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GNDU Question Paper-2022
Bachelor of Commerce
(B.Com) 5
th
Semester
CONTEMPORARY ACCOUNTING
Time Allowed: Three Hours Max. Marks: 50
Note: Attempt Five questions in all, selecting at least One question from each section. The
Fifth question may be attempted from any section. All questions carry equal marks.
SECTION-A
1. Explain Human Resource Accounting and its Scope in detail.
2. Briefly discuss the use of Human Resource Accounting in Managerial Decisions.
SECTION-B
3. Discuss various methods of Price Level Accounting.
4. Briefly explain various approaches to Corporate Social Accounting
SECTION-C
5. Explain Value Added Reporting in detail.
6. Write a brief note on Basel II and III Norms.
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SECTION-D
7. Explain Accounting Standards in India in detail.
8. Explain Accounting Standards relating to Interim Reporting.
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GNDU Answer Paper-2022
Bachelor of Commerce
(B.Com) 5
th
Semester
CONTEMPORARY ACCOUNTING
Time Allowed: Three Hours Max. Marks: 50
Note: Attempt Five questions in all, selecting at least One question from each section. The
Fifth question may be attempted from any section. All questions carry equal marks.
SECTION-A
1. Explain Human Resource Accounting and its Scope in detail.
Ans: Scene 1: The Invisible Asset
It’s Monday morning at “BrightMinds Tech Ltd.”. The balance sheet is on the CEO’s desk. It
lists:
• Land and buildings: ₹50 crore
• Machinery: ₹20 crore
• Cash: ₹5 crore
But the CEO smiles and says to the CFO:
“Our real value isn’t here. It’s in the engineers who design our products, the sales team who
bring in clients, the managers who solve problems. Without them, these machines and
buildings are just metal and concrete.”
This is the core idea of Human Resource Accounting — recognising that people are assets,
not just expenses, and finding a way to measure and report their value.
What is Human Resource Accounting?
In simple words:
Human Resource Accounting (HRA) is the process of identifying, measuring, and reporting
the value of human resources in an organisation, just like we do for physical and financial
assets.
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It treats employees as assets that generate future economic benefits, not just costs on the
profit and loss account. It involves:
• Calculating the cost of acquiring, training, and developing employees.
• Estimating the value they bring through skills, experience, and productivity.
• Presenting this information in a way that helps management make better decisions.
Key Features of HRA
1. Asset Perspective — Employees are seen as assets, not liabilities.
2. Quantification — Attempts to put a monetary value on human resources.
3. Dual Focus — Looks at both the cost of human resources and their value.
4. Decision Support — Helps in planning, training, promotion, and retention strategies.
5. Dynamic — Values change over time as employees gain experience or leave.
Why Human Resource Accounting Emerged
Traditionally, accounting treated:
• Salaries, recruitment, and training costs as expenses.
• Only physical and financial resources as assets.
But in a knowledge economy, human skills, creativity, and relationships often outweigh
physical assets in importance. HRA emerged to:
• Recognise the true worth of human capital.
• Provide a more complete picture of an organisation’s value.
• Support strategic HR decisions with data.
Objectives of Human Resource Accounting
1. Measure the Cost of Human Resources
o Recruitment, selection, training, development, and welfare costs.
2. Assess the Value of Human Resources
o Skills, knowledge, experience, and potential future contribution.
3. Aid in Decision-Making
o Whether to invest in training, hire more staff, or restructure.
4. Improve HR Planning
o Forecasting manpower needs and budgeting for HR activities.
5. Increase Awareness
o Among management and stakeholders about the importance of human
resources.
6. Evaluate Return on Investment in People
o Compare the benefits generated by employees to the costs incurred.
Scope of Human Resource Accounting
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The scope of HRA is wide — it covers every stage of an employee’s journey in the
organisation and every aspect of their value.
Let’s walk through it like a timeline.
1. Acquisition of Human Resources
• Recruitment Costs — Advertising, recruitment agency fees, interview expenses.
• Selection Costs — Testing, background checks, selection panels.
• Hiring Costs — Relocation, joining bonuses.
HRA records these as investment in human capital, not just expenses.
2. Development of Human Resources
• Training Costs — Induction, technical training, soft skills workshops.
• On-the-Job Learning — Mentoring, coaching.
• Education Sponsorships — Funding higher studies or certifications.
These costs increase the value of the human asset by enhancing skills.
3. Utilisation of Human Resources
• Deployment — Assigning the right people to the right jobs.
• Performance Measurement — Productivity, quality of work, innovation.
• Motivation and Engagement — Incentives, recognition programmes.
HRA here focuses on maximising returns from the human asset.
4. Maintenance of Human Resources
• Compensation and Benefits — Salaries, bonuses, health insurance, retirement
benefits.
• Work Environment — Safety measures, wellness programmes.
• Employee Relations — Conflict resolution, grievance handling.
These maintain the asset’s value and prevent depreciation (loss of morale or skills).
5. Retention of Human Resources
• Career Development — Promotions, job rotation.
• Succession Planning — Preparing future leaders.
• Retention Strategies — Stock options, long-term incentives.
Retention reduces the cost of replacing valuable employees.
6. Separation of Human Resources
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• Retirement — Payouts, knowledge transfer.
• Resignation/Termination — Exit interviews, settlement costs.
• Loss of Value — Estimating the cost of losing experienced staff.
HRA records the decrease in asset value when employees leave.
Approaches to Human Resource Accounting
There are two main approaches:
A. Cost Approach
1. Historical Cost Method
o Capitalise all costs of recruitment, training, and development.
o Amortise over the expected service life of the employee.
2. Replacement Cost Method
o Estimate the cost to replace existing employees with similar talent.
B. Value Approach
1. Present Value of Future Earnings
o Estimate the future earnings of employees and discount to present value.
2. Lev & Schwartz Model
o Calculates the present value of future earnings for each age group of
employees until retirement.
3. Economic Value Method
o Measures the employee’s contribution to the organisation’s profits.
Benefits of Human Resource Accounting
1. Better HR Decisions
o Data-driven hiring, training, and retention strategies.
2. Improved Financial Reporting
o More accurate picture of the organisation’s total assets.
3. Performance Measurement
o Evaluate HR policies and their impact on value creation.
4. Investor Confidence
o Shows commitment to developing and retaining talent.
5. Motivation
o Employees feel valued when they are recognised as assets.
Limitations of Human Resource Accounting
1. Valuation Challenges
o Skills and potential are hard to measure in monetary terms.
