In AS 9, revenue is recognized when it is probable that future economic benefits will flow to the enterprise, and the revenue can be measured reliably. For long-term contracts, the percentage of completion method is used to account for revenue over time.

Key Points:

• Revenue should be recognized when the performance obligations are met.
• The percentage of completion method is appropriate when outcomes can be measured reliably.
• Revenue must be measured at the fair value of the consideration received.
• For services, revenue is recognized by reference to the stage of completion at the balance sheet date.

Formula: Revenue recognized = (Cost incurred / Total estimated cost) x Contract revenue

According to AS 16, borrowing costs that are directly attributable to the acquisition, construction, or production of a qualifying asset should be capitalized as part of the cost of the asset. Other borrowing costs should be expensed as incurred.

Key Points:

• A qualifying asset is one that necessarily takes a substantial period of time to get ready for use or sale.
• Borrowing costs that do not meet the capitalization criteria should be recognized as expenses.
• Capitalization of borrowing costs should cease when substantially all activities necessary to prepare the asset are complete.

Formula: Borrowing Costs = Loan amount x Interest rate x Capitalization period

Under AS 29, a provision should be recognized when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required, and a reliable estimate can be made of the amount.

Key Points:

• Provisions are recognized based on the likelihood of the outflow of economic resources.
• Contingent liabilities should be disclosed unless the possibility of outflow is remote.
• Contingent assets are not recognized but may be disclosed where an inflow of economic benefits is probable.
• A provision is a liability of uncertain timing or amount.

Formula: Provision = Estimated liability amount based on probability

According to AS 19, leases are classified as either finance leases or operating leases. A finance lease transfers substantially all the risks and rewards of ownership to the lessee, while an operating lease does not.

Key Points:

• A finance lease is capitalized in the lessee's books as an asset and a liability.
• An operating lease is expensed as lease rentals in the income statement.
• The present value of minimum lease payments should be compared with the fair value of the asset for classification.
• Lease agreements that transfer ownership or contain bargain purchase options are typically classified as finance leases.

Formula: PV of Minimum Lease Payments = Lease payment / (1 + Discount rate)^n

Under AS 26, intangible assets such as goodwill, patents, and software should be recognized if future economic benefits are probable and the costs can be measured reliably. The asset should be amortized over its useful life.

Key Points:

• Intangible assets are amortized over their useful life.
• If the useful life cannot be determined, it should be amortized over a maximum period of 10 years.
• Development costs should be capitalized if they meet the criteria for asset recognition.
• Regular impairment testing is required to ensure the carrying amount is recoverable.

Formula: Amortization expense = (Cost - Residual value) / Useful life

AS 2 requires inventories to be valued at the lower of cost and net realizable value. The cost of inventory can be determined using FIFO or the weighted average method.

Key Points:

• Inventory should be valued at the lower of cost or net realizable value (NRV).
• Cost includes purchase price, conversion costs, and other costs to bring inventory to its current location and condition.
• Net realizable value (NRV) is the estimated selling price less estimated costs of completion and sale.
• The method of inventory valuation must be applied consistently across periods.

Formula: Inventory Valuation = Lower of Cost or NRV