February 5, 2024

Applicability of Accounting Standards to Companies other than those following Indian Accounting Standards (Ind AS)1 (I) Accounting Standards applicable in their entirety to companies AS 1 Disclosures of Accounting Policies AS 2 Valuation of Inventories (revised 2016) AS 3 Cash Flow Statements AS 4 Contingencies and Events Occurring After the Balance Sheet Date (revised 2016) AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies AS 7 Construction Contracts (revised 2002) AS 9 Revenue Recognition AS 10 Property, Plant and Equipment AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003) AS 12 Accounting for Government Grants AS 13 Accounting for Investments (revised 2016) AS 14 Accounting for Amalgamations (revised 2016) AS 16 Borrowing Costs AS 18 Related Party Disclosures AS 21 Consolidated Financial Statements (revised 2016) AS 22 Accounting for Taxes on Income AS 23 Accounting for Investments in Associates in Consolidated Financial Statements AS 24 Discontinuing Operations AS 26 Intangible Assets AS 27 Financial Reporting of Interest in Joint Ventures (II) Exemptions or Relaxations for Small and Medium Sized Companies (SMCs) as defined in the Notification dated June 23, 2021, issued by the Ministry of Corporate Affairs, Government of India (1) Accounting Standards not applicable to SMCs in their entirety: AS 17 Segment Reporting (2) Accounting Standards in respect of which relaxations from certain requirements have been given to SMCs: (i) Accounting Standard (AS) 15, Employee Benefits (revised 2005) (a) paragraphs 11 to 16 of the standard to the extent they deal with recognition and measurement of short-term accumulating compensated absences which are non-vesting (i.e., short-term accumulating compensated absences in respect of which employees are not entitled to cash payment for unused entitlement on leaving); (b) paragraphs 46 and 139 of the Standard which deal with discounting of amounts that fall due more than 12 months after the balance sheet date; (c) recognition and measurement principles laid down in paragraphs 50 to 116 and presentation and disclosure requirements laid down in paragraphs 117 to 123 of the Standard in respect of accounting for defined benefit plans. However, such companies should actuarially determine and provide for the accrued liability in respect of defined benefit plans by using the Projected Unit Credit Method and the discount rate used should be determined by reference to market yields at the balance sheet date on government bonds as per paragraph 78 of the Standard. Such companies should disclose actuarial assumptions as per paragraph 120(l) of the Standard; and (d) recognition and measurement principles laid down in paragraphs 129 to 131 of the Standard in respect of accounting for other long-term employee benefits. However, such companies should actuarially determine and provide for the accrued liability in respect of other long-term employee benefits by using the Projected Unit Credit Method and the discount rate used should be determined by reference to market yields at the balance sheet date on government bonds as per paragraph 78 of the Standard. (ii) AS 19, LeasesParagraphs 22 (c),(e) and (f); 25 (a), (b) and (e); 37 (a) and (f); and 46 (b) and (d) relating to disclosures are not applicable to SMCs. (iii) AS 20, Earnings Per ShareDisclosure of diluted earnings per share (both including and excluding extraordinary items) is exempted for SMCs. (iv) AS 28, Impairment of AssetsSMCs are allowed to measure the ‘value in use’ on the basis of reasonable estimate thereof instead of computing the value in use by present value technique. Consequently, if an SMC chooses to measure the ‘value in use’ by not using the present value technique, the relevant provisions of AS 28, such as discount rate etc., would not be applicable to such an SMC. Further, such an SMC need not disclose the information required by paragraph 121(g) of the Standard. (v) AS 29, Provisions, Contingent Liabilities and Contingent Assets (revised) Paragraphs 66 and 67 relating to disclosures are not applicable to SMCs. (3) AS 25, Interim Financial Reporting, does not require a company to present interim financial report. It is applicable only if a company is required or elects to prepare and present an interim financial report. Only certain Non-SMCs are required by the concerned regulators to present interim financial results, e.g., quarterly financial results required by the SEBI. Therefore, the recognition and measurement requirements contained in this Standard are applicable to those Non-SMCs for preparation of interim financial results. Applicability of Accounting Standards to Non-company Entities The Accounting Standards issued by the ICAI are: AS 1 Disclosure of Accounting Policies AS 2 Valuation of Inventories AS 3 Cash Flow Statements AS 4 Contingencies and Events Occurring After the Balance