2. Lack of Standardisation
o No universally accepted method.
3. Subjectivity
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o Estimates can vary widely between valuers.
4. Non-Recognition in Statutory Accounts
o Most accounting standards don’t mandate HRA in published financial
statements.
Example in Action
At BrightMinds Tech:
• Recruitment & training cost for a software engineer: ₹5 lakh.
• Expected service life: 5 years.
• Annual contribution to profit: ₹4 lakh.
Using HRA:
• The ₹5 lakh is capitalised and amortised over 5 years.
• The engineer’s value is also estimated using the present value of future earnings.
• Management uses this data to decide on training budgets and retention bonuses.
Why HRA Matters Today
In industries like IT, consulting, design, and R&D:
• Physical assets depreciate quickly.
• Human creativity and knowledge drive competitive advantage.
HRA helps:
• Recognise the true drivers of value.
• Justify investments in people.
• Build a culture that sees employees as partners in value creation.
Exam-Ready Summary
Definition: HRA is the process of identifying, measuring, and reporting the value of human
resources as organisational assets.
Objectives:
• Measure cost and value of human resources.
• Aid decision-making and HR planning.
• Increase awareness of human capital’s importance.
• Evaluate ROI on people.
Scope:
• Acquisition → Development → Utilisation → Maintenance → Retention →
Separation.
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• Covers all costs and values associated with employees.
Approaches:
• Cost Approach — Historical cost, replacement cost.
• Value Approach — Present value of future earnings, Lev & Schwartz model,
economic value.
Benefits:
• Better HR decisions.
• Improved reporting.
• Performance measurement.
• Investor confidence.
• Employee motivation.
Limitations:
• Valuation challenges.
• Lack of standardisation.
• Subjectivity.
• Not mandated in statutory accounts.
Final Takeaway: Human Resource Accounting is like putting on a pair of glasses that lets you
see the true value of people in numbers — not to reduce them to figures, but to ensure they
get the recognition, investment, and strategic focus they deserve. In a world where ideas
and skills often matter more than machines and buildings, HRA turns the invisible asset —
your people — into a visible, measurable, and celebrated part of the organisation’s wealth.
2. Briefly discuss the use of Human Resource Accounting in Managerial Decisions.
Ans: Human Resource Accounting in Managerial Decisions
Imagine you are the captain of a cricket team. You have a bat, stumps, pads, balls—these
are your physical resources. But think for a moment—if you don’t have good players, can
you win the match with only equipment? Obviously not! The real strength of the team lies in
the players—their talent, energy, strategies, and teamwork.
Now, replace the cricket team with a company. The buildings, machines, computers, and
furniture are important, but the real "players" are the employees. They generate ideas,
manage systems, solve problems, deal with customers, and innovate new products. Without
them, the machines would just gather dust.
This is where Human Resource Accounting (HRA) enters the story. It is like a special
scoreboard where we measure and record the value of people in financial terms, just as we
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measure machines, land, or money. And once we know their value, managers can make
better decisions—just like a captain deciding the batting order after knowing the strengths
of every player.
Let’s unfold this story step by step.
What is Human Resource Accounting (HRA)?
Human Resource Accounting is the process of identifying, measuring, and reporting the
value of human resources in an organization. In simple words, it answers this question:
“How valuable are our employees, and how can we use this value wisely in decision-
making?”
It doesn’t mean putting a price tag on a person’s life. Instead, it focuses on the cost of
hiring, training, developing, and the benefits employees bring to the organization in terms of
skills, productivity, and innovation.
Why Do We Need HRA?
Managers usually get financial reports showing profits, assets, and liabilities. But one
important thing is missing—the worth of employees. For example, if a company spends
lakhs on training engineers, this investment is invisible in the balance sheet. Without HRA,
managers may overlook how much talent they have and how to use it.
Thus, HRA gives managers a clearer picture of the company’s “real wealth”—its people.
How HRA Helps in Managerial Decisions (Explained as a Story)
Let’s imagine a company called BrightFuture Ltd. The CEO, Mr. Sharma, is struggling to
make some big decisions. Here’s how HRA helps him:
1. Recruitment Decisions
Mr. Sharma wants to hire new software developers. Through HRA, he can compare:
• How much the company spends on hiring,
• The skills required, and
• The long-term value new employees will add.
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Instead of blindly recruiting, he invests in employees who will bring the highest return to the
company. Just like a cricket captain chooses batsmen who can score consistently, HRA helps
managers hire wisely.
2. Training and Development Decisions
BrightFuture Ltd. is planning to introduce Artificial Intelligence (AI) in its products. But the
current employees lack expertise. Here HRA shows how much the company has already
invested in employee training and predicts the benefits of further training.
For example, if training costs ₹10 lakhs but increases productivity by ₹50 lakhs, it is a wise
decision. Thus, HRA helps managers see training not as an expense but as an investment.
3. Retention and Motivation Decisions
Suppose the company’s top software architect is planning to resign. HRA data reveals that
the value he adds is much higher than his salary. Managers, then, can decide to retain him
by offering better pay, promotions, or career growth opportunities.
Here, HRA prevents the company from losing its “star player.”
4. Promotion and Transfer Decisions
When it comes to promoting employees, managers usually rely on performance appraisals.
But with HRA, they also get financial insights. For example, transferring an experienced
employee to a new branch may boost that branch’s performance drastically. Thus, decisions
become more fact-based than emotional.
5. Merger and Acquisition Decisions
Suppose BrightFuture Ltd. is thinking of merging with another company. Normally,
managers check the land, machinery, and profits of the target company. But HRA also
highlights the skills, loyalty, and expertise of employees.
After all, what’s the point of acquiring a company with great machines but unmotivated
staff?
6. Budgeting and Cost Control
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HRA helps managers decide how much budget to allocate for salaries, training, and welfare
schemes. It also identifies departments where human resources are under-utilized, so
managers can cut costs without harming productivity.
7. Performance Measurement
Managers can use HRA to see whether employees are giving returns equal to or greater
than the investment made on them. If not, they can redesign roles, introduce new
incentives, or hire additional staff.
8. Long-Term Strategic Decisions
HRA is not only about day-to-day choices; it also shapes the future. For example, if HRA data
shows employees are aging and few young talents are joining, managers may decide to start
campus recruitment drives.
This way, HRA helps in succession planning—preparing the next generation of leaders.
Advantages of Using HRA in Decisions
1. Clarity for Managers – Provides a complete picture of the organization’s assets.
2. Better Planning – Helps in manpower planning and allocation.
3. Employee Motivation – When employees know their value is recognized, they feel
respected.
