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COMPANY ACCOUNTS-------some queries??
06-11-2006, 01:32 AM
Post: #1
COMPANY ACCOUNTS-------some queries??
Company Accounts
#61692; Dividend
What is the treatment of proposed dividend after B/S date…should they be disclosed as a disclosure note OR they be recorded as a liability in the B/S & appropriation in the P/L.......AS per IAS 10 dividends disclosed after B/S date B/S date are a non adjusting event and shall only be disclosed as they are material …..BUT I have also seen accounts with the other treatment….

What is the treatment of proposed dividend before B/S date? Shall they be treated as interim dividend and shown as only appropriation in the P/L

Shall we record tax on dividends as they fall in PTR and include them in computing company’s tax liability?

#61692; Workers welfare fund WWF
Why is WWF calculated on profits after applying WWF ….e.g. N.P before tax = Rs 100, then WWF = (2/102)*100=RS.1.96…Surely This is what our company law requires but is this a compensation provided to a company for WWF paid in last year and since the data of last year WWF is not available so we make approximation e.g. in our example if WWF of last year =RS 3, then would WWF of current year = (2/100)*97=RS 1.94

#61692; Deferred Tax
What is deferred tax?
Is this the difference between our accounting income and taxable income?
If this is so then should we compute tax of a company after adjusting accounting income with deferred tax asset or liability whatever the case may be?
Likewise if we are required to make a provision for deferred tax we record it as a tax expense in the P/L and liability in the B/S...This is the provision for next year …means next year’s accounting profits would be adjusted by this provision for calculating tax liability

#61692; Loan to directors
What would be the treatment of Loan to directors & loan from directors? Do they need any special treatment?

#61692; What is the treatment of Bank Lien, Bank Guarantee & Bank guarantee margin, L/C Margin on imports?
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06-11-2006, 04:59 AM
Post: #2
 
Hi

Following is the query wise reply

According to IAS 10 and pursuant to the revised 4th schedule to the Companies Ordinance, 1984 the dividend proposed after the balance sheet date is not an adjusting event and shall be accounted for in the year in which it is declared. Earlier it was the requirment of the 4th schedule to recognize it as liability on the balance sheet date.

You may have seen the case opposite to it prior to the revision of 4th schedule.

The treatment of proposed dividend is simple, it shall be shown as final dividend in the statement of changes in equity.

PTR of dividend is for recepient of the dividend and not for the payer. And if a company is recepient of dividend then tax deducted shall be a final tax for the company. However, an article on this topic is also available on this website, which is quite good.

As far as WPPF's treatment is concerned ICAP's ATR 8 adresses its treatment, but WWF's treatment is same as you have shown through example and I am not sure about the underlying concept behind it.

For deferred taxation concept just click on the following link and if you are still not cleared just inform me.

http//www.accountancy.com.pk/forum/topic.asp?topic_id=3411

Loan to directors require special treatment as per IAS 24 (Related Party Transactions) and as per 4th & 5th schedule. 4th and 5th schedule requires the maximum balance outstanding during year to be disclosed. The prupose of this disclosure is to ensure that directors have not utilized unreasonably the resources of company for their personal uses. Loans from directors require the same treatment under IAS 24.

Bank lien/bank guarantee/letter of guarantees are usually shown as contingent liabilities of the company. My view is different, if the bank has given guarantee to third party against the performance of the company then it is not the contingent liability of the company under IAS 37 rather its bank's contingent liability. However, the practice is to show it as contingent liabilities of the company.

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06-12-2006, 07:12 AM
Post: #3
 
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote">As far as WPPF's treatment is concerned ICAP's ATR 8 adresses its treatment<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
treatment of WPPF = 5% of N.P before tax and before any deduction in respect of
a.interest on debentures , on capital A/Ce.gTFCs , on any sums which may be set aside in each year out of reserves
b.any special funds e.g WPPF,WWF etc.
this is treatment of WPPF as i know , do correct me if i am wrong
BUT what is ICAP's ATR 8
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote">For deferred taxation concept just click on the following link and if you are still not cleared just inform me.
http//www.accountancy.com.pk/forum/topic.asp?topic_id=3411<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
i read the thread and got most of it..means the sole purpose for creating this deferred tax is to make our taxable and accounting income comparable....and after the final tax assessment we do adjust our accounting estimates respectively..isn't it

one more thing , i have heard that disclosure note for fixed assets has now changed...now we disclose only opening NBV,additions at cost,disposals at NBV & closing NBV..is it true and if it is should i make the disclosure note according to new format or should i stick to former one
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06-12-2006, 02:17 PM
Post: #4
 
