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Relevant Amendments applicable for CA IPC Nov, 2013 Exam

IPC students must learn thoroughly following amendments and updates announced by ICAI which are most important for Intermediate (IPC) Nov, 2013 Exams.

Relevant Amendments applicable for CA IPC Nov, 2013 Exam
A student who has passed Common Proficiency Test (CPT) and Senior Secondary Examination (10+2 examination) conducted by an examining body constituted by law in India or an examination recognized by the Central Government as equivalent thereto may join the Intermediate (Integrated Professional Competence) Course of The Institute of Chartered Accountants in India (ICAI).

Further, the Chartered Accountants (Amendment) Regulations, 2012 gives the eligibility for graduated students for direct entry in CA Intermediate Course.

Chartered Accountancy Intermediate (IPC) erstwhile known as Integrated Professional Competence Course (IPCC) is the second stage/ label of examination to be conducted by ICAI. It may be noted that in terms of Notification No/1-CA(7)/145/2012 dated 1st August 2012, “Integrated Professional Competence Examination(IPCE)”, stands renamed as “Intermediate (IPC) Examination”.

At this stage students only gets working knowledge of core and allied subjects to accountancy profession and therefore they have to undergo nine months study course in order to develop a strong theoretical base for their better result apart from practical training as an article assistant for the period of three years in a CA firm under any chartered accountant in practice.

Therefore, CA IPC students must read and learn thoroughly following pronouncements/ legislative amendments/ circulars etc. provided by CA Institute and are most important for the coming Examination November, 2013:

Paper 1: Accounting


1) Accounting Standards (AS) applicable for IPC Nov, 2013 examination:



2) Criteria for Classification of Entities and Applicability of ASs


As per the ICAI announcement, there are three levels of entities viz. Level I, Level II and Level III. The Level II and Level III entities are considered as the Small and Medium Entities (SMEs).

However, the Council of the CA Institute has recently changed the first criteria in order to determine SMEs on the basis of turnover for Level II entities and the same amended criteria is effective from the accounting year commencing on or after April 01, 2012.

Thus, non-corporate entities which are not Level I entities but fall in any one or more of the following categories are classified as Level II entities:

(i) All commercial, industrial and business reporting entities, whose turnover (excluding other income) exceeds rupees Rs. 1 Crore but does not exceed rupees fifty crore in the immediately preceding accounting year.

(ii) All commercial, industrial and business reporting entities having borrowings (including public deposits) in excess of rupees one crorebut not in excess of rupees ten crore at any time during the immediately preceding accounting year.

(iii) Holding and subsidiary entities of any one of the above.

The above amendment has been made by ICAI because of recent changes in the enhancement of tax audit limit specified u/s 44AB of Income Tax Act, 1961 which will apply to the assessment year 2013-14 and subsequent assessment years.

Did you know? Under the amended provisions of section 44AB applicable with effect from 1st April, 2013, every person carrying on:

- Business is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceed Rs. 100 lakh rupees.

- Profession is required to get his accounts audited if the total sales, turnover or gross receipts in the previous year exceed Rs. 25 lakh rupees.

3) Non-Applicability of Ind ASs for November, 2013 Examination


The Ministry of Corporate Affairs (MCA) has issued 35 converged Indian Accounting Standards (Ind ‘AS’) without announcing the applicability date. These Ind Ass would not be applicable for CA IPC exams to be held in November, 2013. However, Accounting Standards (AS) as specified in the syllabus are applicable for them in Nov, 2013 examination.

Paper 5: Advanced Accounting


4) Following Accounting Standards are covered in the syllabus of IPC:


e) AS 16 Borrowing Costs.
f) AS 19 Leases.
g) AS 20 Earnings Per Share.
h) AS 26 Intangible Assets.

5) Presentation of Foreign Currency Monetary Item Translation Difference Account (FCMITDA)


In the Revised Schedule VI format, no line item has been specified for the presentation of “Foreign Currency Monetary Item Translation Difference Account (FCMITDA)”. Therefore, the Council of the CA Institute at its 324th meeting held on March 24-26, 2013 at New Delhi, decided that debit or credit balance in FCMITDA should be shown on the “Equity and Liabilities” side of the balance sheet under the head ‘Reserves and Surplus’ as a separate line item.

You may note that in order to resolve the problems faced by industry in proper implementation of Para 46A of AS 11 inserted vide notification number G.S.R. 914(E) dated 29.12.2011, on account of Para 6 of AS 11 and Para 4(e) of AS 16, MCA had further clarified vide Circular No. 25/2012 dated 09.08.2012 that Para 6 of AS 11 and Para 4(e) of the AS 16 shall not apply to a company which is applying clause Para 46A of AS 11.

