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This Study Material has been prepared by the faculty of the Board of Studies
(Academic). The objective of the Study Material is to provide teaching material to
the students to enable them to obtain knowledge in the subject. In case students
need any clarification or have any suggestion for further improvement of the
material contained herein, they may write to the Director of Studies.
All care has been taken to provide interpretations and discussions in a manner
useful for the students. However, the Study Material has not been specifically
discussed by the Council of the Institute or any of its committees and the views
expressed herein may not be taken to necessarily represent the views of the
Council or any of its Committees.
Permission of the Institute is essential for reproduction of any portion of this
material.

© THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

All rights reserved. No part of this book may be reproduced, stored in a retrieval
system, or transmitted, in any form, or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without prior permission, in writing, from the
publisher.

Basic draft of this publication was prepared by CA. Vandana D Nagpal

Edition : April, 2023

Committee/Department : Board of Studies (Academic)

E-mail : [email protected]

Website : www.icai.org

Price : ` /- (For All Modules)

ISBN No. : 978-81-962488-8-8

Published by : The Publication & CDS Directorate on behalf of

The Institute of Chartered Accountants of India,
ICAI Bhawan, Post Box No. 7100,
Indraprastha Marg, New Delhi 110 002 (India)
Printed by :
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BEFORE WE BEGIN …

The traditional role of a chartered accountant, restricted to accounting and

auditing, has now changed substantially and there has been a marked shift
towards strategic decision making and entrepreneurial roles that add value
beyond traditional financial reporting. The primary factors responsible for the
change are the increasing business complexities on account of plethora of laws,
borderless economies consequent to giant leap in e-commerce, emergence of
new financial instruments, emphasis on corporate social responsibility, significant
developments in information technology etc. These factors necessitate an
increase in the competence level of chartered accountants to take up the role of
not merely an accountant or auditor, but a global solution provider. Towards this
end, the scheme of education and training is being continuously reviewed so that
it is in sync with the requisites of the dynamic global business environment; the
competence requirements are being continuously reviewed to enable aspiring
chartered accountants to acquire the requisite professional competence to take
on new roles.
Under the Revised Scheme of Education and Training, at the Intermediate Level,
you are expected to not only acquire professional knowledge but also the ability
to apply such knowledge in problem solving. The process of learning should also
help you inculcate the requisite professional skills, i.e., the intellectual skills and
communication skills, necessary for achieving the desired level of professional
competence. In view of nobility of the objective to provide quality academic
inputs to the students of CA course, the Board of Studies (BoS) of ICAI has
decided to bring forth the Study Material of Advanced Accounting. This Study
Material contains all applicable Accounting Standards and topics as detailed out
in the syllabus.
Accounting is one of the core competence areas of chartered accountants. The
paper of 'Advanced Accounting' at Intermediate level concentrates on
conceptual understanding of the crucial aspects of accounting. The objective of
the paper at this level is to acquire the ability to apply specific accounting
standards and legislations to different transactions and events for preparation
and presentation of financial statements of various business entities. The students
are required to develop an understanding of all the Accounting Standards and
gain ability to apply the provisions contained therein to different practical
situations.
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The Study Material of Advanced Accounting has been designed having regard to
the needs of home study and distance learning students. The study material has
been bifurcated into three modules for the easy handling and convenience of
students. For the bare text of Framework for Preparation and Presentation of
Financial Statements and Accounting Standards, the students are advised to refer the
link https://www.icai.org/post/accounting-standards-as.
The study material has been bifurcated into three modules divided into fifteen
chapters in line with the syllabus. In the study material, Accounting Standards
have not been discussed sequentially; instead the related Accounting Standards
have been grouped and discussed in separate chapters for ease of
understanding. For example, the ‘Presentation and Disclosure based Accounting
Standards like AS 1, AS 3, AS 17, AS 18, AS 20, AS 24 and AS 25 have been
grouped in one chapter. It is important to read the Study Material thoroughly for
understanding the coverage of syllabus in the paper of Advanced Accounting.
Efforts have been made to present each topic of the syllabus in a lucid manner.
Care has been taken to present the chapters in a logical sequence to facilitate
easy understanding by the students. Sincere efforts have been taken to
incorporate the relevant amendments in the Accounting Standards, Companies
Act, 2013 and SEBI regulations in this study material.
The content for each chapter/unit of the study Material has been structured in the
following manner –