4. Cost Control – Avoids unnecessary hiring or training expenses.
5. Investor Confidence – Investors trust companies that value their employees.
Limitations of HRA
Of course, every story has challenges. HRA also faces some issues:
• It is difficult to measure human value in exact numbers.
• Some may feel uncomfortable being treated as “assets.”
• No universally accepted method exists for HRA.
But even with these limitations, HRA is far better than ignoring the value of employees.
A Simple Analogy
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Think of running a company like running a farm. The machines, land, and seeds are
important, but the real magic happens when farmers (human resources) work hard to grow
the crops. If we only calculate the cost of land and machines, but forget the farmers, our
financial picture is incomplete. HRA is like recognizing the worth of farmers and planning
accordingly.
Conclusion
In the end, Human Resource Accounting is not just about numbers—it’s about recognizing
that employees are the lifeblood of an organization. By using HRA, managers make smarter
decisions about hiring, training, promotions, retention, budgeting, and even mergers.
It transforms employees from being seen as “expenses” to being acknowledged as
“investments.” Just like a cricket captain carefully uses each player’s strength to win the
match, managers use HRA to guide their team—because at the end of the day, machines
may run the operations, but it is people who run the machines.
SECTION-B
3. Discuss various methods of Price Level Accounting.
Ans: Discuss Various Methods of Price Level Accounting
Imagine you are running a shop in a busy marketplace. Every day, hundreds of customers
come, and you sell products at the prices printed on your shelves. You record your sales,
profits, and expenses in neat accounting books. Everything looks fine.
But then something strange happens—prices in the market start rising. Last year, the sugar
bag you bought at ₹1,000 is now ₹1,400. The land you purchased 5 years ago for ₹10 lakh is
now worth ₹25 lakh. Even workers are asking for higher wages because daily goods have
become costly.
Suddenly, the numbers in your books don’t make sense anymore. You might have earned a
“profit” on paper, but when you try to buy new stock, the money doesn’t cover it. That’s
when you realize: ordinary accounting ignores the effect of changing price levels.
This is exactly the problem businesses face in the real world. Prices don’t stay still; they rise
(inflation) or sometimes fall (deflation). So, we need a way to adjust accounts so they reflect
the “real” situation. This adjustment is called Price Level Accounting.
And to solve this problem, accountants have developed different methods. Let’s walk
through these methods one by one, like exploring different rides at a fair.
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1. Current Purchasing Power Method (CPP)
Think of this as wearing special glasses that adjust old money to today’s money value.
In this method, we use a general price index (like Consumer Price Index) to restate all items.
For example:
• If machinery bought in 2015 for ₹50,000 is still shown in accounts as ₹50,000, CPP
says, “Wait! Let’s update this into today’s value.” If the index has doubled, we record
it as ₹1,00,000.
How it works
• All non-monetary items (land, building, machinery) are adjusted using the index.
• Monetary items (cash, debtors, creditors) are not adjusted because their value
already changes with inflation.
• The result is a new set of financial statements that show values in current
purchasing power terms.
Benefit: It gives a clearer picture of what money is truly worth.
Limitation: It assumes one general index can represent all price changes, which may not
always be accurate.
So, CPP is like taking your old childhood toy’s price and converting it into today’s money to
see its “real worth.”
2. Current Cost Accounting Method (CCA)
Now imagine you want to replace your shop’s furniture. You bought chairs years ago for
₹500 each. Today, new chairs cost ₹1,500 each. Should your books still show ₹500, or
should they reflect replacement cost?
That’s the thinking behind Current Cost Accounting (CCA).
How it works
• Instead of recording assets at their original cost, we record them at their
replacement cost.
• Depreciation is charged on the new cost, not the old cost.
• Inventory is also valued at replacement cost.
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Example
If you own machinery that originally cost ₹1,00,000 but would cost ₹2,50,000 today, CCA
values it at ₹2,50,000. Depreciation is then charged on ₹2,50,000, not on ₹1,00,000.
Benefit: Shows how much it would actually cost to keep the business running today.
Limitation: Requires frequent revaluation, which can be costly and complicated.
So, CCA is like running your business with today’s price tags rather than yesterday’s.
3. Hybrid Method (CPP + CCA)
Sometimes, just one method is not enough. That’s when accountants mix both CPP and CCA.
How it works
• Use CPP to adjust for general inflation.
• Use CCA to adjust for specific price changes in assets.
It’s like eating pizza with both cheese and toppings—you need both to enjoy the full taste.
Benefit: More realistic, because it captures both overall inflation and specific asset
costs.
Limitation: Complex, because you need both general index data and replacement cost
data.
4. Replacement Cost Accounting
This method is very close to CCA, but slightly simpler. Instead of revaluing everything, it
focuses only on how much it would cost to replace the assets used.
Example: If your delivery van bought for ₹5 lakh would cost ₹12 lakh today, replacement
cost accounting updates it to ₹12 lakh.
It’s like asking: “If my old laptop stops working, how much would I need to buy the same
one today?”
5. Continuous Inflation Accounting
This is a more advanced approach, where accounts are adjusted continuously, not just once
in a year.
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How it works
• Instead of waiting for year-end adjustments, inflation is tracked quarterly or even
monthly.
• This keeps statements fresh and avoids sudden shocks.
But yes, it requires more effort—like weighing yourself daily instead of yearly!
6. Conversion Method
This method focuses mainly on converting past figures into today’s value using conversion
factors (ratios based on price indexes).
Example: If sales in 2010 were ₹10 lakh and the price index was 200 then and 400 now,
the converted sales would be ₹20 lakh in today’s terms.
It’s like converting old cricket scores into modern scoring conditions.
Why Are These Methods Important?
Let’s pause the story and ask: Why should we care about all this?
1. True Profit Measurement
Without price level accounting, profits look bigger than they actually are. Businesses
may think they’re rich but fail to replace assets.
2. Better Decision-Making
With updated values, managers know the real cost of production and pricing.
3. Investor Protection
Investors can judge the real earning power of the company.
4. Social Responsibility
During inflation, showing true profits prevents companies from distributing excessive
dividends, protecting long-term survival.
Challenges in Price Level Accounting
Like every fair has its ticket price, price level accounting also has hurdles:
• Collecting accurate index numbers is tough.
• Continuous revaluation of assets is costly.
• Too many methods may confuse managers and investors.