Newly Inserted Para 46A of AS-11:

(1) In respect of accounting periods commencing on or after the 1st April, 2011, for an enterprise which had earlier exercised the option under paragraph 46 and at the option of any other enterprise (such option to be irrevocable and to be applied to all such foreign currency monetary items), the exchange differences arising on reporting of long term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, can be added to or deducted from the cost of the asset and shall be depreciated over the balance life of the asset, and in other cases, can be accumulated in a ‘‘Foreign Currency Monetary Item Translation Difference Account” in the enterprise’s financial statements and amortized over the balance period of such long term asset or liability, by recognition as income or expense in each of such periods, with the exception of exchange differences dealt with in accordance with the provisions of paragraph 15 of the said rules.

(2) To exercise the option referred to in sub-paragraph (1), an asset or liability shall be designated as a long-term foreign currency monetary item, if the asset or liability is expressed in a foreign currency and has a term of twelve months or more at the date of origination of the asset or the liability:

Provided that the option exercised by the enterprise shall disclose the fact of such option and of the amount remaining to be amortized in the financial statements of the period in which such option is exercised and in every subsequent period so long as any exchange difference remains unamortized.”

6) Criteria for Classification of Entities


As a result of latest enhancement of tax audit limit to Rs. One Crore, the Council of the ICAI has recently decided to change the 1st criteria i.e. determination of SME on turnover basis for Level II entities from Rs. 40 lakhs to Rs. 1 Crore with effect from the accounting year commencing on or after April 01, 2012. [For more details you may read the point No. 2 above.]

7) Clarification on Debenture Redemption Reserve (DRR)


Ministry of Corporate Affairs (MCA) vide Circular no. 04/2013 dated February 11, 2013 has clarified the adequacy of DRR for various institutions/companies as follows:

All India Financial Institutions (AIFIs) regulated by Reserve Bank of India and Banking Companies for both public as well as privately placed debentures.
NIL
Other Financial Institutions and NBFCs registered with the RBI under Section 45-IA of the RBI (Amendment) Act, 1997:

if debentures issued through public issue
25%
if privately placed debentures
NIL
Other companies including manufacturing and infrastructure companies (including listed and unlisted companies)
25%

Every company required to create/maintain DRR shall before the 30th day of April of each year, deposit or invest, as the case may be, a sum which shall not be less than fifteen percent of the amount of its debentures maturing during the year ending on the 31st day of March next following year.

8) Maintenance of Cash Reserve Ratio (CRR):


The Reserve Bank of India (RBI) vide circular DBOD. No. Ret. BC. 76/12.01.001/2012-13 dated January 29, 2013, reduced the Cash Reserve Ratio (CRR) of Scheduled Commercial Banks by 25 basis points from 4.25 per cent to 4.00 per cent of their Net Demand and Time Liabilities (NDTL) with effect from the fortnight beginning February 09, 2013. The Local Area Banks shall also maintain CRR at 4.00 per cent of its net demand and time liabilities from the fortnight beginning from February 09, 2013.

Thus, all banks are required to maintain the CRR at 4.00 per cent with effect from 9th February, 2013.

9) Statutory Liquidity Ratio (SLR) for Local Area Banks


All Local Area Banks are required to maintain the reduced SLR from 25 per cent to 23 per cent of their Net Demand and Time Liabilities (NDTL) with effect from the fortnight beginning August 11, 2012.

10) Review of the Prudential Guidelines on Restructuring of Advances by Banks/Financial Institutions


The RBI has reviewed the prudential guidelines on restructuring of advances by banks/ financial institutions vide circular no. DBOD.No.BP.BC.63/21.04.048/2012-13 applicable for all scheduled commercial banks excluding RRBs dated November 26, 2012 and has decided:

i) To enhance the provisioning requirement for restructured accounts classified as standard advances from the existing 2.00 per cent to 2.75 per cent in the first two years from the date of restructuring. In cases of moratorium on payment of interest/principal after restructuring, such advances will attract a provision of 2.75 per cent for the period covering moratorium and two years thereafter; and that

ii) Restructured accounts classified as non-performing advances, when upgraded to standard category will attract a provision of 2.75 per cent in the first year from the date of upgradation instead of the existing 2.00 per cent.

In accordance with the above, loans to projects under implementation, when restructured due to change in the date of commencement of commercial operations (DCCO) beyond the original DCCO as envisaged at the time of financial closure and classified as standard advances would attract higher provisioning at 2.75 per cent as against the present requirement of 2.00 per cent as per the details given below:

Infrastructure projects
Particulars
Provisioning Requirement
If the revised DCCO is within two years from the original DCCO prescribed at the time of financial closure
0.40 per cent
If the DCCO is extended beyond two years and upto four years or three years from the original DCCO, as the case may be, depending upon the reasons for such delay (Ref.: DBOD.No.BP.BC.85 /21.04.048/2009-10 dated March 31, 2010)
2.75 per cent – From the date of such restructuring till the revised DCCO or 2 years from the date of restructuring, whichever is later.

