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Thread: 06 - Indian Accounting Standard (Ind AS) 11 - Earlier Accounting standard (7) - Construction Contracts

  1. #21
    IND-AS
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    Thumbs up Intangible asset of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7) - Construction Contracts

    Intangible asset of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7)

    Construction Contracts

    Appendix - A

    Service Concession Arrangements


    Intangible asset

    26. Ind AS 38 applies to the intangible asset recognised in accordance with paragraphs 17 and 18 of this Appendix . Paragraphs 45–47 of Ind AS 38 provide guidance on measuring intangible assets acquired in exchange for a non -monetary asset or assets or a combination of monetary and non -monetary assets.



  2. #22
    IND-AS
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    Thumbs up Items provided to the operator by the grantor of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7) - Construction Contracts

    Items provided to the operator by the grantor of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7)

    Construction Contracts

    Appendix - A

    Service Concession Arrangements


    Items provided to the operator by the grantor

    27. In accordance with paragraph 11 of this Append ix, infrastructure items to which the operator is given access by the grantor for the purposes of the service arrangement are not recognised as property, plant and equipment of the operator.
    The grantor may also provide other items to the operator that the operator can keep or deal with as it wishes. If such assets form part of the consideration payable by the grantor for the services, they are not government grants as defined in Ind AS 20. They are recognised as assets of the operator, measured at fair value on initial recognition. The operator shall recognise a liability in respect of unfulfilled obligations it has assumed in exchange for the assets.



  3. #23
    IND-AS
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    Thumbs up This Application Guidance is an integral part of Appendix A of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7)

    This Application Guidance is an integral part of Appendix A of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7)

    Construction Contracts


    Application Guidance on Appendix A


    This Application Guidance is an integral part of Appendix A

    Scope
    (paragraph 5 of Appendix A)

    AG1. Paragraph 5 of Appendix A specifies that infrastructure is within the scope of the Appendix when the following conditions apply:

    (a) the grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price;
    and
    (b) the grantor controls—through ownership, beneficial entitlement or otherwise—any significant residual interest in the infrastructure at the end of the term of the arrangement.

    AG2. The control or regulation referred to in condition (a) could be by contract or otherwise (such as through a regulator), and includes circumstances in which the grantor buys all of the output as well as those in which some or all of the output is bought by other users. In applying this condition, the grantor and any related parties shall be considered together. If the grantor is a public sector entity, the public sector as a whole, together with any regulators acting in the public interest, shall be regarded as related to the grantor for the purposes of this Appendix A.

    AG3. For the purpose of condition (a), the grantor does not need to have complete control of the price: it is sufficient for the price to be regulated by the grantor, contract or regulator, for examp le by a capping mechanism. However, the condition shall be applied to the substance of the agreement. Non -substantive features, such as a cap that will apply only in remote circumstances, shall be ignored. Conversely, if for example, a contract purports to give the operator freedom to set prices, but any excess profit is returned to the grantor, the operator’s return is capped and the price element of the control test is met.

    AG4. For the purpose of condition (b), the grantor’s control over any significant residual interest should both restrict the operator’s practical ability to sell or pledge the infrastructure and give the grantor a continuing right of use throughout the period of the arrangement. The residual interest in the infrastructure is the estimated current value of the infrastructure as if it were already of the age and in the condition expected at the end of the period of the arrangement.

    AG5. Control should be distinguished from management. If the grantor retains both the degree of control described in paragraph 5(a) of Appendix A and any significant residual interest in the infrastructure, the operator is only managing the infrastructure on the grantor’s behalf—even though, in many cases, it may have wide managerial discretion.

    AG6. Conditions (a) and (b) together identify when the infrastructure, including any replacements required (see paragraph 21 of Appendix A), is controlled by the grantor for the whole of its economic life. For example, if the operator has to replace part of an item of infrastructure during the period of the arrangement (eg the top layer of a road or the roof of a building), the item of infrastructure shall be considered as a whole. Thus condition (b) is met for the whole of the infrastructure, including the part that is rep laced, if the grantor controls any significant residual interest in the final replacement of that part.

    AG7. Sometimes the use of infrastructure is partly regulated in the manner described in paragraph 5(a) of Appendix A and partly unregulated. However, these arrangements take a variety of forms:

    (a) any infrastructure that is physically separable and capable of being operated independently and meets the definition of a cash -generating unit as defined in Ind AS 36 shall be analysed separately if it is used wholly for unregulated purposes. For example, this might apply to a private wing of a hospital, where the remainder of the hospital is used by the grantor to treat public patients.

    (b) when purely ancillary activities (such as a hospital shop) are unregulated, the control tests shall be applied as if those services did not exist, because in cases in which the grantor controls the services in the manner described in paragraph 5 of Appendix A, the existence of ancillary activities does not detract from the grantor’s control of the infrastructure.