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Final Thoughts
Price Level Accounting is like updating the old maps of your city. If you still follow a 20-year-
old map, you will get lost because new roads, malls, and flyovers have appeared. Similarly, if
businesses still use old money values, they’ll miscalculate profits, costs, and decisions.
That’s why accountants designed various methods—CPP, CCA, Hybrid, Replacement Cost,
Continuous Inflation, and Conversion—to keep financial records realistic.
So, whenever inflation knocks on the door, Price Level Accounting opens the window to
truth. It helps businesses, investors, and even society to see beyond paper profits and
understand the real financial health.
4. Briefly explain various approaches to Corporate Social Accounting
Ans: Scene 1: The Idea Behind Corporate Social Accounting
Before we start the tour, here’s the idea in simple words:
Corporate Social Accounting is about measuring and reporting the social, environmental,
and community impacts of a company’s activities — not just the financial results.
It answers questions like:
• How much did we spend on community development?
• Did our operations harm or help the environment?
• Are our employees better off this year?
• What value did we add to society beyond profits?
Scene 2: The Eight Rooms — Approaches to Corporate Social Accounting
We’ll walk through eight “rooms” — each representing a different approach.
1. Cost–Benefit Analysis Approach
The Room: A big balance sheet on the wall, but instead of “Assets” and “Liabilities,” it says
“Social Benefits” and “Social Costs.”
What it is:
• Developed and used by Abt Associates in the USA.
• Quantifies the positive and negative social impacts of a company’s activities.
• Two main statements:
1. Social Income Statement — lists social benefits (e.g., jobs created,
community donations) and social costs (e.g., pollution, accidents).
2. Social Balance Sheet — shows the “net social worth” of the company.
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Example: If BrightStar Ltd. spent ₹10 lakh on local schools (benefit) but caused ₹4 lakh
worth of environmental damage (cost), the net social benefit is ₹6 lakh.
Why it’s useful: It gives a numerical net impact — easy to compare year to year.
2. Socio-Economic Operating Statement Approach
The Room: Two columns on a giant board — “What We Did for Society” and “What We
Failed to Do.”
What it is:
• Suggested by David Linowes and Ralph W. Estes.
• The company prepares a Socio-Economic Operating Statement alongside its
financial statements.
• Lists social benefits (positive contributions) and social costs (negative impacts) in a
structured way.
Example: Benefits: Free health camps, clean drinking water projects. Costs: Noise pollution
from factory, traffic congestion caused by operations.
Why it’s useful: It’s honest — it shows both sides, not just the good news.
3. Integral Welfare Theoretical Approach
The Room: A circle diagram showing employees, customers, community, environment — all
connected.
What it is:
• Based on the idea that a company’s responsibility covers all stakeholders.
• Measures welfare created for:
o Employees (wages, training, safety)
o Customers (quality, safety, fair pricing)
o Community (jobs, infrastructure)
o Environment (pollution control, conservation)
Example: A textile mill reports not just profits, but also:
• Number of employees trained.
• Reduction in defective products.
• Trees planted in the community.
Why it’s useful: It’s holistic — covers every group affected by the company.
4. Descriptive or Narrative Approach
The Room: A wall of storyboards and photographs — no numbers, just stories.
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What it is:
• Focuses on qualitative reporting — describing social activities in words and pictures.
• Explains policies, programmes, and achievements without heavy quantification.
Example: A company’s CSR report narrates how it built a school in a rural area, with photos
of the inauguration and quotes from students.
Why it’s useful: It’s engaging and easy for the public to understand — but less precise for
analysis.
5. Goal-Oriented Approach
The Room: A scoreboard showing “Targets vs Achievements.”
What it is:
• The company sets specific social goals at the start of the year.
• At year-end, it reports how far it achieved them.
Example: Goal: Provide clean water to 10 villages. Achievement: 8 villages completed, 2 in
progress.
Why it’s useful: It’s measurable and accountable — stakeholders can see if promises were
kept.
6. Value-Added Approach
The Room: A pie chart showing how the company’s “value added” is shared.
What it is:
• Calculates the total value the company created (sales revenue minus bought-in
goods and services).
• Shows how this value is distributed among:
o Employees (wages, benefits)
o Government (taxes)
o Shareholders (dividends)
o Community (donations, CSR)
o Retained earnings (for future growth)
Example: Value added: ₹100 crore. Distribution: Employees ₹50 crore, Government ₹20
crore, Shareholders ₹15 crore, Community ₹5 crore, Retained ₹10 crore.
Why it’s useful: It shows who benefits from the company’s activities.
7. Pictorial Approach
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The Room: Infographics, charts, and diagrams everywhere.
What it is:
• Uses visual representation — graphs, charts, maps — to present social performance.
• Makes complex data easy to grasp.
Example: A map showing locations of community projects, with icons for schools, hospitals,
and water plants.
Why it’s useful: It’s quick to understand and appeals to a wide audience.
8. Regulatory Requirements Approach
The Room: A shelf of law books and compliance checklists.
What it is:
• Reporting is done to meet legal or regulatory requirements.
• In India, for example:
o Companies Act mandates CSR spending for eligible companies.
o SEBI requires Business Responsibility and Sustainability Reporting (BRSR) for
top listed entities.
Example: A company’s CSR report follows the exact format prescribed by law, ensuring
compliance.
Why it’s useful: It ensures standardisation and comparability — but may be less flexible or
creative.
Scene 3: Comparing the Approaches
Approach
Key Feature
Strength
Limitation
Cost–Benefit Analysis
Quantifies net
social impact
Clear numbers
May oversimplify
complex impacts
Socio-Economic Operating
Statement
Lists positives &
negatives
Balanced view
Needs reliable data
Integral Welfare
Theoretical
Covers all
stakeholders
Holistic
Can be complex to
measure
Descriptive/Narrative
Stories &
descriptions
Engaging
Lacks quantification
Goal-Oriented
Targets vs
achievements
Accountability
Only as good as
goal-setting
Value-Added
Distribution of
created value
Shows benefit
sharing
Doesn’t show
negative impacts
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Approach
Key Feature
Strength
Limitation
Pictorial
Visual presentation
Easy to grasp
May lack depth
Regulatory Requirements
Legal compliance
Standardised
May be minimalistic
Scene 4: Why These Approaches Matter
Corporate Social Accounting isn’t just a PR exercise — it:
• Builds trust with stakeholders.
• Helps management track progress on social commitments.
• Encourages responsible behaviour.
• Provides evidence for awards, funding, or partnerships.
• Meets legal obligations.
Different approaches suit different purposes:
• Want hard numbers? Use Cost–Benefit or Value-Added.
