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Classification of Financial Instruments into 4 categories of Financial Assets and 2 categories of Financial Liabilities are important for subsequent measurement. Only the categories decide how a financial asset or liability will be subsequently measured.  

Prior to IFRS 13: Fair Value Measurement standard, fair value was defined as “an amount exchanged between knowledgeable willing parties at an arm’s length transaction”. As per this definition fair value is the price at which parties are ready to "enter" into the transaction. The notion was therefore "entry price" The change in IFRS 13 of the definition of fair value concentrates on exit price. The new definition "Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." It means that an entity shall look at how the market participants will price the asset or liability at a measurement date. The notion here is now the "exit price". The objective of IFRS 13 was to define fair value in a single IFRS and to set out disclosures about fair value measurements. What must an entity do to calculate Fair Value? determ...

The Companies Act 2013 comes into force from 1-April-2014 for the Indian corporate. There are sea changes brought in this Act from the earlier one. Let's have a quick browse on the checklist: WHAT COMPANIES WILL HAVE TO DO? IMMEDIATELY Devise and implement policies on corporate social responsibility and vigil mechanism (if any one of the criteria satisfied ~ networth of Rs.500 crore or more, turnover of Rs. 1,000 crore or more, a net profit of Rs. 5 crore or more during any financial year) Finalise a new code for independent directors and identify and notify the related parties to their respective accounts departments Print new stationery, bills, etc, with name, address of the registered office, Company Identification No. (CIN) , telephone, fax, email and website File returns with the Registrar of Companies on changes in top 10 shareholders Get certificate of independence from directors Maintain register of key management personnel (KMP) WITHIN THREE MONTHS Fil...

  Prior to the introduction of IFRS 9, OCI had 5 components and the easier way to remember was the acronym CAART – which is: C – The effective portion of gains/losses on hedging instruments in a C ash flow hedge A - A ctuarial gains and losses on defined benefit pension plans  A - Gains and losses on A vailable-for-sale financial assets R - R evaluation surplus related to property, plant and equipment T - Gains and losses arising from T ranslating the financial statements of a foreign operation Now with IFRS 9 earlier adoption, the acronym has changed from CAART to CRAAFT C – The effective portion of gains and losses on hedging instruments in a C ash flow hedge R - R evaluation surplus related to property, plant and equipment A - A ctuarial gains and losses on defined benefit pension plans  A - Gains and losses on A vailable-for-sale financial assets F - F inancial liabilities designated as at fair value through profit or loss: fair value changes attr...

Where a company’s sources of finance includes either securities convertible into equity shares, or options and warrants which entitle holders to obtain equity shares, such financial instruments increase the likelihood that additional equity shares will be issued in the future. This possible increase in the number of shares is called potential dilution. Case Study: Suppose IStaR Ltd. has 30,000 equity shares outstanding in the market along with INR 100,000 of convertible debentures – that is, bonds that can be converted into equity shares. According to the terms of the debenture agreement, each INR 1,000 face value bond can be exchanged for 300 equity shares. If all the debentures were exchanged, bondholders would receive 30,000 new equity shares. The effect on current equity shareholders would be to dilute their claim to earnings from 100% - when they own all equity shares – to 50% - when they own only half of all outstanding shares. Computed Basic EPS ignore this potential...

IFRS 9 - Financial Instruments much awaited amendment is finally out on November 19, 2013. The entities which need to  deal with the financial instruments in line with IFRS, are probably aware of multiple standards covering this really titanic topic: IAS 39, IFRS 9, IFRS 7, IAS 32 and partially IFRS 13.  The new standard - IFRS 9 - is still under development. Let's see what are the 3 main changes brought in the amended IFRS 9: Mandatory effective date of IFRS 9 (1 January 2015) was removed. It means that you can apply old IAS 39 after 31-12-2014 Financial Liabilities (Own Debt) at Fair Value has new requirements for the accounting and presentation of changes in the fair value when own debt is measured at fair value New hedge accounting rules! New hedging rules were long-awaited, because the older rules in IAS 39 are really strict and hard to apply.  Further post will explain Hedge Accounting in brief..Stay glued:)

Niall Fitzerald, Former CEO, Unilever once said that “Corporate Social Responsibility is a hard-edged business decision. Not because it is a nice thing to do or because people are forcing us to do it because it is good for our business. The Companies Act 2013 requires that every company (private/ public unlisted / listed) with Networth of ≥ INR 500 crore (5 billion) or Turnover of ≥ INR 1,000 crore (10 billion) or Net profit of ≥ INR 5 crore (50 million) during the financial year will constitute a CSR Board committee (CSRC). The board will ensure that company spends, in every financial year, at least 2% of its average net profits during the immediately preceding 3 years, in pursuance of CSR policy. The CSR committee will consists of 3 or more directors with atleast 1 independent director. The Board’s report should disclose the composition of CSRC. The board will approve the CSR policy and disclose its contents in the board report and place it on the company’s website. If...