Sheet Date AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies AS 7 Construction Contracts AS 9 Revenue Recognition AS 10 Property, Plant and Equipment AS 11 The Effects of Changes in Foreign Exchange Rates AS 12 Accounting for Government Grants AS 13 Accounting for Investments AS 14 Accounting for Amalgamations AS 15 Employee Benefits AS 16 Borrowing Costs AS 17 Segment Reporting AS 18 Related Party Disclosures AS 19 Leases AS 20 Earnings Per Share AS 21 Consolidated Financial Statements AS 22 Accounting for Taxes on Income AS 23 Accounting for Investments in Associates in Consolidated Financial Statements AS 24 Discontinuing Operations AS 25 Interim Financial Reporting AS 26 Intangible Assets AS 27 Financial Reporting of Interests in Joint Ventures AS 28 Impairment of Assets AS 29 Provisions, Contingent Liabilities and Contingent Assets (1) Applicability of the Accounting Standards to Level 1 Non-company entities. Level I entities are required to comply in full with all the Accounting Standards. (2) Applicability of the Accounting Standards and exemptions/relaxations for Level II, Level III and Level IV Non-company entities (A) Accounting Standards applicable to Non-company entities AS Level II Entities Level III Entities Level IV Entities AS 1 Applicable Applicable Applicable AS 2 Applicable Applicable Applicable AS 3 Not Applicable Not Applicable Not Applicable AS 4 Applicable Applicable Applicable AS 5 Applicable Applicable Applicable AS 7 Applicable

ANNOUNCEMENTS OF THE COUNCIL REGARDING STATUS OF VARIOUS DOCUMENTS ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA Contents I. Clarification regarding Authority Attached to Documents Issued by the Institute 607 II. Accounting Standards 1, 7, 8, 9 and 10 Made Mandatory 611 III. Applicability of Mandatory Accounting Standards to Non-corporate Enterprises 619 IV. Accounting Standard 11 621 V. Mandatory Application of Accounting Standards in respect of Certain Non-corporate Bodies 621 VI. Mandatory Application of Accounting Standards in respect of Tax Audit under Section 44AB of the Income Tax Act, 1961 623 VII. Accounting Standard (AS) 6 (Revised), Depreciation Accounting, Made Mandatory 625 VIII. Applicability of Accounting Standards to Charitable and/or Religious Organisations 626 IX. Applicability of Accounting Standard 11, Accounting for the Effects of Changes in Foreign Exchange Rates, to Authorised Foreign Exchange Dealers 627 X. Accounting Standard (AS) 3, Cash Flow Statements, Made Mandatory 628 XI. Applicability of Accounting Standard (AS) 20, Earnings Per Share 628 XII. Applicability of Accounting Standard (AS) 18, Related Party Disclosures 629 XIII. Clarification on Status of Accounting Standards and Guidance Notes 630 XIV. Accounting Standard (AS) 24, Discontinuing Operations 630 XV. Accounting Standards Specified by the Institute of Chartered Accountants of India under Section 211 of the Companies Act, 1956 631 XVI. Applicability of Accounting Standards to Co-operative Societies 633 XVII. Applicability of Accounting Standards (with reference to Small and Medium Sized Enterprises) 633 XVIII. Treatment of exchange differences under Accounting Standard (AS) 11 (revised 2003), The Effects of Changes in Foreign Exchange Rates vis-a-vis Schedule VI to the Companies Act, 1956 652 XIX. Applicability of Accounting Standard (AS) 26, Intangible Assets, to intangible items 654 XX. Applicability of AS 4 to impairment of assets not covered by present Indian Accounting Standards 655 XXI. Deferment of the Applicability of AS 22 to Non- corporate 656 XXII. Applicability of Accounting Standard (AS) 11 (revised 2003), The Effects of Changes in Foreign Exchange Rates, in respect of exchange differences arising on a forward exchange contract entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction 657 XXIII. Elimination of unrealised profits and losses under AS 21, AS 23 and AS 27 658 XXIV. Disclosures in cases where a Court/Tribunal makes an order sanctioning an accounting treatment which is different from that prescribed by an Accounting Standard 659 XXV. Treatment of Inter-divisional Transfers 660 XXVI. Withdrawal of the Statement on Auditing Practices 661 XXVII. Applicability of Accounting Standards to an Unlisted Indian Company, which is a Subsidiary of a Foreign Company Listed Outside India 662 XXVIII. Tax effect of expenses/income adjusted directly against the reserves and/or Securities Premium Account 663 XXIX. Applicability of Accounting Standard (AS) 28, Impairment of Assets, to Small and Medium Sized Enterprises (SMEs) 664 XXX. Disclosures regarding Derivative Instruments 667 XXXI. Accounting for exchange differences arising on a forward exchange contract entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction 668 XXXII. Applicability Date of Announcement on ‘Accounting for exchange differences arising on a forward exchange contract entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction’ 669 XXXIII. Deferment of Applicability of Announcement on ‘Accounting for exchange differences arising on a forward exchange contract entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction’ 670 XXXIV. Deferment of Applicability of Accounting Standard (AS) 15, Employee Benefits (revised 2005) 671 XXXV. Withdrawal of the Announcement issued by the Council on ‘Treatment of Exchange differences under Accounting Standard (AS)11 (revised 2003), The Effects of changes in Foreign Exchange Rates vis-a-vis Schedule VI to the Companies Act, 1956’ 671 XXXVI. Deferment of Applicability of Announcement on ‘Accounting for exchange differences arising on a forward exchange contract entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction 672 XXXVII. Option to an entity to adopt alternative treatment allowed by way of amendment to the Transitional Provisions of Accounting Standard (AS) 15, Employee Benefits (revised 2005) 673 XXXVIII. Harmonisation of various differences between the Accounting Standards issued by the ICAI and the Accounting Standards notified by the Central Government 673 XXXIX. Accounting for Derivatives 690 XL. Announcements on ‘Accounting for exchange differences arising on a forward exchange contract entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction withdrawn 690 XLI. Application of AS 30, Financial Instruments: Recognition and Measurement. 691 XLII. Revision in the criteria for classifying Level II non- corporate entities 693 XLIII. Presentation of Foreign Currency Monetary Item Translation Difference Account 694 XLIV. Insertion of new paragraph 46 in AS 11, The Effects of Changes in Foreign Exchange Rates, issued by the Chartered Accountant of India, for their applicability to entities other than companies. 696 XLV Amendment to AS 2, 4, 6, 10, 13, 14, 21 and 29 issued by the Institute of Chartered Accountants of India pursuant to issuance of amendment to Accounting Standards by MCA. 697 XLVI Withdrawal of the Accounting Standards (AS) 30, Financial Instruments: Recognition and Measurement, AS 31, Financial Instruments: Presentation, AS 32 Financial Instruments: Disclosures. 698 XLVII Announcement providing Temporary Exceptions to Hedge Accounting prescribed under Guidance Note on Accounting for Derivative Contracts due to Interest Rate Benchmark Reform 700 XLVIII Criteria for classification of Non-company entities for applicability of Accounting Standards 704 ANNOUNCEMENTS OF THE COUNCIL REGARDING STATUS OF VARIOUS DOCUMENTS ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA I Clarification regarding Authority Attached to Documents Issued by the Institute1 1 The Institute has, from time to time, issued ‘Guidance Notes’ and ‘Statements’ on a number of matters. With the formation of the Accounting Standards Board and the Auditing Practices Committee2 , ‘Accounting Standards’ and ‘Statements on Standard Auditing Practices’3 are also being issued. 2 Members have sought guidance regarding the level of authority attached to the various documents issued by the Institute and the degree of compliance required in respect thereof. This note is being

Provisions, Contingent Liabilities and Contingent Assets Objective The objective of this Standard is to ensure that appropriate recognition criteria and measurement bases are applied to provisions and contingent liabilities and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing and amount. The objective of this Standard is also to lay down appropriate accounting for contingent assets. Scope 1. This Standard should be applied in accounting for provisions and contingent liabilities and in dealing with contingent assets, except: (a) those resulting from financial instruments2 that are carried at fair value; (b) those resulting from executory contracts, except where the contract is onerous; Explanation: (i) An ‘onerous contract’ is a contract in which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. Thus, for a contract to qualify as an onerous contract, the unavoidable costs of meeting the obligation under the contract should exceed the economic benefits expected to be received under it. The unavoidable costs under a contract reflect 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 fulfill it. (ii) If an enterprise has a contract that is onerous, the present obligation under the contract is recognised and measured as a provision as per this Standard. The application of the above explanation is illustrated in Illustration 10 of Illustration C attached to the Standard. (c) those arising in insurance enterprises from contracts with policy- holders; and (d) those covered by another Accounting Standard. 2. This Standard applies to financial instruments (including guarantees) that are not carried at fair value. 