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by insaan</i>
<br /><blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote">As far as WPPF's treatment is concerned ICAP's ATR 8 adresses its treatment<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
treatment of WPPF = 5% of N.P before tax and before any deduction in respect of
a.interest on debentures , on capital A/Ce.gTFCs , on any sums which may be set aside in each year out of reserves
b.any special funds e.g WPPF,WWF etc.
this is treatment of WPPF as i know , do correct me if i am wrong
BUT what is ICAP's ATR 8
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote">For deferred taxation concept just click on the following link and if you are still not cleared just inform me.
http//www.accountancy.com.pk/forum/topic.asp?topic_id=3411<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
i read the thread and got most of it..means the sole purpose for creating this deferred tax is to make our taxable and accounting income comparable....and after the final tax assessment we do adjust our accounting estimates respectively..isn't it

one more thing , i have heard that disclosure note for fixed assets has now changed...now we disclose only opening NBV,additions at cost,disposals at NBV & closing NBV..is it true and if it is should i make the disclosure note according to new format or should i stick to former one
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Treatment of WPPF is simple. 5% of NP befor charging WPPF. The treatment you have shown is Zuberi's view and not being practically followed, we don't add back interest on debentures etc. Refer ICAP's ATR 8

http//icap.org.pk/TRs/Tr-8.htm

Deferred tax arises due to temporary differences b/w accounting profit and taxable profit. The sole purpose of deferred tax is to depict the NP as the provision for taxation has been provided on the basis of accountig profit rather than taxable profit. As in illustration on the other thread it has been shown that after providing charge/income of deferred tax NP remain constant (keeping all the other things constant). We do not adjust our accounting estimates, the word estimate doesn't seem suitable here. Rather say, with the passage of time the temporary differences reverse and deferred tax asset/liability is recovered/settled thorugh income statement or Equity or Goodwill. However, this is a bit advanced topic and only basic knowledge is expected at Inter level. So, dont worry.

As far IAS 16 is concerned can you show me the reference of this change? You mean to say that we shall report figures on net basis? I don't agree with this statement. Refer disclosures IAS 16 (revised).

Waiting for your response

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06-12-2006, 05:06 PM
Post: #5
 
this is what our teacher told us
i would just confirm it & would then reply
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote">The treatment you have shown is Zuberi's view and not being practically followed, we don't add back interest on debentures etc.<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
it means i shan't follow zuberi's treatment in this regards...ohhhh...are zuberi's books outdated , then this may pose problems....
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06-12-2006, 05:36 PM
Post: #6
 
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by insaan</i>
<br />this is what our teacher told us
i would just confirm it & would then reply
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote">The treatment you have shown is Zuberi's view and not being practically followed, we don't add back interest on debentures etc.<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
it means i shan't follow zuberi's treatment in this regards...ohhhh...are zuberi's books outdated , then this may pose problems....
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

No, dont take my words in this regard. You should consult your own teacher. When we were in C, we have been told by our teacher not to follow this treatment as the same is not practically applied. Our teacher was Finance Manager Dewan Salman Fibres. So, you should consult a person having practical exposure and you should also consult ICAP's ATR.

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06-13-2006, 04:56 AM
Post: #7
 
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote">As far IAS 16 is concerned can you show me the reference of this change? You mean to say that we shall report figures on net basis? I don't agree with this statement. Refer disclosures IAS 16 (revised).<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
yes it is IAS 16.73(e)requires reconcilitaion of C.A at beginning and end of period , not of cost & likewise refer 17.7 (d)
then have a look at unilevers accounts for year ended 30 june 2005
http//www.unilever.com/ourcompany/investorcentre/financial_reports/annual_report_Form.asp
i confirmed all this from my accounts teacher...he is currently manager at AFF karachi
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06-13-2006, 05:53 AM
Post: #8
 
Carrying Amount (CA) is made up of cost and accumulated depreciation. CA is nothing in itself. Had the disclosure requirement been changed, this change would have been emphasized in "Main Changes" given with every IAS. However, I shall discuss this issue with my teacher.

Thanks.

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06-13-2006, 05:59 AM
Post: #9
 
And what about clause (d) of para 73 of IAS 16. It states that "financial statements shall disclose GROSS carrying amount and accumulated depreciation at the BEGINNING and END of the period"

So clause (e) is in conitinuation of clause (d) and its not a standalone!

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06-13-2006, 04:53 PM
Post: #10
 
Yah for sure, this is what my teacher said, clause d and e are in continuation and both these need to be disclosed in disclosure notes
In unilevers disclosure note clause e requirement continue and then clause d at the end showing gross book value along with op and closing accumulated dep
Let’s confirm it with your teacher too and then do inform me too
I think if we get the older version of IAS 16 i.e. before revision it would solve the problem…if there is a revision in disclosure requirements then the disclosure needs to be changed accordingly…do u have the older version of IAS 16
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06-14-2006, 03:22 AM
Post: #11
 
Insaan and Ali bhi for taxation mod c which book u would preffer!
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06-14-2006, 03:44 AM
Post: #12
 
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote">Insaan and Ali bhi for taxation mod c which book u would preffer!<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
tax ordinance as the base
+notes by KP , can be downloaded from alhamd's website
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06-14-2006, 04:44 AM
Post: #13
 
Oh yes I got the older version of IAS 16, and I am pleased to inform you that there has been no change in disclosure requirements stated by you. Only paragraph number has been changed from 60 to 73. Have a look of older version and inquire this change with your teacher too.

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06-14-2006, 04:50 AM
Post: #14
 
OHhhh
this is the case
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06-14-2006, 04:53 AM
Post: #15
 
<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by nabeelanwer</i>
<br />Insaan and Ali bhi for taxation mod c which book u would preffer!
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

My teacher's handouts, these were really helpful for us and Income Tax Ordinance.

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