• Want to inspire the public? Use Narrative or Pictorial.
• Want to meet legal needs? Use Regulatory.
• Want a full picture? Combine several approaches.
Scene 5: A Story to Remember
Think of a company as a citizen in society.
• The Cost–Benefit approach is like calculating your personal “good deeds minus harm
done.”
• The Socio-Economic Statement is like keeping a diary of both your achievements
and your mistakes.
• The Integral Welfare approach is like checking how your actions affect your family,
friends, neighbours, and the environment.
• The Narrative approach is telling your life story.
• The Goal-Oriented approach is setting New Year’s resolutions and checking them at
year-end.
• The Value-Added approach is showing how you shared your income with family,
taxes, charity, and savings.
• The Pictorial approach is making a scrapbook of your activities.
• The Regulatory approach is filling out the official forms the government requires.
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SECTION-C
5. Explain Value Added Reporting in detail.
Ans: Value Added Reporting – A Story of Contribution and Sharing
Imagine for a moment that your college canteen is not just a place where you eat, but
actually a small company. The canteen buys raw vegetables, flour, spices, milk, and other
items from the market. With the help of cooks, waiters, and electricity, these raw things are
converted into tasty samosas, chai, dosas, and meals.
Now, here’s the interesting part: The canteen is not just buying goods and selling them. It is
adding something extra – a touch of cooking, service, cleanliness, and packaging. This extra
part, which makes the food worth more than just raw vegetables and milk, is what we call
“Value Added.”
And when the canteen owner wants to show how much value was created, and how that
value was distributed among cooks, suppliers, waiters, government, and the owner himself,
he prepares something called “Value Added Report.”
This, in essence, is what Value Added Reporting means in business. But let’s explore it step
by step, just like a story unfolding.
1. What is Value Added?
Value Added is the wealth created by a business during a particular period. In simple words,
it is the difference between:
• What a company produces (sales revenue)
minus
• What it buys from outside (raw material, fuel, services, etc.)
This remaining amount is called Value Added, because it shows how much “new value” the
company has created by using its own employees, resources, and processes.
For example:
• Canteen sales in a month = ₹1,00,000
• Purchases from outside (vegetables, milk, spices, LPG gas) = ₹40,000
• Value Added = ₹60,000
This ₹60,000 is the wealth created by the canteen. Now the big question is – who gets this
wealth?
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2. What is Value Added Reporting?
Value Added Reporting is a method of financial reporting in which a business shows not only
its profit but also how the created value (wealth) has been distributed among different
stakeholders.
Think of it as a big family dinner where everyone shares the food. The business prepares
food (value), and then distributes it to different members:
• Employees (salaries, wages, benefits)
• Government (taxes)
• Financiers (interest to banks)
• Shareholders (dividends)
• Business itself (retained earnings for growth)
This report is usually prepared in the form of a “Value Added Statement.”
3. Why is Value Added Reporting Important?
Traditionally, businesses focused only on Profit and Loss Accounts. That shows only what
profit belongs to the owners. But today, businesses are part of society. They use public
resources, employ workers, and take loans from banks. Therefore, it is fair to show how
everyone benefited from the business.
Let’s see why Value Added Reporting matters:
1. Fair Presentation: It shows that wealth is not created by the owner alone, but by
collective efforts of employees, government, suppliers, and investors.
2. Transparency: Stakeholders can see how much share they are getting from the
created wealth.
3. Employee Motivation: When workers see their contribution in wealth creation, they
feel more responsible and proud.
4. Better Decision-Making: Management can compare value added over years and
improve productivity.
5. Social Responsibility: It highlights the company’s role in society, not just for owners
but for everyone.
4. Format of a Value Added Statement
The Value Added Statement looks somewhat like this (simplified canteen example):
Value Added Statement (for the month of August)
1. Sales Revenue: ₹1,00,000
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2. Less: Bought-in materials and services: ₹40,000
3. Value Added: ₹60,000
Distributed as follows:
• Employees (salaries, wages, perks): ₹25,000
• Government (taxes): ₹5,000
• Banks/Financiers (interest): ₹10,000
• Shareholders (dividends): ₹8,000
• Retained in business: ₹12,000
Total Distribution = ₹60,000
This simple statement tells a complete story: how much wealth was created and how it was
shared among participants.
5. Features of Value Added Reporting
To make the idea clearer, let’s summarize its key features:
• Focus on Wealth Creation: Unlike traditional accounts that focus on profit, this
shows value created.
• Stakeholder-Oriented: It covers employees, government, creditors, and
shareholders.
• Complementary to P&L Account: It doesn’t replace profit statements but adds
another perspective.
• Simple & Understandable: Anyone can read and see how wealth is shared.
6. Advantages of Value Added Reporting
1. Holistic View: It tells the complete story of distribution, not just profits.
2. Motivational Tool: Workers and staff feel like partners in success.
3. Improves Industrial Relations: Helps avoid conflicts by showing transparent
distribution.
4. Social Reporting: Shows company’s contribution to society and economy.
5. Useful for Management: Helps in analyzing productivity and planning.
7. Limitations of Value Added Reporting
Of course, no system is perfect. This method too has some challenges:
1. Not a Substitute: It cannot replace Profit and Loss Accounts, only supplement them.
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2. Comparisons Difficult: Different companies may prepare it in slightly different
formats.
3. Focus Only on Distribution: It doesn’t analyze efficiency or cost structures deeply.
4. Not Legally Required: In many countries, it is not compulsory, so not widely used.
8. Value Added vs. Profit Reporting
It is very important to note the difference:
• Profit Reporting → Focuses only on owners’ share (net profit).
• Value Added Reporting → Focuses on wealth created and distribution among all
stakeholders.
So, if Profit and Loss Account is like showing “what is left for the owner”, then Value Added
Statement is like showing “how the cake was baked and divided among everyone.”
9. Relevance in Modern Business World
Today, companies are no longer seen as just “profit machines.” They are part of society and
are responsible for inclusive growth. Governments, trade unions, and investors want
transparency. That’s why Value Added Reporting is gaining importance.
In fact, many big corporations in the UK and Europe present Value Added Statements along
with their annual reports. It’s a way of saying:
“See, we are not only earning profits for ourselves, but also contributing to employees,
government, banks, and society.”
10. Conclusion
So, Value Added Reporting is not just about numbers – it’s about a philosophy of fairness
and sharing.
Think again about our canteen story. The samosas, tea, and meals are not just food. They
represent the combined efforts of farmers (who grew raw materials), suppliers, cooks,
waiters, electricity providers, the canteen owner, and even the government collecting tax.