3. Executory contracts are contracts under which neither party has performed any of its obligations or both parties have partially performed their obligations to an equal extent. This Standard does not apply to executory contracts unless they are onerous. 4. This Standard applies to provisions, contingent liabilities and contingent assets of insurance enterprises other than those arising from contracts with policy-holders. 5. Where another Accounting Standard deals with a specific type of provision, contingent liability or contingent asset, an enterprise applies that Standard instead of this Standard. For example, certain types of provisions are also addressed in Accounting Standards on: (a) construction contracts (see AS 7, Construction Contracts); (b) taxes on income (see AS 22, Accounting for Taxes on Income); (c) leases (see AS 19, Leases). However, as AS 19 contains no specific requirements to deal with operating leases that have become onerous, this Standard applies to such cases; and (d) Employee benefits (see AS 15, Employee Benefits). 6. Some amounts treated as provisions may relate to the recognition of revenue, for example where an enterprise gives guarantees in exchange for a fee. This Standard does not address the recognition of revenue. AS 9, Revenue Recognition, identifies the circumstances in which revenue is recognised and provides practical guidance on the application of the recognition criteria. This Standard does not change the requirements of AS 9. 7. This Standard defines provisions as liabilities which can be measured only by using a substantial degree of estimation. The term ‘provision’ is also used in the context of items such as depreciation, impairment of assets and doubtful debts: these are adjustments to the carrying amounts of assets and are not addressed in this Standard. 8. Other Accounting Standards specify whether expenditures are treated as assets or as expenses. These issues are not addressed in this Standard. Accordingly, this Standard neither prohibits nor requires capitalisation of the costs recognised when a provision is made. 9. This Standard applies to provisions for restructuring (including discontinuing operations). Where a restructuring meets the definition of a discontinuing operation, additional disclosures are required by AS 24, Discontinuing Operations. Definitions  10. The following terms are used in this Standard with the meanings specified:  10.1 A provision is a liability which can be measured only by using a substantial degree of estimation.  10.2 A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.  10.3 An obligating event is an event that creates an obligation that results in an enterprise having no realistic alternative to settling that obligation.  10.4 A contingent liability is: (a) a possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the enterprise; or (b) a present obligation that arises from past events but is not recognised because: (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or (ii) a reliable estimate of the amount of the obligation cannot be made.  10.5 A contingent asset is a possible asset that arises from past events the existence of which will be confirmed only by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the enterprise.  10.6 Present obligation – an obligation is a present obligation if, based on the evidence available, its existence at the balance sheet date is considered probable, i.e., more likely than not.  10.7 Possible obligation – an obligation is a possible obligation if, based on the evidence available, its existence at the balance sheet date is considered not probable.  10.8 A restructuring is a programme that is planned and controlled by management, and materially changes either: (a) the scope of a business undertaken by an enterprise; or (b) the manner in which that business is conducted.  11. An obligation is a duty or responsibility to act or perform in a certain way. Obligations may be legally enforceable as a consequence of a binding contract or statutory requirement. Obligations also arise from normal business practice, custom and a desire to maintain good business relations or act in an equitable manner. 12. Provisions can be distinguished from other liabilities such as trade payables and accruals because in the measurement of provisions

