Accounting Standard (AS) 3(This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of its objective and the Preface to the Statements of Accounting Standards.)
Cash Flow Statements
Accounting Standard (AS) 3, ‘Cash Flow Statements’ (revised 1997), issued by the Council of the Institute of Chartered Accountants of India, comes into effect in respect of accounting periods commencing on or after 1-4-1997. This Standard supersedes Accounting Standard (AS) 3, ‘Changes in Financial Position’, issued in June 1981. This Standard is mandatory in nature in respect of accounting periods commencing on or after 1-4-20043 for the enterprises which fall in any one or more of the following categories, at any time during the accounting period:
(i) Enterprises whose equity or debt securities are listed whether in India or outside India.
(ii) Enterprises which are in the process of listing their equity or debt securities as evidenced by the board of directors’ resolution in this regard.
(iii) Banks including co-operative banks.
(iv) Financial institutions.
(v) Enterprises carrying on insurance business.
(vi) All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 50 crore. Turnover does not include ‘other income’.
(vii) All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 10 crore at any time during the accounting period.
(viii)Holding and subsidiary enterprises of any one of the above at any time during the accounting period.
The enterprises which do not fall in any of the above categories are encouraged, but are not required, to apply this Standard.
Where an enterprise has been covered in any one or more of the above categories and subsequently, ceases to be so covered, the enterprise will not qualify for exemption from application of this Standard, until the enterprise ceases to be covered in any of the above categories for two consecutive years.
Where an enterprise has previously qualified for exemption from application of this Standard (being not covered by any of the above categories) but no longer qualifies for exemption in the current accounting period, this Standard becomes applicable from the current period. However, the corresponding previous period figures need not be disclosed.
An enterprise, which, pursuant to the above provisions, does not present a cash flow statement, should disclose the fact.
The following is the text of the Accounting Standard.
Last edited by Admin; 25-03-2010 at 05:19 PM.
ANNOUNCEMENT Status of Accounting Standard (AS) 3, Cash Flow Statements, under Section 211 Of The Companies Act, 1956 1. Section 211 of the Companies Act, 1956, as amended by the Companies (Amendment) Act, 1999, requires that every profit and loss account and balance sheet of the company shall comply with the accounting standards. For the purpose of Section 211, the expression "accounting standards" means the standards of accounting recommended by the Institute of Chartered Accountants of India as may be prescribed by the Central Government in consultation with the National Advisory Committee on Accounting Standards established under sub-section (1) of section 210A of the said Act. Provided that the standards of accounting specified by the Institute of Chartered Accountants of India shall be deemed to be the Accounting Standards until the accounting standards are prescribed by the Central Government under section 211(3C) of the Act.
2. Accounting Standard (AS) 3, Cash Flow Statements, was made mandatory in respect of accounting periods commencing on or after 1.4.2001 for the following:
- Enterprises whose equity or debt securities are listed on a recognised stock exchange in India, and enterprises that are in the process of issuing equity or debt securities that will be listed on a recognised stock exchange in India as evidenced by the board of directors' resolution in this regard.
- All other commercial, industrial and business reporting enterprises, whose turnover for the accounting period exceeds Rs. 50 crores. (Announcement published in December 2000 issue of the Institute's Journal.)
3. The Council, at its meeting held in September 2002, decided that AS 3 should also be treated as a 'specified' accounting standard for the purpose of section 211 of the Act. Accordingly, the companies in respect of which AS 3 is mandatory, are required to comply with AS 3 under section 211 of the Companies Act, 1956. In view of this, the statutory auditors of such companies are required to give an assertion in respect of compliance with AS 3 along with other 'specified' accounting standards while reporting under section 227 (3)(d) of the Act.
The Council decided that the above position in respect of 'specified' status of AS 3 is applicable in respect of accounting periods commencing on or after 1-4-2002.
4. Accordingly, in view of the announcements published in the Institute's Journal, from time to time, in respect of 'specified' status of Accounting Standards, read with this announcement, the extant position is that all the accounting standards, issued by the Institute which have been made mandatory by the Institute as indicated in the respective standards or made mandatory by way of a separate announcement are 'specified' for the purpose of the proviso to section 211 (3C) and section 227(3)(d) of the Act.