ASLB 34 Separate FS

Accounting Standard for Local Bodies ASLB 34
Separate Financial Statements
Contents
Paragraphs
OBJECTIVE 1
SCOPE 2-5
DEFINITIONS 6-10
PREPARATION OF SEPARATE FINANCIAL STATEMENTS 11-18
DISCLOSURE 19-23
APPENDIX 1 COMPARISON WITH IPSAS 34, ‘SEPARATE
FINANCIAL STATEMENTS’
Compendium of Accounting Standards for Local Bodies (ASLBs)

Accounting Standard for Local Bodies (ASLB) 34
Separate Financial Statements
(This Accounting Standard includes paragraphs set in bold italic type and
plain type, which have equal authority. Paragraphs in bold italic type indicate
the main principles. This Accounting Standard should be read in the context
of its objective and the ‘Preface to Accounting Standards for Local Bodies 1’.)
The Accounting Standard for Local Bodies (ASLB) 34, ‘Separate Financial
Statements’, issued by the Council of the Institute of the Chartered
Accountants of India, will be recommendatory in nature in the initial years for
use by the Local Bodies. This Standard will be mandatory for local bodies in
a State from the date specified in this regard by the State Govern ment
concerned2.
The following is the text of the Accounting Standard for Local Bodies:

Objective
1. The objective of this Standard is to prescribe the accounting and
disclosure requirements for investments in controlled entities, joint
ventures and associates when an entity prepares separate financial
statements.

Scope
2. An entity that prepares and presents financial statements under
the accrual basis of accounting should apply this Standard in
accounting for investments in controlled entities, joint ventures
and associates when it elects, or is required by regulations, to
present separate financial statements.

1 Attention is specifically drawn to paragraph 4.2 of the ‘Preface to Accounting
Standards for Local Bodies’, according to which Accounting Standards are
intended to apply only to items which are material.
2 In respect of compliance with the Accounting Standards for Local Bodies, reference
may be made to the paragraph 7.1 of the ‘Preface to the Accounting Standards for
Local Bodies’.

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2A. This Standard applies to all entities described as Local Bodies in
the ‘Preface to the Accounting Standards for Local Bodies’ 3.
3. This Standard does not mandate which entities produce separate
financial statements. It applies when an entity prepares separate
financial statements that comply with Accounting Standards for Local
Bodies (ASLBs).
4. [Deleted]
5. [Deleted]

Definitions
6. The following terms are used in this Standard with the meanings
specified:
Consolidated financial statements are the financial statements of
an economic entity in which the asset, liabilities, net
assets/equity, revenue, expenses and cash flows of the
controlling entity and its controlled entities are presented as
those of a single economic entity.
Separate financial statements are those presented by an entity, in
which the entity could elect, subject to the requirements in this
Standard, to account for its investments in controlled entities,
joint ventures and associates either at cost, in accordance with
Guidance on ‘Financial Instruments’.
Terms defined in other ASLBs are used in this Standard with the
same meaning as in those Standards. The following terms are
defined in ASLB 35, ‘Consolidated Financial Statements’, ASLB
36, ‘Investment in Associates and Joint Ventures’ or ASLB 37,
‘Joint Arrangements’ 4: associate, control, controlled entity,
controlling entity, economic entity, investment entity, joint
control, joint operation, joint venture, joint venturer and
significant influence.

3 Refer paragraph 1.3 of the ‘Preface to the Accounting Standards for Local
Bodies’.
4 The standard makes a reference to ASLBs 35 & 37 and Guidance on ‘Financial
Instruments’ that are yet to be formulated/ issued. The Guidance in regard to
those may be obtained from other corresponding pronouncements as per the
hierarchy prescribed in paragraph 15 of the ASLB 3, ‘Accounting Policies,
Changes in Accounting Estimates, and Errors’.

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7. Separate financial statements are those presented in addition to
consolidated financial statements or in addition to the financial
statements of an investor that does not have controlled entities but has
investments in associates or joint ventures in which the investments in
associates or joint ventures are required by ASLB 36 to be accounted
for using the equity method, other than in the circumstances set out in
paragraphs 9-10.
8. The financial statements of an entity that does not have a controlled
entity, associate or joint venturer's interest in a joint venture are not
separate financial statements.
9. An entity that is exempted in accordance with paragraph 5 of ASLB 35,
from consolidation or paragraph 23 of ASLB 36, from applying the
equity method may present separate financial statements as its only
financial statements.
10. An investment entity 5 that is required, throughout the current period
and all comparative periods presented, to measure its investment in all
its controlled entities at fair value through surplus or deficit in
accordance with paragraph 56 of ASLB 35, presents separate financial
statements as its only financial statements.

Preparation of Separate Financial Statements
11. Separate financial statements should be prepared in accordance
with all applicable ASLBs, except as provided in paragraph 12.
12. When an entity prepares separate financial statements, it should
account for similar investments in controlled entities, joint
ventures and associates either:
(a) At cost; or
(b) In accordance with Guidance on ‘Financial Instruments’.
(c) [Refer to Appendix 1]

5 The concept of ‘investment entity’ may not be applicable to Local Bodies in India
in current scenario. However, the same may be relevant in future, hence retained
here.