Components of About the component

each Chapter
1. Learning Learning outcomes which you need to demonstrate
Outcomes after learning each topic, have been detailed, in the first
page of each chapter/unit. Demonstration of these
learning outcomes would help you to achieve the
desired level of technical competence.
2. Chapter/Unit As the name suggests, the flow chart/table/diagram
Overview given at the beginning of each chapter would give a
broad outline of the contents covered in the chapter.
3. Content of each The concepts and provisions of accounting
unit/ chapter standards/topics are explained in student-friendly
manner with the aid of
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examples/illustrations/diagrams/flow charts. These
value additions would help you develop conceptual
clarity and get a good grasp of the topic. Diagrams and
Flow charts would help you understand the
concept/application of accounting standard/topic in a
better manner.
4. Illustrations Illustrations would help the students to understand the
involving application of concepts/provisions of accounting
conceptual standards. In effect, it would test understanding of
understanding concepts/ provisions as well as ability to apply the
concepts/provisions learnt in solving problems and
addressing issues.
5. Summary A summary of the chapter is given at the end to help
you revise what you have learnt. It would especially
facilitate quick revision of the chapter the day before
the examination.
6. Test Your This section comprises of number of multiple choice
Knowledge questions, theoretical questions and practical questions
which would help students to evaluate what they have
understood after studying the chapter. The questions
given in this section have also been supplemented with
the answers to help the students in evaluating their
solutions so that they can know about their grey areas.
7.. Multiple Choice In the New Scheme of education and training, assessment
Questions for 30 marks in each paper at the intermediate and final
(MCQ) level would be by way of case scenario based MCQs.
Questions in this segment would comprise of a case
scenario followed by a few MCQs based on the case
scenario. All case scenario based MCQs would be
application oriented. In the subject of Advanced
Accounting, a student has to apply the concepts learnt in
solving the MCQs based on the case scenario. In order to
hone the application and analytical skills of students,
independent MCQs have been included in every chapter
of this Study Material. Solving these MCQs will enhance
your conceptual clarity and sharpen your analytical skills.
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Every effort has been done to make the Study Material error free, however if
inadvertently any error is present and found by readers, they may send it to us
immediately, so that it can be rectified at our end.
In case you need any further clarification/ guidance, you may send your queries
through ICAI BoS App.
We hope that these student-friendly features in the Study Material makes your
learning process more enjoyable, enriches your knowledge and sharpens your
application skills.

Happy Reading and Best Wishes!

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SYLLABUS

PAPER 1: ADVANCED ACCOUNTING

(One paper – Three hours – 100 Marks)

Objective:
To acquire the ability to apply specific accounting standards and legislations to different
transactions and events and in preparation and presentation of financial statements of various
business entities.
Contents:
1. Process of formulation of Accounting Standards including Indian Accounting Standards (IFRS
converged standards) and IFRSs; Convergence vs Adoption; Objective and Concepts of
carve outs.
2. Framework for Preparation and Presentation of Financial Statements (as per Accounting
Standards).
3. (i) Applicability of Accounting Standards to various entities
(ii) Application of Accounting Standards:
AS 1: Disclosure of Accounting Policies
AS 2: Valuation of Inventories
AS 3: Cash Flow Statements
AS 4: Contingencies and Events Occurring After the Balance Sheet Date
AS 5: Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting
Policies
AS 7: Construction Contracts
AS 9: Revenue Recognition
AS 10: Property, Plant and Equipment
AS 11: The Effects of Changes in Foreign Exchange Rates
AS 12: Accounting for Government Grants
AS 13: Accounting for Investments
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AS14: Accounting for Amalgamations (excluding inter- company holdings)

