment of various accounting entries that should be recorded by any entity holding any financial instrument. Over the past two decades there have been several innovative financial instruments from the ‘Street’ that calls for special treatment from the accounting, legal and regulatory perspective. The accounting requirements are constantly being monitored and enhanced by the regulators and standard setters to provide more transparency in recording and reporting of these financial products. The book is written from the practical angle and is meant to cater to the …
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Yagnesh Mohanlal Desai

Yagnesh Mohanlal Desai Professional Accountant practicing since August 1983 Actively participated in the process of formulation of IFRS in India Advising and implementing Indian Accounting Standards (Ind AS) Imparting training in the field of Accounting and Auditing Standards Helping big corporates select and implement accounting policies and help them prepare annual reports and notes to accounts from the perspective of Companies Act Have delivered more than 750 lectures on accounting and auditing standards and Companies Act Imparted training in GCC Countries, Myanmar, and Sri Lanka Faculty for one of the big four firms for ‘Finance for Non-Financial Executives (FFNF)’ and ‘Diploma In IFRS – DIP FIRS’ examinations conducted …
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What is the new Expected Credit Loss Model

What is the new Expected Credit Loss Model What is the new ECL Model? Ind AS 109 is the converged version of IFRS 9, as it stood as of 24 July, 2014 when the revised IFRS 9 was announced by the International Accounting Standards Board (IASB). It is pertinent to note that the IASB agreed to disagree with Financial Accounting Standards Board (FASB), the US counterpart. As per the new requirement, it is no longer necessary for a credit event to have occurred before credit losses are recognised. As per the revised requirements, an entity should always account for the expected credit …
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What is meant by significant increase in credit risk

What is meant by significant increase in credit risk Significant increase in credit risk (SICR) At each reporting date an entity shall assess whether the credit risk on a financial instrument is increased significantly since initial recognition. The entity is required to assess the change in the risk of a default occurred over the expected life of the financial instrument and not the change in the amount of expected credit losses. The effect of this is that the risk of default occurring on the financial instrument as at the reporting date is compared with the risk of default occurring on the same …
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What is meant by Hedging

What is meant by Hedging Requirements for hedging Hedging is a mechanism to either minimise the loss or to protect unrealised profits, if any. Maximising the profit is not an objective of hedging. Hedging is a risk management tool. There has to be two components – one underlying instrument – known as the ‘hedged item’ and the other usually a derivative instrument – known as the ‘hedging instrument’. The fair value changes of one instrument would more or less offset the fair value changes of the other instrument. For example, if there is a loss in the underlying instrument, there would be …
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Terms & Conditions

Terms & Conditions These terms and conditions (“Terms”, “Agreement”) are an agreement between Website Operator (“Website Operator”, “us”, “we” or “our”) and you (“User”, “you” or “your”). This Agreement sets forth the general terms and conditions of your use of the rvsbell.com and rvsbell.com/academy website and any of its products or services (collectively, “Website” or “Services”). Accounts and membership If you create an account on the Website, you are responsible for maintaining the security of your account and you are fully responsible for all activities that occur under the account and any other actions taken in connection with it. We may, but have …
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Sumit Dhadda

Sumit Dhadda Chartered accountant, member since 2003 & secured gold medal in CA Inter exams (AIR 25th), Diploma in Information System Audit & Risk Management, Certified Anti Money Laundering Specialist, Certified Concurrent Auditor Registered Valuer from Insolvency & Bankruptcy Board of India under Securities or Financial Asset Class.Insolvency Professional from Insolvency & Bankruptcy Board of India under Securities or Financial Asset Class.Managing Partner of DLS & Associates LLP, having offices at Delhi, Jaipur, Bangalore & ChandigarhOver 17 years of experience in multi-national audit & accounting firms in statutory audits, Ind AS, Valuation & Risk Management.Worked with PWC India (4 years) & KPMG …
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Simplified Approach for ECL for trade receivables

Simplified Approach for ECL for trade receivables Trade receivables, contract assets & lease receivables An entity shall always measure the loss allowance at an amount equal to lifetime expected credit losses for: (a)  trade receivables or contract assets that result from transactions that are within the scope of Ind AS 115, and that: (i)   do not contain a significant financing component (or when the entity applies the practical expedient for contracts that are one year or less) in accordance with Ind AS 115; or (ii)  contain a significant financing component in accordance with Ind AS 115, if the entity chooses as its accounting policy to …
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CA Sanjay Sisodia

CA Sanjay Sisodia A senior Chartered Accountant professional with broad knowledge of fund accounting, financial business principles of asset management, hedge fund industry including role performed by service providers in middle & back office, fund administration, reconciliation, custodians, prime brokers, broking, dealers etc.   Demonstrated expertise in middle office functions including trade support, collateral management, corporate actions, valuations, fund accounting, reconciliations and performance reporting etc.  A strategic thinker and effective leader to make long term and sustainably profitable decisions. Experience with people and project management.  Ability to cultivate strong working relationship with internal teams and clients. Identify, review, investigate and documentation of operational risk activities, …
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Arunachalam Rajaraman