Impairment of Assets Objective The objective of this Standard is to prescribe the procedures that an enterprise applies to ensure that its assets are carried at no mo re than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and this Standard requires the enterprise to recognise an impairment loss. This Standard also specifies when an enterprise should reverse an impairment loss and it prescribes certain disclosures for impaired assets. Scope 1. This Standard should be applied in accounting for the impairment of all assets, other than: (a) inventories (see AS 2, Valuation of Inventories); (b) assets arising from construction contracts (see AS 7, Construction Contracts); (c) financial assets 2, including investments that are included in the scope of AS 13, Accounting for Investments; and (d) deferred tax assets (see AS 22, Accounting for Taxes on Income). 2. This Standard does not apply to inventories, assets arising from construction contracts, deferred tax assets or investments because existing Accounting Standards applicable to these assets already contain specific requirements for recognising and measuring the impairment related to these assets. 3. This Standard applies to assets that are carried at cost. It also applies to assets that are carried at revalued amounts in accordance with other applicable Accounting Standards. However, identifying whether a revalued asset may be impaired depends on the basis used to determine the fair value of the asset: (a) if the fair value of the asset is its market value, the only difference between the fair value of the asset and its net selling price is the direct incremental costs to dispose of the asset: (i) if the disposal costs are negligible, the recoverable amount of the revalued asset is necessarily close to, or greater than, its revalued amount (fair value). In this case, after the revaluation requirements have been applied, it is unlikely that the revalued asset is impaired and recoverable amount need not be estimated; and (ii) if the disposal costs are not negligible, net selling price of the revalued asset is necessarily less than its fair value. Therefore, the revalued asset will be impaired if its value in use is less than its revalued amount (fair value). In this case, after the revaluation requirements have been applied, an enterprise applies this Standard to determine whether the asset may be impaired; and (b) if the asset’s fair value is determined on a basis other than its market value, its revalued amount (fair value) may be greater or lower than its recoverable amount. Hence, after the revaluation requirements have been applied, an enterprise applies this Standard to determine whether the asset may be impaired. Definitions  4. The following terms are used in this Standard with the meanings specified:  4.1 Recoverable amount is the higher of an asset’s net selling price and its value in use.  4.2 Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Provided that in the context of Small and Medium-sized Companies and Small and Medium-sized Enterprises (SMEs) (Level III and II non-company entities), as defined in Appendix 1 to this Compendium, the definition of the term ‘value in use’ would read as follows: “ Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life, or a reasonable estimate thereof. ” Explanation: The definition of the term ‘value in use’ in the proviso implies that instead of using the present value technique, a reasonable estimate of the ‘value in use’ can be made. Consequently, if an SMC /SME chooses to measure the ‘value in use’ by not using the present value technique, the relevant provisions of AS 28, such as discount rate etc., would not be applicable to such an SMC/SME.  4.3 Net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.  4.4 Costs of disposal are incremental costs directly attributable to the disposal of an asset, excluding finance costs and income tax expense.  4.5 An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount.  4.6 Carrying amount is the amount at which an asset is recognised in the balance sheet after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon.  4.7 Depreciation (Amortisation ) is a systematic allocation of the depreciable amount of an asset over its useful life. 3  4.8 Depreciable amount is the cost of an asset, or other amount substituted for cost in the financial statements, less its residual value.  4.9 Useful life is either: (a) the period of time over which an asset is expected to be used by the enterprise; or (b) the number of production or similar units expected to be obtained from the asset by the enterprise.  4.10 A cash generating unit is the smallest identifiable group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets.  4.11 Corporate assets are assets other than goodwill that contribute to the future cash flows of both the cash generating unit under review and other cash generating units.  4.12 An active market is a market where all the following conditions exist: (a) the items traded within the market are homogeneous; (b) willing buyers and sellers can normally be found at any time; and (c) prices are available to the public. Identifying an Asset that may be Impaired  5. An asset is impaired when the carrying amount of the asset exceeds its recoverable amount. Paragraphs 6 to 13 specify when recoverable amount should be determined. These requirements use the term ‘an asset’ but apply equally to an individual asset or a cash-generating unit. 6. An enterprise should assess at each balance sheet date whether there is any indication that an