11-05-2007, 11:43 PM
Dear,
The concept of differentiating among recognition, measurement, subsequent recognition, de-recognition and disclosure etc has been given by IFRSs and much emphasis has been made in the recent past.
CO 84, when developed, it was the era of very limited knowledge, research and importance for the financial statements and accountancy. Therefore, it included what could have been deemed fit in those earlier days and so much was influenced by Companies ACt 1913.
Section 234 had been dealing with IASs and IFRSs since the promulgation of CO 84 specifying for notified standards and their relevance for various companies. Even then, there was no particular guidelines regarding other accounting issues and criterion except the disclosure and presentation requirements given in the (before amendment) Fourth and Fifth schedules. There was no particular mention of recognition and measurement principles and even for dercognition in crystal clear words. A mixture of such instructions was available which was supposed to provide only a raw guideline.
Then came the amendments in 2002 to CO 84 where IASs were made compulsory for all companies including private limited or unlisted ones. Still, there had been real conflict in this section 234 as it in its ownself exepmted certain companies from cash flow statement and statement of changes in equity that was really against the IASs. Moreover, the disclosure requirements of 4th and 5th schedules included so many such things which did not at all agree to IFRSs and had real conflicts with them. These may be seen in case of segment information and segment selection/identification, government grants and relevant recognition of assets, capitalization of exchange differences, deferring certain costs and so many others.
This had ever been in the eyes of ICAP and other stakeholders and regulators, so, amendment in law was always desired. Still, being a governmental issue, it took so much of time to bring 4th schedule of CO 84 in line with IFRSs providing only certain additional disclosures. For example IAS 24 does not accept the chief executive, directors or executives remuneration as a related party transaction. Even it is not described by CO 84 as such. Still its detailed disclosure has beend demanded by 4 the schedule as in pakistan the service contracts of CEO and directors are typically carrying related parties issues and have to be kept under the eye of regulators. You will appreciate that a Matric pass/fail CEO can get salary in millions in Pakistan thus making it a related party issue by all means. So it is only for explaining that additional disclosures prescribed by 4th schedule after amendment are not in conflict with IFRSs and now it is almost in agreement with IFRSs.
Further to it, since IFRSs were applicable on all companies but disclosures required under 5th schedule were different than IFRSs and its revision was also desired. Meanwhile, ICAP developed standard for MSEs and SSEs under TR 5. Therefore, fifth schedule was revised keping in view practical issues and categorization for following IFRSs or MSE standard or SSE standard was laid down.
Now, about ur question, yes, there was no where mentioned for deferring such costs in CO 84 except fourth schedule and Fifth schedule, before their current revision. Even these were given as a disclosure items, still, this caused the reason for their existence and provided a mild way out to account for such transactions in this way.
After the revision of schedules and elimination of such options, companies had to change their accounting policies wherever necessary and the companies in fact did this all applying IAS 8 in case of listed companies and other relevant standards in case of other companies.
The company which had not been preparing its profit and loss account, has to prepare it, adjusting /writing off the deferred cost to loss in the earliest period presented and then adjusting remaining figures in comparative and current profit and loss account.
Only some transition provision ould be helpful to avoid such on spot adjustments as were specified for capitalization of exchange differences and deferred cost already recognized etc.
However, after such pronouncements, it was mandatory to do what has been prescribed.
Hope you would be benefited.
Regards,
Kamran.
The concept of differentiating among recognition, measurement, subsequent recognition, de-recognition and disclosure etc has been given by IFRSs and much emphasis has been made in the recent past.
CO 84, when developed, it was the era of very limited knowledge, research and importance for the financial statements and accountancy. Therefore, it included what could have been deemed fit in those earlier days and so much was influenced by Companies ACt 1913.
Section 234 had been dealing with IASs and IFRSs since the promulgation of CO 84 specifying for notified standards and their relevance for various companies. Even then, there was no particular guidelines regarding other accounting issues and criterion except the disclosure and presentation requirements given in the (before amendment) Fourth and Fifth schedules. There was no particular mention of recognition and measurement principles and even for dercognition in crystal clear words. A mixture of such instructions was available which was supposed to provide only a raw guideline.
Then came the amendments in 2002 to CO 84 where IASs were made compulsory for all companies including private limited or unlisted ones. Still, there had been real conflict in this section 234 as it in its ownself exepmted certain companies from cash flow statement and statement of changes in equity that was really against the IASs. Moreover, the disclosure requirements of 4th and 5th schedules included so many such things which did not at all agree to IFRSs and had real conflicts with them. These may be seen in case of segment information and segment selection/identification, government grants and relevant recognition of assets, capitalization of exchange differences, deferring certain costs and so many others.
This had ever been in the eyes of ICAP and other stakeholders and regulators, so, amendment in law was always desired. Still, being a governmental issue, it took so much of time to bring 4th schedule of CO 84 in line with IFRSs providing only certain additional disclosures. For example IAS 24 does not accept the chief executive, directors or executives remuneration as a related party transaction. Even it is not described by CO 84 as such. Still its detailed disclosure has beend demanded by 4 the schedule as in pakistan the service contracts of CEO and directors are typically carrying related parties issues and have to be kept under the eye of regulators. You will appreciate that a Matric pass/fail CEO can get salary in millions in Pakistan thus making it a related party issue by all means. So it is only for explaining that additional disclosures prescribed by 4th schedule after amendment are not in conflict with IFRSs and now it is almost in agreement with IFRSs.
Further to it, since IFRSs were applicable on all companies but disclosures required under 5th schedule were different than IFRSs and its revision was also desired. Meanwhile, ICAP developed standard for MSEs and SSEs under TR 5. Therefore, fifth schedule was revised keping in view practical issues and categorization for following IFRSs or MSE standard or SSE standard was laid down.
Now, about ur question, yes, there was no where mentioned for deferring such costs in CO 84 except fourth schedule and Fifth schedule, before their current revision. Even these were given as a disclosure items, still, this caused the reason for their existence and provided a mild way out to account for such transactions in this way.
After the revision of schedules and elimination of such options, companies had to change their accounting policies wherever necessary and the companies in fact did this all applying IAS 8 in case of listed companies and other relevant standards in case of other companies.
The company which had not been preparing its profit and loss account, has to prepare it, adjusting /writing off the deferred cost to loss in the earliest period presented and then adjusting remaining figures in comparative and current profit and loss account.
Only some transition provision ould be helpful to avoid such on spot adjustments as were specified for capitalization of exchange differences and deferred cost already recognized etc.
However, after such pronouncements, it was mandatory to do what has been prescribed.
Hope you would be benefited.
Regards,
Kamran.