AS 15: Employee Benefits
AS 16: Borrowing Costs
AS 17: Segment Reporting
AS 18: Related Party Disclosures
AS 19: Leases
AS 20: Earnings Per Share
AS21: Consolidated Financial Statements of single subsidiaries (excluding problems
involving acquisition of Interest in Subsidiary at Different Dates, Cross holding,
Disposal of a Subsidiary and Foreign Subsidiaries).
AS 22: Accounting for Taxes on Income
AS 23: Accounting for Investment in Associates in Consolidated Financial Statements
AS 24: Discontinuing Operations
AS 25: Interim Financial Reporting
AS 26: Intangible Assets
AS 27: Financial Reporting of Interests in Joint Ventures
AS 28: Impairment of Assets
AS 29: Provisions, Contingent Liabilities and Contingent Assets
4. Company Accounts
(i) Schedule III to the Companies Act, 2013 (Division I)
(ii) Preparation of financial statements – Statement of Profit and Loss, Balance Sheet and
Cash Flow Statement
(iii) Buy back of securities
(iv) Accounting for reconstruction of companies.
5. Accounting for Branches including foreign branches.
Note : If either new Accounting Standards (AS), Announcements and Limited Revisions to AS are
issued or the earlier ones are withdrawn or new AS, Announcements and Limited Revisions to AS
are issued in place of existing AS, Announcements and Limited Revisions to AS, the syllabus will
accordingly include/exclude such new developments in the place of the existing ones with effect
from the date to be notified by the Institute.
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CONTENTS

MODULE I

CHAPTER 1: Introduction to Accounting Standards

CHAPTER 2: Framework for Preparation and Presentation of Financial

Statements

CHAPTER 3: Applicability of Accounting Standards

CHAPTER 4: Presentation & Disclosures Based Accounting Standards

MODULE II

CHAPTER 5: Assets Based Accounting Standards

CHAPTER 6: Liabilities based Accounting Standards

CHAPTER 7: Accounting Standards based on items impacting Financial
Statements

CHAPTER 8: Revenue based Accounting Standards

CHAPTER 9: Other Accounting Standards

CHAPTER 10: Accounting Standards for Consolidated Financial
Statements

MODULE III

CHAPTER 11: Financial Statements of Companies

CHAPTER 12: Buy back of Securities

CHAPTER 13: Amalgamation of companies

CHAPTER 14: Accounting for Reconstruction of companies

CHAPTER 15: Accounting for Branches including foreign branches.

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DETAILED CONTENTS: MODULE – 1

CHAPTER 1: INTRODUCTION TO ACCOUNTING STANDARDS .......... 1.1 – 1.33

Learning Outcomes ................................................................................................................. 1.1
Chapter overview ..................................................................................................................... 1.2
1. Introduction ................................................................................................................. 1.2
2. Standards Setting Process ....................................................................................... 1.6
3. How Many Accounting Standards? ....................................................................... 1.9
4. Status of Accounting Standards ........................................................................... 1.13
5. Need for Convergence towards Global Standards ......................................... 1.13
6. International Accounting Standard Board ......................................................... 1.15
7. International Financial Reporting Standards as Global Standards ............. 1.16
8. Becoming IFRS Compliant .................................................................................... 1.17
9. What are Carve Outs/Ins in Ind AS? .................................................................... 1.18
10. Convergence to IFRS in India ................................................................................ 1.20
11. What are Indian Accounting Standards (Ind AS)? ........................................... 1.21
12. History of IFRS Converged Indian Accounting Standards (Ind AS) ............ 1.22
13. List of Ind AS ............................................................................................................. 1.23
14. Roadmap for Implementation of Indian Accounting Standards (Ind AS): A
Snapshot ...................................................................................................................... 1.26
Summary .................................................................................................................................. 1.28
Test Your Knowledge ............................................................................................................ 1.30