Value Added Reporting is like writing down this story in accounting language. It tells
everyone:
• How much wealth was created?
• And how was it shared?
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It gives a bigger, more human picture of business, moving beyond profits to contribution.
And that is why it is such an important part of modern financial reporting.
6. Write a brief note on Basel II and III Norms.
Ans: Scene 1: The Bankers’ Meeting in Basel
It’s the mid-1970s. Central bankers from around the world gather in Basel, Switzerland, at
the headquarters of the Bank for International Settlements (BIS). They form the Basel
Committee on Banking Supervision (BCBS) — a club of regulators whose mission is to make
sure banks everywhere play safe and don’t bring down the global economy.
Over the years, they create a series of “Basel Accords” — global safety standards for banks.
• Basel I (1988) was the first step — a simple rulebook on minimum capital.
• Basel II (2004) made the rules more sophisticated.
• Basel III (2010 onwards) made them tougher after the 2008 crisis.
Chapter One — Basel II: Building Risk Management
The Backdrop
By the early 2000s, banking had become more complex. Banks weren’t just lending money;
they were trading derivatives, investing globally, and taking on new kinds of risks. Basel I’s
simple “one-size-fits-all” capital rules were no longer enough.
The BCBS introduced Basel II in 2004 to:
• Make capital requirements more sensitive to the actual riskiness of assets.
• Encourage better risk management inside banks.
• Increase transparency for markets and regulators.
The Three Pillars of Basel II
Think of Basel II as a three-pillar temple — each pillar holding up the stability of the banking
system.
Pillar 1 — Minimum Capital Requirements
• Banks must hold a minimum amount of capital based on Risk-Weighted Assets
(RWA).
• Not all loans or assets are equally risky:
o A loan to a government might have a low risk weight.
o A loan to a start-up might have a high risk weight.
• Basel II allowed banks to use:
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o Standardised Approach — use regulator-set risk weights.
o Internal Ratings-Based (IRB) Approach — use their own models (with
approval) to estimate risk.
Capital had to cover three main risks:
1. Credit Risk — risk of borrowers defaulting.
2. Market Risk — risk from changes in market prices.
3. Operational Risk — risk from failures in processes, people, systems, or external
events.
Pillar 2 — Supervisory Review
• Regulators review banks’ internal processes for assessing capital adequacy.
• Banks must have strategies to maintain capital levels above the minimum.
• Encourages dialogue between banks and supervisors.
Pillar 3 — Market Discipline
• Banks must disclose detailed information about their risk exposures, capital, and risk
management practices.
• The idea: if markets have more information, they can reward well-managed banks
and punish risky ones.
Strengths of Basel II
• More risk-sensitive than Basel I.
• Encouraged better internal risk models.
• Increased transparency.
Weaknesses of Basel II
• Relied heavily on banks’ own risk models — which could be flawed or manipulated.
• Didn’t address liquidity risk well.
• Failed to prevent the 2008 crisis — banks still collapsed despite meeting Basel II
capital rules.
Chapter Two — Basel III: Enhancing Resilience
The Shock of 2008
In 2008, the world watched major banks fail or need bailouts. The problem wasn’t just credit
risk — it was also:
• Too little high-quality capital.
• Too much borrowing (leverage).
• Not enough liquid assets to survive a panic.
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Basel II hadn’t anticipated the scale of interconnectedness and the speed of contagion. The
BCBS responded with Basel III — a stronger, more comprehensive framework.
Key Features of Basel III
1. Higher and Better-Quality Capital
• Focus on Common Equity Tier 1 (CET1) — the purest form of capital (ordinary shares
and retained earnings).
• Minimum CET1 ratio: 4.5% of RWA (up from 2% in Basel II).
• Total capital requirement: 8% of RWA, but with stricter definitions.
2. Capital Buffers
• Capital Conservation Buffer (CCB) — extra 2.5% of RWA in CET1 capital, to be used
in stress times.
• Countercyclical Buffer — up to 2.5% more in good times, to be released in
downturns.
3. Leverage Ratio
• A simple, non-risk-based measure: Tier 1 capital / total exposures.
• Minimum: 3%.
• Prevents banks from becoming over-leveraged even if their risk models look fine.
4. Liquidity Standards
Two new ratios to ensure banks can survive funding stress:
• Liquidity Coverage Ratio (LCR)
o Banks must hold enough High-Quality Liquid Assets (HQLA) to cover net cash
outflows for 30 days of stress.
o LCR ≥ 100%.
• Net Stable Funding Ratio (NSFR)
o Encourages stable, long-term funding over a one-year horizon.
o NSFR ≥ 100%.
5. Systemically Important Banks (SIBs)
• Extra capital requirements for “too-big-to-fail” banks whose collapse would shake
the global system.
Differences Between Basel II and Basel III
Feature
Basel II
Basel III
Capital Quality
Allowed more lower-quality
capital
Focus on CET1, stricter definitions
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Feature
Basel II
Basel III
Capital Quantity
CET1 min 2%
CET1 min 4.5% + buffers
Leverage Ratio
Not prescribed
Min 3%
Liquidity
Standards
Not addressed
LCR & NSFR introduced
Buffers
None
Capital Conservation & Countercyclical
Buffers
Systemic Risk
Not specific
Extra for SIBs
Impact of Basel III
• Banks are stronger, with more and better capital.
• Liquidity positions improved.
• Leverage reduced.
• However, some argue it may limit lending in the short term due to higher capital
requirements.
Scene 3: Why This Matters to Everyone
You might think Basel norms are just for bankers, but they affect:
• Depositors — safer banks mean your money is more secure.
• Borrowers — stable banks can keep lending even in downturns.
• Economies — fewer bank failures mean fewer taxpayer-funded bailouts.
A Simple Analogy
Think of a bank as a ship:
• Basel II made sure the ship had enough lifeboats (capital) based on the type of cargo
(risk-weighted assets) and trained crew (risk management).
• Basel III not only increased the number and quality of lifeboats but also:
o Limited how much cargo the ship could carry (leverage ratio).
o Ensured it had emergency supplies for a month at sea (LCR).
o Made sure the ship’s funding was stable for long voyages (NSFR).
o Added extra safety rules for the biggest ships (SIBs).