    AG8. The operator may have a right to use the separable infrastructure described in paragraph AG7 (a), or the facilities used to provide ancillary unregulated services described in paragraph AG7 (b). In either case, there may in substance be a lease from the grantor to the operator; if so, it shall be accounted for in accordance with Ind AS 17.


    Last edited by IND-AS; 31-01-2011 at 02:04 PM.

  4. #24
    IND-AS
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    Thumbs up Information note 1 of Appendix A of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7) - Construction Contracts

    Information note 1 of Appendix A of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7)

    Construction Contracts


    Information note 1


    Accounting framework for public -to-private service arrangements

    This note accompanies, but is n ot part of, Appendix A


    For Full Detail You can download this from PDF Format

    Attached Files Attached Files

  5. #25
    IND-AS
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    Thumbs up Information note 2 of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7) - Construction Contracts

    Information note 2 of Indian Accounting Standard (Ind AS)11 -Earlier Accounting standard(7)

    Construction Contracts


    Information note 2


    References to Indian Accounting Standards that apply to typical types of public-to-private arrangements

    This note accompanies, but is not part of , Appendix A
    .

    The table sets out the typical types of arrangements for private sector participation in the provision of public sector services and provides references to Indian Accounting Standards that apply to those arrangements. The list of arrangements types is not exhaustive. The purpose of the table is to highlight the continuum of arrangements. It is not Appendix A’s intention to convey the impression that bright lines exist betwee n the accounting requirements for public -to-private arrangements

    For Full Detail You can download this from PDF Format

    Attached Files Attached Files
    Last edited by IND-AS; 31-01-2011 at 02:28 PM.

  6. #26
    IND-AS
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    Thumbs up Illustrative examples of Indian Accounting Standard (Ind AS)11 -Earlier Accounting standard (7) - Construction Contracts

    Illustrative examples of Indian Accounting Standard (Ind AS)11 -Earlier Accounting standard(7)

    Construction Contracts

    Illustrative examples


    These examples accompany, but are not part of, Appendix A



    1. Example 1: The grantor gives the operator a financial asset

    2. Example 2: The grantor gives the operator an intangible asset
    (a licence to charge users)

    3. Example 3: The grantor gives the operator a financial asset and an intangible asset


    For Illustrative examples u Can download this in pdf format

    Attached Files Attached Files
    Last edited by IND-AS; 31-01-2011 at 02:56 PM.

  7. #27
    IND-AS
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    Thumbs up Appendix - B of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7) - Construction Contracts

    Appendix - B of Indian Accounting Standard (Ind AS)11 -Earlier Accounting standard(7)

    Construction Contracts


    Appendix - B

    Service Concession Arrangements : Disclosures


    This Appendix is an integral part of Indian Accounting Standard (Ind AS) 11.


    Issues


    1. An entity (the operator) may enter into an arrangement with another entity (the grantor) to provide services that give the public access to major economic and social facilities. The grantor may be a public or private sector entity, including a governmental body. Examples of service concession arrangements involve water treatment and supply facilities, motorways, car parks, tunnels, bridges, airports and telecommunication networks. Examples of arrangements that are not service concession arrangements include an entity outsourcing the operation of its internal services (eg employee cafeteria, building maintenance, and accounting or information technology functions).

    2. A service concession arrangement generally involves the grantor conveying for the period of the concession to the operator:

    (a) the right to provide services that give the public access to major economic and social facilities, and
    (b) in some cases, the right to use specified tangible assets, intangible assets, or financial assets, in exchange for the operator:
    (c) committing to provide the services according to certain terms and conditions during the concession period, and
    (d) when applicable, committing to return at the end of the concession period the rights received at the beginning of the concession period and/or acquired during the concession period.

    3. The common characteristic of all service concession arrangements is that the operator both receives a right and incurs an obligation to provide public services.

    4. The issue is what information should be disclosed in the notes in the financial statements of an operator and a gran tor.

    5. Certain aspects and disclosures relating to some service concession arrangements are addressed by Indian Accounting Standards (eg Ind AS 16 applies to acquisitions of items of property, plant and equipment, Ind AS 17 applies to leases of assets, and Ind AS 38 applies to acquisitions of intangible assets). However, a service concession arrangement may involve executory contracts that are not addressed in Indian Accounting Standards, unless the contracts are onerous, in which case Ind AS 37 applies. Therefore, this Appendix addresses additional disclosures of service concession arrangements.

    Accounting Principles

    6. All aspects of a service concession arrangement shall be considered in determining the appropriate disclosures in the notes. An operator and a grantor shall disclose the following in each period:
    (a) a description of the arrangement;
    (b) significant terms of the arrangement that may affect the amount, timing and certainty of future cash flows (eg the period of the concession, re-pricing dates and the basis upon which re -pricing or re-negotiation is determined);

    (c) the nature and extent (eg quantity, time period or amount as appropriate) of:

    (i) rights to use specified assets;
    (ii) obligations to provide or rights to expect provision of services;
    (iii) obligations to acquire or build items of property, plant and equipment;
    (iv) obligations to deliver or rights to receive specified assets at the end of the concession period;
    (v) renewal and termination options; and
    (vi) other rights and obligations (eg major overhauls);

    (d) changes in the arrangement occurring during the period; and
    (e) how the service arrangement has been classified.