Non-infrastructure projects
Particulars
Provisioning Requirement
If the revised DCCO is within six months from the original DCCO prescribed at the time of financial closure
0.40 per cent
If the DCCO is extended beyond six months and upto one year from the original DCCO prescribed at the time of financial closure (Ref.: DBOD.No.BP.BC.85 /21.04.048/2009-10 dated March 31, 2010)
2.75 per cent – From the date of such restructuring for 2 years.

All other extant guidelines on Income Recognition, Asset Classification and Provisioning pertaining to advances will remain unchanged.

11) Non-Applicability of Ind ASs for November, 2013 Examination


The MCA has hosted on its website 35 converged Indian Accounting Standards (Ind AS) without announcing the applicability date. These are the standards which are being converged by eliminating the differences of the Indian Accounting Standards vis-a-vis IFRS.

Accordingly, all these Ind ASs are not applicable in November, 2013 Examination. However, Accounting Standards as specified in the syllabus are applicable for them in November, 2013 examination.

Paper 4: Taxation


12) Applicability of Finance Act, Assessment Year etc. for November, 2013 examination


A) Finance Act, 2012: The amendments made by the Finance Act, 2012 in income-tax and service tax;
B) Assessment Year 2013-14: The provisions of income-tax law as applicable for the assessment year 2013-14 related to previous year 2012-13.
C) Notifications and Circulars: The significant notifications and circulars issued upto 30th April, 2013 (income-tax and service tax).

Paper 6: Auditing and Assurance


13) Statements


1. Statement on Reporting under Section 227 (1A) of the Companies Act, 1956
2. Statement on the Companies (Auditor’s Report) Order, 2003 (2005 Edition)

14) Standards on Auditing (SAs)


SL. No.
SA
Title of Standard on Auditing
Effective Date
1
SA 200
Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Standards on Auditing
April 1, 2010
2
SA 210
Agreeing the Terms of Audit Engagements
April 1, 2010
3
SA 220
Quality Control for an Audit of Financial Statements
April 1, 2010
4
SA 230
Audit Documentation
April 1, 2009
5
SA 240
The Auditor’s responsibilities Relating to Fraud in an Audit of Financial Statements
April 1, 2009
6
SA 250
Consideration of Laws and Regulations in An Audit of Financial Statements
April 1, 2009
7
SA 260
Communication with Those Charged with Governance
April 1, 2009
8
SA 265
Communicating Deficiencies in Internal Control to Those Charged with Governance and Management
April 1, 2010
9
SA 299
Responsibility of Joint Auditors
April 1, 1996
10
SA 300
Planning an Audit of Financial Statements
April 1, 2008
11
SA 315
Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its Environment
April 1, 2008
12
SA 320
Materiality in Planning and Performing an Audit 
April 1, 2010
13
SA 330
The Auditor’s Responses to Assessed Risks
April 1, 2008
14
SA 402
Audit Considerations Relating to an Entity Using a Service Organization
April 1, 2010
15
SA 450
Evaluation of Misstatements Identified during the Audits
April 1, 2010
16
SA 500
Audit Evidence
April 1, 2009
17
SA 501
Audit Evidence - Specific Considerations for Selected Items
April 1, 2010
18
SA 505
External Confirmations
April 1, 2010
19
SA 510
Initial Audit Engagements-Opening Balances
April 1, 2010
20
SA 520
Analytical Procedures
April 1, 2010
21
SA 530
Audit Sampling
April 1, 2009
22
SA 540
Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures
April 1, 2009
23
SA 550
Related Parties
April 1, 2010
24
SA 560
Subsequent Events
April 1, 2009
25
SA 570
Going Concern
April 1, 2009
26
SA 580
Written Representations 
April 1, 2009
27
SA 600
Using the Work of Another Auditor
April 1, 2002
28
SA 610
Using the Work of Internal Auditors
April 1, 2010
29
SA 620
Using the Work of an Auditor’s Expert
April1, 2010
30
SA 700
Forming an Opinion and Reporting on Financial Statements
April 1, 2011
31
SA 705
Modifications to the Opinion in the Independent Auditor’s Report
April 1, 2011
32
SA 706
Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report
April 1, 2011
33
SA 710
Comparative Information – Corresponding Figures and Comparative Financial Statements
April 1, 2011
34
SA 720
The Auditor’s Responsibility in Relation to Other Information in Documents Containing Audited Financial Statements
April 1, 2010
NOTE: Effective date means that the SA is effective for audits of the financial statements for periods beginning on or after the specified date.

15) Guidance Notes /Study Guide / Monograph


1. Guidance Note on Audit of Inventories.
2. Guidance Note on Audit of Debtors, Loans and Advances.
3. Guidance Note on Audit of Investments.
4. Guidance Note on Audit of Miscellaneous Expenditure.
5. Guidance Note on Audit of Cash and Bank Balances.
6. Guidance Note on Audit of Liabilities.
7. Guidance Note on Audit of Revenue.
8. Guidance Note on Audit of Expenses.
9. Guidance Note on Provision for Proposed Dividend




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