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SECTION-D
7. Explain Accounting Standards in India in detail.
Ans: A New Beginning: The Story of Order in Chaos
Many, many years ago, when businesses in India started expanding, everyone was recording
their financial transactions in their own way. One company would record sales in one style,
another would record them differently, and yet another would mix up personal and
business expenses. Imagine a library where every book is written in a different language
with no rules at all — how would you find the story you want? Similarly, investors, banks,
government authorities, and even company owners struggled to compare and trust
financial information.
It was clear: India needed a common language of accounting. That’s when Accounting
Standards stepped in, like traffic signals on a busy road — bringing order, uniformity, and
trust into the chaotic world of financial reporting.
Now, let’s unfold this story step by step.
What are Accounting Standards?
Think of accounting standards as a set of written rules that decide:
• How businesses should record their financial transactions,
• How they should prepare financial statements, and
• How they should disclose information to outsiders.
In simple words, they make sure that a company in Delhi records its profits in the same way
as a company in Mumbai, so when you compare them, you’re comparing apples to apples,
not apples to oranges.
Without these standards, businesses could manipulate figures, hide losses, or show profits
unrealistically. Standards act as guardians of honesty and transparency.
Birth of Accounting Standards in India
India’s journey with Accounting Standards officially began in 1977, when the Institute of
Chartered Accountants of India (ICAI) took the initiative to draft the first set. Over time,
these standards evolved, became stricter, and eventually aligned with international norms.
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But why international norms? Because businesses no longer stay within one country.
Investors from the U.S. may invest in Indian companies, and Indian companies may trade
with Europe. To avoid confusion, India decided to harmonize its standards with the
International Financial Reporting Standards (IFRS).
Thus, two sets came into existence:
1. Accounting Standards (AS): The older system, followed mainly by smaller
companies.
2. Indian Accounting Standards (Ind AS): The new system, aligned with IFRS, used by
listed companies and large organizations.
Objectives of Accounting Standards
Let’s pause for a moment and ask: Why do we even need these rules?
Here are the main goals:
1. Uniformity: Every business follows the same rules, making comparison easy.
2. Transparency: Companies cannot hide information; everything important must be
disclosed.
3. Reliability: Investors and banks can trust financial reports.
4. Comparability: A company’s results today can be compared with its own past or with
another company’s performance.
5. Fairness: Protects stakeholders like employees, customers, creditors, and
shareholders.
So, accounting standards are like a referee in a cricket match — making sure everyone plays
fair and by the same rules.
Governing Authority in India
Who ensures these standards are created and enforced?
• The Institute of Chartered Accountants of India (ICAI): It formulates the Accounting
Standards.
• The Ministry of Corporate Affairs (MCA): Notifies and enforces them for companies
under the Companies Act, 2013.
• The National Financial Reporting Authority (NFRA): Regulates and monitors
compliance.
Together, these bodies act like the watchdogs of accounting discipline in India.
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Types of Standards in India
India currently has two frameworks running side by side:
1. Accounting Standards (AS)
• Introduced earlier, mostly followed by smaller and medium enterprises (SMEs).
• Simpler in nature, easier to apply.
• Example: AS 1 (Disclosure of Accounting Policies), AS 2 (Valuation of Inventories).
2. Indian Accounting Standards (Ind AS)
• Introduced to bring Indian reporting closer to global practices.
• Complex and detailed, applicable to large companies, listed entities, and those
having significant foreign dealings.
• Example: Ind AS 16 (Property, Plant & Equipment), Ind AS 115 (Revenue from
Contracts with Customers).
Some Important Accounting Standards
Let me give you a flavor of what these standards look like:
• AS 1 (Disclosure of Accounting Policies): Every company must clearly state which
rules it is following.
• AS 2 (Inventories): Stocks must be valued at cost or market price, whichever is
lower.
• AS 6 (Depreciation): Defines how assets lose value over time.
• AS 9 (Revenue Recognition): Decides when income should be recorded.
• Ind AS 16: Deals with fixed assets like land and machinery.
• Ind AS 21: Explains how to handle transactions in foreign currencies.
• Ind AS 109: Talks about financial instruments like bonds and shares.
Each standard is like a chapter in a rule book, ensuring no area of accounting remains
vague.
Why are Accounting Standards Important?
Let’s imagine a real-life scenario. Suppose you want to invest in Tata Motors and compare it
with Mahindra & Mahindra. Without accounting standards:
• Tata could record its sales differently, and Mahindra in another way.
• One could show more profit simply by delaying expenses, while the other could hide
losses.
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Would you dare to invest in such a confusing environment? Probably not!
Thanks to accounting standards, both companies follow the same rules. As an investor, you
can confidently analyze their reports and make wise decisions.
Convergence with IFRS
India didn’t fully adopt IFRS but created its own version called Ind AS, which is 95% similar
to IFRS but customized for Indian conditions. This balance ensures two things:
• Indian companies can be compared globally.
• Indian business environment and laws are respected.
Challenges in Implementing Accounting Standards
Like every good story, this one also has its challenges:
1. Complexity: Standards, especially Ind AS, are technical and hard for small
businesses.
2. Costly: Adopting them requires training, software, and expert auditors.
3. Constant Updates: Businesses must keep up with frequent revisions.
4. Resistance: Some companies resist because strict rules reduce their flexibility to
manipulate accounts.
Benefits of Accounting Standards
Despite challenges, the benefits are far greater:
• Builds trust among investors.
• Encourages foreign investment.
• Makes financial markets more stable.
• Protects the interest of small stakeholders.
• Ensures India stays connected with global financial practices.
Conclusion
Accounting Standards in India are not just technical guidelines; they are the heartbeat of
financial reporting. They make sure that a balance sheet is not just numbers on paper but a
true story of a company’s financial health.
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Imagine if every student in a class wrote exams in their own style — one in poetry, one in
drawings, one in random codes. How would the teacher grade them? That’s what
businesses would look like without accounting standards.
Thanks to ICAI, MCA, and NFRA, India now has a system where businesses speak the same
financial language. And whether it’s a small shop or a multinational corporation, everyone
follows these guiding lights.
So, next time you read a company’s annual report, remember: behind every number lies the
discipline of Accounting Standards, silently working to build trust, fairness, and
comparability.
8. Explain Accounting Standards relating to Interim Reporting.
Ans: Scene 1: The Mid-Season Check-In
It’s September at “Everbright Industries Ltd.” — exactly halfway through their April–March
financial year. The annual accounts won’t be ready until next March, but shareholders,
lenders, and the stock exchange are curious:
• Are sales growing?
• Is the company profitable this quarter?
• Are there any red flags?
The CFO explains:
“We can’t keep everyone waiting until year-end. We need to publish an interim financial
report — a snapshot of our performance for the quarter or half-year.”