CHAPTER 2: FRAMEWORK FOR PREPARATION AND PRESENTATION OF

FINANCIAL STATEMENTS .............................................. 2.1 – 2.37
Learning Outcomes ................................................................................................................. 2.1
Chapter overview ..................................................................................................................... 2.2
1. Introduction ................................................................................................................. 2.2
2. Purpose of the Framework ...................................................................................... 2.3
3. Status and Scope of the Framework ..................................................................... 2.3
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4. Components of Financial Statements ................................................................... 2.4
5. Objectives and Users of Financial Statements ................................................... 2.5
6. Fundamental Accounting Assumptions ............................................................... 2.6
7. Qualitative Characteristics of Financial Statements ........................................ 2.11
8. True and Fair View ................................................................................................... 2.13
9. Elements of Financial Statements ........................................................................ 2.13
10. Measurement of Elements of Financial Statements ....................................... 2.21
11. Capital Maintenance ................................................................................................ 2.25
Summary .................................................................................................................................. 2.29
Test Your Knowledge ............................................................................................................ 2.33
CHAPTER 3: APPLICABILITY OF ACCOUNTING STANDARDS .......... 3.1 – 3.28
Learning Outcomes ................................................................................................................. 3.1
Chapter overview ..................................................................................................................... 3.2
1 Status of Accounting Standards ............................................................................. 3.2
2 Applicability of Accounting Standards ................................................................. 3.6
Summary .................................................................................................................................. 3.24
Test Your Knowledge ......................................................................................................... 3.25
CHAPTER 4: PRESENTATION & DISCLOSURES BASED
ACCOUNTING STANDARDS .......................................... 4.1 – 4.152
Unit 1: ACCOUNTING STANDARD 1 DISCLOSURE OF ACCOUNTING POLICIES
1.1 Introduction ................................................................................................................. 4.2
1.2 Fundamental Accounting Assumptions ............................................................... 4.3
1.3 Accounting Policies ................................................................................................... 4.4
1.4 Selection of Accounting Policy ............................................................................... 4.5
1.5 Disclosure of Changes in Accounting Policies ................................................... 4.7
1.6 Disclosure of Deviations From Fundamental Accounting Assumptions ..... 4.8
Test Your Knowledge ............................................................................................................ 4.12
Unit 2: ACCOUNTING STANDARD 3 CASH FLOW STATEMENT
2.1 Introduction ............................................................................................................... 4.16
2.2 Objective ..................................................................................................................... 4.17
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2.3 Meaning of the Term Cash and Cash Equivalents for Cash Flow
Statements ................................................................................................................. 4.18
2.4 Meaning of The Term Cash Flow ......................................................................... 4.18
2.5 Types of Cash Flow .................................................................................................. 4.19
2.6 Identifying Type of Cash Flows ............................................................................ 4.20
2.7 Reporting Cash Flows from Operating Activities ............................................ 4.22
2.8 Reporting Cash Flows on Net Basis..................................................................... 4.24
2.9 Business Purchase .................................................................................................... 4.25
2.10 Exchange gains and losses .................................................................................... 4.26
2.11 Disclosures ................................................................................................................. 4.27
Test Your Knowledge ............................................................................................................ 4.34
Unit 3: ACCOUNTING STANDARD 17 SEGMENT REPORTING
3.1 Introduction ............................................................................................................... 4.40
3.2 Objective ..................................................................................................................... 4.41
3.3 Scope ........................................................................................................................... 4.41
3.4 Definition of the terms used in the Accounting Standard ............................ 4.42
3.5 Treatment of Interest for determining Segment Expense ............................ 4.45
3.6 Allocation ................................................................................................................... 4.46
3.7 Primary and Secondary Segment Reporting Formats .................................... 4.46
3.8 Business and Geographical Segments................................................................ 4.47
3.9 Identifying Reportable Segments (Quantitative Thresholds) ....................... 4.48
3.10 Segment Accounting Policies ............................................................................... 4.50