Arunachalam Rajaraman He is a Consulting Actuary and Cost & Management Accountant from Chennai with about 25+ years of work and consulting experience. His experience is spread across Consulting, Technology, Investments, Pensions, Life Insurance and General Insurance.   He had earlier been elected and served as the Vice President and Honorary Secretary of the Institute of Actuaries of India (IAI).  He was also involved in the Committees / Working Groups set up by the Insurance Regulatory and Development Authority of India (IRDAI), the Insurance Regulator.  He is quite passionate about Financial Modelling, Investments and Teaching and involves himself in this area quite extensively.
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Qualifying criteria for hedge accounting

Qualifying criteria for hedge accounting Three criteria for hedge accounting A hedging relationship qualifies for hedge accounting only if all of the following criteria are met: Eligible instruments only The hedging relationship consists only of eligible hedging instruments and eligible hedged items. Formal designation and documentation At the inception of the hedging relationship there is formal designation and documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge. That documentation shall include identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the entity will assess whether the hedging relationship meets the …
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New Privacy Policy

Privacy Policy Rvsbell.com and rvsbell.com/academy website and any of its products or services (collectively, “Website” or “Services”). It also describes the choices available to you regarding our use of your Personal Information and how you can access and update this information. This Policy does not apply to the practices of companies that we do not own or control, or to individuals that we do not employ or manage. Automatic collection of information When you visit the Website our servers automatically record information that your browser sends. This data may include information such as your device’s IP address, browser type and version, operating system type …
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Mohan R. Lavi

Mohan R. Lavi He has over 25 years of experience in industry across a variety of industries, qualified as Chartered Accountant in 1989 Mohan is the author of books on US GAAP, IFRS and the Sarbanes Oxley Act He writes frequently on IFRS and other topics for major publications including the London based http://ifrs.wiley.com Mohan is a speaker at various conferences in India and abroad on Accounting Standards, IFRS, Sarbanes Oxley and Service tax Faculty member of the Institute of Chartered Accountants of India, for their Ind AS (IFRS) Certification Course and with the Management Study Centre, Chennai for their corporate programs He is also on …
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Hedging instruments and hedged items

Hedging instruments and hedged items Hedging  instrument A hedging instrument should normally have one or more of the following characteristic features It should help minimise risk.It should protect the profit still unrealised by locking the same.It should not have the effect of realising the unrealised profit.It should not increase the existing risk by taking a changed exposure or additional exposure to risk.It should usually have a positive net present value, ie, it should be an asset in the books and should not be a liability at any point of time. (There are exceptions to this feature explained later.)It usually has a zero cost …
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Hedge Accounting as per indas109 / IFRS 9

Hedge Accounting as per indas109 / IFRS 9 It may be useful to understand the genesis of hedge accounting as to how the process itself matured over the last two decades. Even though this may not be relevant in the context of Indian Accounting Standards as we in India have inherited the accounting standards relating to financial instruments in general and hedge accounting in particular based on the accounting standards issue by the International Accounting Standards Board (IASB) as on 24 July, 2014.  The main reason for revamping the accounting standards relating to financial instruments by the IASB is the direct outcome …
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Equity derivatives and interest rate derivatives

Equity derivatives and interest rate derivatives Equity derivatives The important difference between futures contract and options contract is that in the case of a futures contract, the risk-reward is symmetric, whereas in an options contract, the risk reward is asymmetric. In other words, if a person enters into a futures contract, he or she stands to gain or lose exactly the same amount if the price of the underlying moves up or down. For example, let us assume that a person enters into a futures contract to buy 100 shares of ABC Limited at Rs 100 with the settlement date after 30 …
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Dr. K. Sriram

Dr. K. Sriram Sriram is a Consulting Actuary engaged in Employee Benefits Consulting Practice since 2007 He is also an Actuarial Consultant- Trainer to some of the leading analytics firms in the area of actuarial analytics Sriram has over two decades of experience in actuarial engagements related to Insurance and Pensions and 15 years of teaching, training & consulting experience in Financial Services & Corporate Finance From January 2010 to April 2012, Sriram was the Appointed Actuary of Max Bupa Health Insurance Company From 2001 to 2006 Sriram was the Chief Actuary of MetLife India Insurance Company. He was also the Appointed Actuary of …
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Dr. Anand Banka

Dr. Anand Banka Dr. Anand Banka is a Fellow Chartered Accountant with PhD in Finance, an Author of 6 best-selling books and a celebrated faculty for courses on International Financial Reporting Standards (IFRS). He started young and always had zeal for giving back to the society – so he started teaching and became guest lecturer/ speaker at various professional forums across India, USA, UAE and other countries. To spread knowledge about IFRS among students and chartered accountants, he also started writing books in lucid language. He has been one of the youngest special invitees on the Accounting Standards Board of the …
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Discontinuation of hedge accounting

