ICDS Overview: Scope and Major Differences
- Blog|Account & Audit|
- 3 Min Read
- By Taxmann
- Last Updated on 24 March, 2021
Income Computation and Disclosure Standards or ICDS Overview, Scope and Major Differences
Major Points of Differences
ICDS-I: Accounting Policy
♦ Disclosure of all significant accounting policies adopted by a person shall be disclosed.
Any change in an accounting policy which has a material effect shall be disclosed.
♦ Marked to market loss or an expected loss shall not be recognised unless the recognition of such loss is in accordance with the provisions of any other Income Computation and Disclosure Standard.
♦ An accounting policy shall not be changed without reasonable cause.
ICDS-n : Valuation of Inventory
Applicable for inventory valuation, except:
(a) Producers’ inventories of livestock, agriculture and forest products, mineral oils, ores and gases to the extent that they are measured at net realisable value;
(b) Valuation is provided in any other ICDS.
♦ In case of dissolution of a partnership firm or association of person or body of individuals, notwithstanding whether business is discontinued or not, the inventory on the date of dissolution shall be valued at the net realisable value.
The costs of services shall consist of labour and other costs of personnel directly engaged in providing the service including supervisory personnel and attributable overheads.
Applicable in determination of income for a construction contract of a contractor.
♦ Contract revenue shall be recognised when there is reasonable certainty of its ultimate collection.
♦ During the early stages of a contract, where the outcome of the contract cannot be estimated reliably contract revenue is recognised only to the extent of costs incurred. The early stage of a contract shall not extend beyond 25% of the stage of completion.
ICDS-IV: Revenue Recognition
Applicable for revenue recognition arising in the course of the ordinary activities of a person from
(i) the sale of goods;
(ii) the rendering of services;
(iii) the use by others of the person’s resources yielding interest, royalties or dividends.
Revenue from service transactions shall be recognised by the percentage completion method.
ICDS-V : Tangible Fixed Assets
Applicable to the treatment of tangible fixed assets.
♦ Machinery spares shall be charged to the revenue as and when consumed.
♦ When such spares can be used only in connection with an item of tangible fixed asset and their use is expected to be irregular, they shall be capitalised.
ICDS-VI: Effect of change in foreign exchange rates
(a) treatment of transactions in foreign currencies;
(b) translating the financial statements of foreign operations;
(c) treatment of foreign currency transactions in the nature of forward exchange contracts.
All exchange differences arising on translation of foreign currency are recognised in profit or loss.
However, initial recognition, translation and recognition of exchange differences are subject to provisions of section 43 A of Act or Rule 115 of Income-tax Rules, 1962, as the case may be.
ICDS-VII: Government Grant
Applicable to the treatment of Government grants.
Recognition of government grant is not postponed beyond the date of actual receipt.
Applicable to securities held as stock-in-trade.
♦ At the end of any previous year, securities held as stock- in-trade shall be valued at actual cost initially recognised or net realisable value at the end of that previous year, whichever is lower.
The comparison of actual cost initially recognised and net realisable value shall be done category wise and not for each individual security.
♦ For this purpose, securities shall be classified into the following categories, namely:-
(b) debt securities;
(c) convertible securities; and
(d) any other securities not covered above.
♦ Applicable to treatment of borrowing costs.
♦ Not applicable for the actual or imputed cost of owners’ equity and preference share capital.
♦ In respect of general borrowing if any, the amount of borrowing costs to be capitalised shall be computed in accordance with the specified formula: A X B/C, Where, A – borrowing costs, B – the average of costs of qualifying asset, C = the average of the amount of total assets
♦ The capitalisation of borrowing costs shall commence:
(a) in a case referred to in paragraph 5, from the date on which funds were borrowed;
(b) in a case referred to in paragraph 6, from the date on which funds were utilised.
ICDS-X: Provision, Contingent Liability and Contingent Assets
Applicable to provisions, contingent liabilities and contingent assets, except those:
(a) resulting from financial instruments;
(b) resulting from executory contracts;
(c) arising in insurance business from contracts with policyholders; and
(d) covered by another Income Computation and Disclosure Standard.
Word used in the definition of provisions is reasonable certain, whereas in Accounting standards, it is Probable.
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