This is where Accounting Standards on Interim Reporting step in — to make sure these
snapshots are prepared consistently, reliably, and comparably.
What is Interim Reporting?
Definition: An interim period is any financial reporting period shorter than a full financial
year — e.g., a quarter, half-year, or nine months. Interim reporting is the preparation and
presentation of financial statements for such a period.
Purpose:
• Provide timely information to stakeholders.
• Reduce the information gap between annual reports.
• Help in decision-making (investors, creditors, regulators).
The Standards in India
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• AS 25 — Interim Financial Reporting: Applies to entities following the old
Accounting Standards (non-Ind AS companies).
• Ind AS 34 — Interim Financial Reporting: Applies to Ind AS-compliant entities (listed
companies, large corporates, etc.), aligned with IAS 34.
Both have similar objectives, but Ind AS 34 is more detailed and principle-based.
Scope of the Standard
The standard itself doesn’t require companies to prepare interim reports — that’s usually
mandated by regulators like SEBI (quarterly results for listed companies) or RBI (banks,
NBFCs). But if an entity prepares and presents an interim financial report, it must comply
with the standard.
Minimum Components of an Interim Financial Report
According to Ind AS 34 (and similarly AS 25), an interim financial report should include, at a
minimum:
1. Condensed Balance Sheet (Statement of Financial Position) — end of current interim
period and comparative year-end.
2. Condensed Statement of Profit and Loss — for the current interim period and
cumulatively for the year-to-date, with comparatives for the same periods in the
previous year.
3. Condensed Statement of Changes in Equity — year-to-date, with comparatives.
4. Condensed Statement of Cash Flows — year-to-date, with comparatives.
5. Selected Explanatory Notes — to explain events, transactions, and changes since the
last annual statements.
Recognition and Measurement Principles
Here’s where the “mid-season” analogy really fits:
• You don’t change the rules of the game mid-match.
• Interim reports use the same accounting policies as annual reports.
Key points:
• Apply the same recognition and measurement principles as in annual financial
statements.
• Revenues that are seasonal, cyclical, or occasional are recognised when they occur
— not smoothed over the year.
• Costs incurred unevenly during the year are recognised when incurred, unless
deferral is appropriate under the annual policies.
• Use of estimates is often greater in interim reports — because you’re projecting for
part of the year.
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Example:
If Everbright pays its annual insurance premium of ₹12 lakh in April:
• Under accrual accounting, the interim report for April–June will recognise only ₹3
lakh as expense (for 3 months), not the full ₹12 lakh.
If the company earns most of its revenue during the festive season (Oct–Dec):
• The interim report for April–Sept will show lower revenue — and that’s fine, because
it reflects the actual pattern.
Disclosure Requirements
Interim reports don’t repeat all the notes from the annual report — only those that are
significant to understanding the current period.
Typical disclosures include:
• Accounting policies and methods followed.
• Explanations of seasonality or cyclicality.
• Nature and amount of unusual items.
• Changes in estimates.
• Issuances, repurchases, repayments of debt and equity.
• Dividends paid.
• Segment information.
• Events after the interim period.
• Changes in composition of the entity (mergers, acquisitions, disposals).
Comparative Information
Interim reports must present:
• Comparative balance sheet as at the end of the previous financial year.
• Comparative statements of profit and loss for the comparable interim periods of the
previous year.
• Comparative cash flow and changes in equity for the comparable year-to-date
period.
Materiality
Materiality for interim reporting is assessed in relation to the interim period data, not the
annual data. An item might be immaterial in the annual context but material for a quarter.
Special Points in Ind AS 34
Ind AS 34 also covers:
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• Restatement: If prior interim periods in the same year are misstated, they must be
restated.
• Impairment: Appendix A clarifies that impairment losses recognised in an interim
period on goodwill or certain financial assets cannot be reversed in subsequent
interim periods.
• Consistency: Interim reports are evaluated on their own for compliance — you can’t
justify a wrong interim treatment by saying it will be “fixed” at year-end.
Why Interim Reporting Matters
For stakeholders:
• Investors: Can track performance and adjust portfolios.
• Creditors: Can monitor financial health before lending more.
• Regulators: Can ensure timely disclosure and market discipline.
• Management: Can spot trends and take corrective action mid-year.
A Simple Analogy
Think of the financial year as a cricket test match:
• The annual report is the final scorecard after 5 days.
• Interim reports are the lunch and tea scores — they don’t tell you the final result,
but they show how the game is progressing.
• The rules of cricket (accounting policies) don’t change between sessions.
• The commentary (notes) focuses on what’s new since the last break.
Example Walk-Through: Everbright’s Q2 Interim Report
Balance Sheet — as at 30 Sept 2025 and 31 Mar 2025. P&L — for July–Sept 2025 (Q2) and
April–Sept 2025 (H1), with comparatives for 2024. Cash Flow — for April–Sept 2025, with
comparative for April–Sept 2024. Notes — highlight:
• Seasonal dip in sales in Q2 due to monsoon.
• Acquisition of a small competitor in August.
• Dividend of ₹2 per share paid in July.
• Change in estimate for warranty provisions.
Exam-Ready Summary
Definition: Interim reporting = financial statements for a period shorter than a full year.
Standards:
• AS 25 (old framework)
• Ind AS 34 (IFRS-aligned)
Scope: Applies if an entity is required or chooses to publish interim reports.
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Minimum Components:
1. Condensed balance sheet.
2. Condensed P&L.
3. Condensed changes in equity.
4. Condensed cash flows.
5. Selected notes.
Recognition & Measurement:
• Same policies as annual.
• Seasonal revenues recognised when earned.
• Uneven costs recognised when incurred.
• More estimates may be needed.
Disclosures:
• Significant changes/events since last annual report.
• Seasonality, unusual items, changes in estimates, dividends, segment info,
post-period events.
Comparatives: Show corresponding figures for previous year’s comparable periods.
Materiality: Judged in relation to interim data.
Special Ind AS 34 Points:
• Restatement of prior interim periods if needed.
• No reversal of certain impairment losses within the year.
• Interim compliance judged independently.
Final Takeaway: Interim reporting is like giving stakeholders a progress report before the
final exam results. The Accounting Standard ensures that this progress report is prepared
with the same discipline, honesty, and consistency as the final one — so that everyone can
trust the picture it paints, even if the story isn’t over yet.
“This paper has been carefully prepared for educational purposes. If you notice any mistakes or
have suggestions, feel free to share your feedback.”