3.11 Primary Reporting Format ..................................................................................... 4.50
3.12 Secondary Segment Information .......................................................................... 4.51
3.13 Other Disclosures ..................................................................................................... 4.52
Test Your Knowledge ............................................................................................................ 4.58
Unit 4: ACCOUNTING STANDARD 18 RELATED PARTY DISCLOSURES
4.1 Introduction ............................................................................................................... 4.68
4.2 Related Party Issue – Why disclosure is needed?............................................ 4.68
4.3 Related Party Relationships, as contemplated under AS-18 ........................ 4.69
4.4 Who are NOT deemed to be Related Parties under AS-18? ........................ 4.70
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4.5 Exemption from Related Party Disclosure in certain situations .................. 4.71
4.6 Definitions of other Terms used in AS 18 .......................................................... 4.72
4.7 Disclosure requirements under AS-18 ............................................................... 4.82
4.8 List of Related Party Transactions, to be Disclosed
(What Needs to be Disclosed?) ............................................................................ 4.83
Test Your Knowledge ............................................................................................................ 4.86
Unit 5: ACCOUNTING STANDARD 20 EARNINGS PER SHARE
5.1 Introduction ............................................................................................................... 4.91
5.2 Definition of the terms used in AS 20 ................................................................ 4.92
5.3 Earnings-Basic ........................................................................................................... 4.94
5.4 Per share- Basic ........................................................................................................ 4.95
5.5 Shares issued in a scheme of Amalgamation ................................................... 4.97
5.6 Diluted Earnings Per Share ................................................................................. 4.101
5.7 Earnings-Diluted .................................................................................................... 4.102
5.8 Per share- Diluted ................................................................................................. 4.103
5.9 Dilutive Potential Equity Shares ........................................................................ 4.106
5.10 Restatement ............................................................................................................ 4.108
5.11 Presentation ............................................................................................................ 4.108
5.12 Disclosure ................................................................................................................ 4.109
Test Your Knowledge ......................................................................................................... 4.110
Unit 6: ACCOUNTING STANDARD 24 DISCONTINUING OPERATIONS
6.1 Introduction ............................................................................................................ 4.119
6.2 Discontinuing Operation ..................................................................................... 4.119
6.3 Initial Disclosure Event ......................................................................................... 4.123
6.4 Recognition and Measurement ......................................................................... 4.124
6.5 Presentation and Disclosure............................................................................... 4.124
6.6 Updating the Disclosures .................................................................................... 4.125
6.7 Separate Disclosure for Each Discontinuing Operation ............................. 4.126
6.8 Presentation of The Required Disclosures ..................................................... 4.126
6.9 Restatement of Prior Periods ............................................................................. 4.126
6.10 Disclosure in Interim Financial Reports ........................................................... 4.127
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Test Your Knowledge ......................................................................................................... 4.128

Unit 7: ACCOUNTING STANDARD 25 INTERIM FINANCIAL REPORTING
7.1 Introduction ............................................................................................................ 4.133
7.2 Definitions of the terms used under the Accounting Standard ............... 4.134
7.3 Content of an Interim Financial Report ........................................................... 4.134
7.4 Form and Content of Interim Financial Statements..................................... 4.135
7.5 Selected Explanatory Notes................................................................................ 4.135
7.6 Periods for which Interim Financial Statements are required to be
presented................................................................................................................. 4.137
7.7 Materiality ............................................................................................................... 4.137
7.8 Disclosure in Annual Financial Statements .................................................... 4.140
7.9 Accounting Policies .............................................................................................. 4.140
7.10 Revenue Received Seasonally or Occasionally .............................................. 4.142
7.11 Cost Incurred Unevenly During the Financial Year ...................................... 4.142
7.12 Use of Estimates .................................................................................................... 4.142
7.13 Restatement of Previously Reported Interim Periods ................................. 4.143
7.14 Transitional Provision ........................................................................................... 4.143
7.15 Applicability of AS 25 to Interim Financial Results ...................................... 4.143
Test Your Knowledge ......................................................................................................... 4.146