Discontinuation of hedge accounting Only prospective discontinuation Discontinuation of hedge accounting applies prospectively from the date on which the qualifying criteria are no longer met. An entity shall not de-designate and thereby discontinue a hedging relationship that: still meets the risk management objective on the basis of which it qualified for hedge accounting (ie, the entity still pursues that risk management objective); andcontinues to meet all other qualifying criteria (after taking into account any rebalancing of the hedging relationship, if applicable). The distinction between the entity’s risk management strategy and the risk management objectives is already discussed earlier. To recapitulate, the risk management strategy is …
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Disclaimer Policy

Disclaimer Policy This disclaimer (“Disclaimer”, “Agreement”) is an agreement between Website Operator (“Website Operator”, “us”, “we” or “our”) and you (“User”, “you” or “your”). This Disclaimer sets forth the general guidelines, terms and conditions of your use of the rvsbell.com and rvsbell.com/academy website and any of its products or services (collectively, “Website” or “Services”). Representation Any views or opinions represented in this Website belong solely to the Content creators and do not represent those of people, institutions or organizations that the Website Operator or creators may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or …
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Cookie Policy

Cookie Policy This cookie policy (“Policy”) describes what cookies are and how Website Operator (“Website Operator”, “we”, “us” or “our”) uses them on the rvsbell.com and rvsbell.com/academy website and any of its products or services (collectively, “Website” or “Services”). You should read this Policy so you can understand what type of cookies we use, the information we collect using cookies and how that information is used. It also describes the choices available to you regarding accepting or declining the use of cookies. For further information on how we use, store and keep your personal data secure, see our Privacy Policy. What are cookies? Cookies …
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CA Viral Shah

CA Viral Shah He is a fellow Member of ICAI, also holds bachelor’s and Master’s in Commerce from Gujarat University, AhmedabadHe holds a USA CPA license from Arizona State Board of AccountancyHe also has successfully passed the certified course of Ind AS conducted by ICAIHe also has cleared CS (Company Secretary) Professional examViral has over 10 years of experience of Accounting and Auditing and Consulting on varied Accounting frameworks (including IND AS, IFRS, US GAAP and IGAAP)His expertise includes implementing IFRS / IND AS in companies across sectorsPresently, Viral has been consulting / advising to corporates and varied entities based on …
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Approaches for assessing credit risk

Approaches for assessing credit risk Drivers of expected credit loss The Standard explains that an entity may apply various approaches to determine whether the credit risk on a financial instrument has increased significantly since initial recognition or when measuring expected credit losses. The entity is also allowed to apply different approaches for different financial instruments. The approach should normally include an explicit PD as an entity. However, even where such an input is not included, the approach may still be considered to be as per the requirements of Ind AS 109 provided the entity is able to separate the changes in the …
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Accounting for Investments – Volume 2

Accounting for Investments – Volume 2  Preface to Volume 2 Accounting for Investments – Fixed Income Securities & Interest Rate Derivatives is the second volume of the Accounting for Investments series. This volume covers the financial instruments of fixed income securities and interest rate derivatives viz. interest rate swaps, caps, floors, collars, reverse collars and cross currency swaps. As in the first volume, this book provides an exhaustive treatment of accounting, presentation and disclosure aspects of any entity dealing with such financial instruments. Since the break out of a severe financial crisis starting in the year 2008 that virtually crippled the world economy, the …
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Acceptable Use Policy

Acceptable Use Policy These acceptable use policy (“Acceptable Use Policy”, “AUP”, “Policy”) is an agreement between Website Operator (“Website Operator”, “us”, “we” or “our”) and you (“User”, “you” or “your”). This Policy sets forth the general guidelines and acceptable and prohibited uses of the rvsbell.com and rvsbell.com/academy website and any of its products or services (collectively, “Website” or “Services”). Prohibited activities and uses You may not use the Services to publish content or engage in activity that is illegal under applicable law, that is harmful to others, or that would subject us to liability, including, without limitation, in connection with any of the …
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Anti-Avoidance measures in certain jurisdictions – Transfer pricing

Anti-Avoidance measures in certain jurisdictions – Transfer pricing Specific anti-avoidance measures in respect of transactions with persons located in Notified Jurisdictional area was introduced in the Act under sec 94AWe have seen in earlier sections that transactions with the AEs are subject to transfer pricing provisions.This is generally sufficient to cover all the related party transactions, since most countries exchange information to the tax authorities of the other country.Where the exchange of information regarding the tax residence of a particular country is difficult to obtain, the CBDT had come up with the idea of Notified Jurisdictional Area (NJA) where any transaction …
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How is the expected credit loss measured

How is the expected credit loss measured ECL measurement criteria An entity shall measure expected credit losses of a financial instrument in a way that reflects: an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;the time value of money; andreasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. The expected credit losses are calculated based on the present value of all cash shortfalls over the expected life of financial instruments. A cash shortfall is determined as the difference between the cash flows that are …
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