WORLD ACADEMY OF INFORMATICS AND MANAGEMENT SCIENCES
ISSN : 2278-1315
It is separable, i.e. capable of being separated or divided
SECTION 21: PROVISIONS AND CONTINGENCIES
from the entity and sold, transferred, licensed, rented or
This section applies to all provisions (i.e. liabilities of
exchanged, either individually or together with a related
uncertain timing or amount), contingent liabilities and
contract, asset or liability; or It arises from contractual or
contingent assets except those provisions covered by other
other legal rights, regardless of whether those rights are
sections of this Standard. These include provisions relating to:
transferable or separable from the entity or from other rights
Leases (Section 20 Leases). However, this section deals with
and obligations. This section does not apply to the
operating leases that have become onerous. Construction
following: Financial assets; or mineral rights and mineral
contracts (Section 23 Revenue). However this section deals
reserves, such as oil, natural gas and similar non-
with construction contracts that have become onerous.
regenerative resources.
Employee benefit obligations (Section 28 Employee Benefits).
Income tax (Section 29 Income Tax). The requirements in this
SECTION 19: BUSINESS COMBINATIONS AND
section do not apply to executory contracts unless they are
GOODWILL
This section applies to accounting for business
onerous contracts. Executory contracts are contracts under
combinations. It provides guidance on identifying the
which neither party has performed any of its obligations or
acquirer, measuring the cost of the business combination
both parties have partially performed their obligations to an
and allocating that cost to the assets acquired and liabilities
equal extent. The word ‘provision’ is sometimes used in the
and provisions for contingent liabilities assumed. It also
context of such items as depreciation, impairment of assets
addresses accounting for goodwill both at the time of a
and uncollectable receivables. Those are adjustments of the
business combination and subsequently. This section
carrying amounts of assets, instead of recognition of
specifies the accounting for all business combinations
liabilities, and therefore are not covered by this section.
except: Combinations of entities or businesses under
SECTION 22: LIABILITIES AND EQUITY
common control. Common control means that all of the
This section establishes principles for classifying financial
combining entities or businesses are ultimately controlled by
instruments as either liabilities or equity and addresses
the same party or parties both before and after the business
accounting for equity instruments issued to individuals or
combination, and that control is not transitory. The
other parties acting in their capacity as investors in equity
formation of a joint venture. Acquisition of a group of
instruments (i.e. in their capacity as owners). Section 26
assets that do not constitute a business.
Share-based Payment addresses accounting for a transaction
in which the entity receives goods or services (including
employee services) as consideration for its equity instruments
SECTION 20: LEASES
This section covers accounting for all leases other than:
(including shares or share options) from employees and other
Leases to explore for or use minerals, oil, natural gas and
vendors acting in their capacity as vendors of goods and
similar non-regenerative resources (see Section 34
services.This section shall be applied when classifying all
Specialized Activities); Licensing agreements for such items
types of financial instruments except: Those interests in
as motion picture films, video recordings, plays,
subsidiaries, associates and joint ventures that are accounted
manuscripts, patents and copyrights (see Section 18
for in accordance with Section 9 Consolidated and Separate
Intangible Assets other than Goodwill); Measurement of
Financial Statements, Section 14 Investments in Associates or
property held by lessees that is accounted for as investment
Section 15 Interests in Joint Ventures. Employers’ rights and
property and measurement of investment property provided
obligations under employee benefit plans, to which Section 28
by lessors under operating leases (see Section 16 Investment
Employee Benefits applies. Contracts for contingent
Property); Measurement of biological assets held by lessees
consideration in a business combination (see Section 19
under finance leases and biological assets provided by
Business Combinations and Goodwill). This exemption
lessors under operating leases (see Section 34); Leases that
applies only to the acquirer. Financial instruments, contracts
could lead to a loss to the lessor or the lessee as a result of
and obligations under share-based payment transactions to
contractual terms that are unrelated to changes in the price
which Section 26 applies, except that paragraphs 22.3–22.6
of the leased asset, changes in foreign exchange rates,
(see the full document) shall be applied to treasury shares
changes in lease payments based on variable market interest
purchased, sold, issued or cancelled in connection with
rates, or a default by one of the counterparties (see
employee share option plans, employee share purchase plans
paragraph 12.3(f) of the full document); and Operating
and all other share-based payment arrangements.
leases that are onerous. This section applies to agreements
SECTION 23: REVENUE
that transfer the right to use assets even though substantial
This section shall be applied in accounting for revenue arising
services by the lessor may be called for in connection with
from the following transactions and events: The sale of goods
the operation or maintenance of such assets. This section
(whether produced by the entity for the purpose of sale or
does not apply to agreements that are contracts for services
purchased for resale); The rendering of services;
that do not transfer the right to use assets from one
Construction contracts in which the entity is the contractor;
contracting party to the other. Some arrangements, such as
and The use by others of entity assets yielding interest,
some outsourcing arrangements, telecommunication
royalties or dividends. Revenue or other income arising from
contracts that provide rights to capacity and take-or-pay
some transactions and events is dealt with in other sections of
contracts, do not take the legal form of a lease but convey
this Standard: Lease agreements (see Section 20 Leases);
rights to use assets in return for payments. Such
Dividends and other income arising from investments that are
arrangements are in substance leases of assets and they shall
accounted
for using the equity method (see Section 14
be accounted for under this section.
Investments in Associates and Section 15 Investments in Joint
Ventures);
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