Disclosures

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Accounting Standard (AS) 1, Disclosure of Accounting Policies, principally requires the disclosure of significant accounting policies and specifies the manner of their disclosure. A clear statement of significant accounting policies followed in the preparation and presentation of financial statements is necessary, irrespective of the type of entity presenting the financial statements. Further, all significant accounting policies should be disclosed at one place. Accordingly, NPOs should disclose their significant accounting policies at one place.

 

Where an NPO has followed a basis of accounting other than accrual, a disclosure in this regard should be made. Further, an illustrative list of accounting policies that an NPO could disclose in accordance with the laid down Accounting Standards governing these policies is as follows:

  1. The basis of recognition of major types of expenses and revenue

  2. Accounting for income from and expenditure on specialised activities such as research

  3. Conversion or translation of foreign currency (in case of organisations receiving foreign funds)

  4. Valuation of inventories

  5. Valuation of investments

  6. Treatment of employee benefits

  7. Valuation of property, plant and equipment

  8. Treatment of provisions, contingent liabilities and contingent assets

  9. Treatment for Government grants

  10. Treatment for Intangible assets

  11. Impairment of assets

  12. Effects of changes in foreign exchange rates

 

As per Accounting Standard (AS) 2, Valuation of Inventories, an NPO should disclose in the financial statements:

 

As per Accounting Standard (AS) 9, Revenue Recognition, in addition to the disclosures required by AS 1, an NPO should also disclose the circumstances in which revenue recognition has been postponed pending the resolution of significant uncertainties and should recognise revenue when ultimate collection is reasonably certain.

 

As per Accounting Standard (AS) 10, an NPO should disclose in the financial statements for each class of property, plant and equipment:

The depreciation rates or the useful lives of the assets should be disclosed in the financial statements alongwith the disclosure of other accounting policies In case, they are different from the principal rates specified in the statute governing the NPO it should make specific mention of the fact.

 

As per Accounting Standard (AS) 10, an NPO should make the following disclosures in the financial statements:

 

As per Accounting Standard (AS) 11, The Effects of Changes in Foreign Exchange Rates, an NPO should make the following disclosures in its financial statements:

 

As per Accounting Standard (AS) 12, Accounting for Government Grants, an NPO should make the following disclosures in the financial statements:

These disclosures are also required to be made in respect of donations and other grants received by an NPO.

 

As per Accounting Standard (AS) 13, Accounting for Investments, an NPO should make the following disclosures in the financial statements:
  1. the accounting policies for the determination of carrying amount of investments;
  2. classification of investments - whether current or long-term (refer AS- 13);
  3. the amounts included in income and expenditure account for:
    • interest, dividends, and rentals on investments showing separately such income from current and long-term investments;
    • profits and losses on disposal of current investments and changes in the carrying amount of such investments; and
    • profits and losses on disposal of long-term investments and changes in the carrying amount of such investments;
  4. significant restrictions on the right of ownership, realisability of investment or the remittance of income and proceeds of disposal;
  5. the aggregate amount of quoted and unquoted investments, giving the aggregate market value of quoted investments;
  6. other disclosures as specifically required by the relevant statute governing the NPOs.

 

As per Accounting Standard (AS) 17, Segment Reporting, an NPO that is operating in different geographical locations or is involved in different kinds of service delivery programmes/projects which meet the definitions of ‘geographical segment’ and ‘business segment’, should disclose segmental information according to the requirements of AS 17. However, for micro, small and medium sized NPOs falling within the meaning of MSMEs/SMCs AS 17 is not mandatory. Such entities are, however, encouraged to comply with AS 17.

 

Accounting Standard (AS) 18, Related Party Disclosures, establishes the requirements for disclosure of related party relationships, and transactions between a reporting enterprise and its related parties. Related party – parties are considered to be related if at any time during the reporting period one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions. Related party transaction is a transfer of resources or obligations between related parties, regardless of whether or not a price is charged. Key management personnel are those persons who have the authority and responsibility for planning, directing and controlling the activities of the reporting enterprises.

 

 

Parties are considered to be related if at any time during the reporting period one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions. For the purposes of AS 18, trustees of an NPO would be considered as key management personnel and, accordingly, trustees and their relatives would, inter alia, be treated as related parties. It may be noted that according to AS 18, relative, in relation to an individual, means the spouse, son, daughter, brother, sister, father and mother who may be expected to influence, or be influenced by, that individual in his/her dealings with the reporting enterprise. For micro and small sized NPO falling within the meaning of MSME/SMC , AS 18 is not mandatory. However, due to the onerous implications of related party transactions on the functioning of an NPO, it is recommended that the disclosures required in AS 18 should be made by all NPOs.

 

As per the requirements of Accounting Standard (AS) 19, Leases, where an NPO is a lessee, in case of a finance lease, it should in addition to the requirements of AS 10, make the following minimum disclosures:
  1. assets acquired under finance lease as segregated from the assets owned;
  2. for each class of assets, the net carrying amount at the balance sheet date;
  3. contingent rents recognised as expense in the income and expenditure account.

(Only minimum disclosure requirements as per AS 19)


Where an NPO is a lessee, for operating leases it should make the following minimum disclosures:

 

As per Accounting Standard (AS) 26, Intangible Assets, with regard to intangible assets, an NPO should disclose in the financial statements the following for each class of intangible assets, distinguishing between internally generated intangible assets and other intangible assets:

 

An NPO should also disclose in the financial statements:

 

Accounting Standard (AS) 27, Financial Reporting of Interests in Joint Ventures, sets out the principles and procedures for accounting for interests in joint ventures and reporting of joint venture assets, liabilities, income and expenses in the financial statements of venturers and investors. In case of NPOs, there may be instances where two or more NPOs jointly undertake or fund a certain project or activity which is considered as a jointly controlled operation. Similarly, two or more NPOs may jointly control an asset. In addition, an NPO may also have joint control in a jointly controlled entity with other enterprises that may be in any form of organisation. Accordingly, in such cases, NPOs should report their interests in such joint ventures in separate as well as in consolidated financial statements (prepared as per AS 21) in accordance with the requirements of AS 27.

 

In respect of the funds created in the financial statements, the NPO should disclose the following in the Schedules/Notes to the accounts:



Revision #5
Created 29 July 2024 16:30:09 by Pooja
Updated 4 September 2024 04:10:06 by Pooja