    6A. An operator shall disclose the amount of revenue and profits or losses recognized in the period on exchanging construction services for a financial asset or an intangible asset.

    7. The disclosures required in accordance with paragraph 6 of this Appendix shall be provided individually for each service concession arrangement or in aggregate for each class of service concession arrangements. A class is a grouping of service concession arrangements involving services of a similar nature (eg toll collections, telecommunications and water treatment services).



  8. #28
    IND-AS
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    Thumbs up Appendix - C of Indian Accounting Standard (Ind AS)11 -Earlier Accounting standard(7) - Construction Contracts

    Appendix - C of Indian Accounting Standard (Ind AS)11 -Earlier Accounting standard(7)

    Construction Contracts


    Appendix - C


    References to matters contained in other Indian Accounting Standards

    This Appendix is an integral part of Indian Accounting Standard (Ind AS) 11.


    This appendix lists the appendices which are part of other Indian Accounting Standards and makes reference to Ind AS 11, Construction Contracts.

    1. Appendix B Evaluating the Substance of Transactions Involving the Legal Form of a Lease contained in Ind AS 17 Leases .

    2. Appendix A Intangible Assets—Web Site Costs contained in Ind AS 38 Intangible Assets.


  9. #29
    IND-AS
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    Thumbs up Appendix - D of Indian Accounting Standard (Ind AS)11 - Earlier Accounting standard (7) - Construction Contracts

    Appendix - D of Indian Accounting Standard (Ind AS)11 -Earlier Accounting standard(7)

    Construction Contracts


    Appendix - D

    Illustrative examples

    This Appendix accompanies, but is not part of, Ind AS 11.


    Disclosure of accounting policies

    The following are examples of accounting policy disclosures:

    Revenue from fixed price construction contracts is recognised on the percentage of completion method, measured by reference to the percentage of labour hours incurred to date to estimated total labour hours for each contract.

    Revenue from cost plus contracts is recognised by reference to the recoverable costs incurred during the period plus th e fee earned, measured by the proportion that costs incurred to date bear to the estimated total costs of the contract.

    The determination of contract revenue and expenses

    The following example illustrates one method of determining the stage of completion of a contract and the timing of the recognition of contract revenue and expenses (see paragraphs 22-35 of the Standard). (Amounts shown hereinbelow are in Rs. Lakhs) A construction contractor has a fixed price contract for Rs 9,000 to build a bridge. The initial amount of revenue agreed in the contract is Rs 9,000. The contractor’s initial estimate of contract costs is Rs 8,000. It will take 3 years to build the bridge.

    By the end of year 1, the contractor’s estimate of contract costs has increased to Rs 8,050.

    In year 2, the customer approves a variation resulting in an increase in contract revenue of Rs 200 and estimated additional contract costs of Rs 150. At the end of year 2, costs incurred include Rs 100 for standard materials stored at the site to be used in year 3 to complete the project.


    For Full Detail You can download this from PDF Format

    Attached Files Attached Files

  10. #30
    IND-AS
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    Thumbs up Appendix 1 of Indian Accounting Standard (Ind AS)11 -Earlier Accounting standard (7) - Construction Contracts

    Appendix 1 of Indian Accounting Standard (Ind AS)11 -Earlier Accounting standard (7)

    Construction Contracts



    Appendix 1

    Note:
    This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the differences, if any, between Indian Accounting Standard (Ind AS) 11 and the corresponding International Accounting Standard (IAS) 11, Construction Contracts, IFRIC 12, Service Concession Arrangements and SIC 29, Service Concession Arrangements : Disclosures

    Comparison with IAS 11, Construction Contracts, IFRIC 12, Service Concession Arrangements and SIC 29, Service Concession Arrangements : Disclosures

    1. IAS 11 does not deal with accounting for construction contracts in respect of real estate developers. However, this has been dealt with under Ind AS 11, since it has been kept out of the scope t of Ind AS 18, Revenue.

    2. The transitional provisions given in IFRIC 12 have not been given i n Ind AS 11, since all transitional provisions related to Ind ASs, wherever considered appropriate have been included in Ind AS 101, First-time Adoption of Indian Accounting Standards corresponding to IFRS 1, First-time Adoption of International Financial Reporting Standards.

    3. Different terminology is used in this standard, e.g., the term ‘balance sheet’ is used instead of ‘Statement of financial position’ and ‘Statement of profit and loss’ is used instead of ‘Statement of comprehensive income’

    4. . Paragraph 2 of IAS 11 which states that IAS 11 supersedes the earlier version of IAS 11 is deleted in Ind AS 11 as this is not relevant in Ind AS 11. However, paragraph number 2 is retained in Ind AS 7 to maintain consistency with paragraph numbers of IAS 11.



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