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13. If an entity elects, in accordance with paragraph 24 of ASLB 36, to
measure its investments in associates or joint ventures at fair
value through surplus or deficit in accordance with Guidance on
‘Financial Instruments’, it should also account for those
investments in the same way in its separate financial statements.
14. If a controlling entity is required, in accordance with paragraph 56
of ASLB 35, to measure its investment in a controlled entity at fair
value through surplus or deficit in accordance with Guidance on
‘Financial Instruments’, it should also account for that investment
in the same way in its separate financial statements. If a
controlling entity that is not itself an investment entity is
required, in accordance with paragraph 58 of ASLB 35, to
measure the investments of a controlled investment entity at fair
value through surplus or deficit in accordance with Guidance on
‘Financial Instruments’ and consolidate the other assets and
liabilities and revenue and expenses of the controlled investment
entity, it should also account for that investment in the controlled
investment entity in the same way in its separate financial
statements.
15. When a controlling entity ceases to be an investment entity, or
becomes an investment entity, it should account for the change
from the date when the change in status occurred, as follows:
(a) When an entity ceases to be an investment entity, the entity
should account for an investment in a controlled entity in
accordance with paragraph 12. The date of the change of
status should be the deemed acquisition date. The fair
value of the controlled entity at the deemed acquisition date
should represent the transferred deemed consideration
when accounting for the investment in accordance with
paragraph 12.
(b) When an entity becomes an investment entity, it should
account for an investment in a controlled entity at fair value
through surplus or deficit in accordance with Guidance on
‘Financial Instruments’. The difference between the
previous carrying amount of the controlled entity and its
fair value at the date of the change of status of the investor

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should be recognised as a gain or loss in surplus or deficit.
The cumulative amount of any gain or loss previously
recognised directly in net assets/equity in respect of those
controlled entities should be treated as if the investment
entity had disposed of those controlled entities at the date
of change in status.
16. Dividends or similar distributions from a controlled entity, a joint
venture or an associate are recognised in the separate financial
statements of an entity when the entity's right to receive the
dividend or similar distribution is established.
17. When a controlling entity reorganises the structure of its
economic entity by establishing a new entity as its controlling
entity6 in a manner that satisfies the following criteria:
(a) The new controlling entity obtains control of the original
controlling entity either (i) by issuing equity instruments 7 in
exchange for existing equity instruments of the original
controlling entity, if any, or (ii) by some other mechanism
which results in the new controlling entity having a
controlling ownership interest in the original controlling
entity;
(b) The assets and liabilities of the new economic entity and
the original economic entity are the same immediately
before and after the reorganisation; and
(c) The owners of the original controlling entity before the
reorganisation have the same absolute and relative
interests in the net assets of the original economic entity
and the new economic entity immediately before and after
the reorganisation;
and the new controlling entity accounts for its investment in the
original controlling entity in accordance with paragraph 12(a) in
its separate financial statements, the new controlling entity
should measure cost at the carrying amount of its share of the net

6 Restructuring/ reorganisation may normally happen in Local Bodies in India with
Government directive/ order only.
7 Issuance of equity Instruments may also not be relevant for local bodies in India
in current scenario.

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assets/equity items shown in the separate financial statements of
the original controlling entity at the date of the reorganisation.
18. Similarly, an entity that is not a controlling entity might establish a new
entity as its controlling entity in a manner that satisfies the criteria in
paragraph 17. The requirements in paragraph 17 apply equally to such
reorganisations. In such cases, references to "original controlling
entity" and "original economic entity" are to the "original entity".

Disclosure
19. An entity should apply all applicable ASLBs when providing
disclosures in its separate financial statements, including the
requirements in paragraphs 20-23.
20. When a controlling entity, in accordance with paragraph 5 of
ASLB 35, elects not to prepare consolidated financial statements
and instead prepares separate financial statements, it should
disclose in those separate financial statements:
(a) The fact that the financial statements are separate financial
statements; that the exemption from consolidation has
been used; the name of the entity whose consolidated
financial statements that comply with ASLBs have been
produced for public use; and the address where those
consolidated financial statements are obtainable.
(b) A list of significant investments in controlled entities, joint
ventures and associates, including:
(i) The name of those controlled entities, joint ventures and
associates.
(ii) The jurisdiction in which those controlled entities, joint
ventures and associates operate (if it is different from that
of the controlling entity).
(iii) Its proportion of the ownership interest held in those
entities and a description of how that ownership interest
has been determined.
(c) A description of the method used to account for the
controlled entities, joint ventures and associates listed
under (b).

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21. When an investment entity that is a controlling entity (other than
a controlling entity covered by paragraph 20) prepares, in
accordance with paragraph 10, separate financial statements as
its only financial statements, it should disclose that fact. The
investment entity should also present the disclosures relating to
investment entities required by ASLB 38, ‘Disclosure of Interest in
Other Entities’.
22. If a controlling entity that is not itself an investment entity is
required, in accordance with paragraph 56 of ASLB 35, to
measure the investments of a controlled investment entity at fair
value through surplus or deficit in accordance with Guidance on
‘Financial Instruments’ and consolidate the other assets and
liabilities and revenue and expenses of the controlled investment
entity, it should disclose that fact. The entity should also present
the disclosures relating to investment entities required by ASLB
38, ‘Disclosure of Interest in Other Entities’.
23. When a controlling entity (other than a controlling entity covered
by paragraphs 20-21) or an investor with joint control of, or
significant influence over, an investee prepares separate financial
statements, the controlling entity or investor should identify the
financial statements prepared in accordance with ASLB 35, ASLB
36 or ASLB 37, to which they relate. The controlling entity
or investor should also disclose in its separate financial
statements:
(a) The fact that the statements are separate financial
statements and the reasons why those statements are
prepared, if not required by legislation or other authority.
(b) A list of significant controlled entities, joint ventures and
associates, including:
(i) The name of those controlled entities, joint ventures
and associates.
(ii) The jurisdiction in which those controlled entities,
joint ventures and associates operate (if different
from that of the controlling entity).

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(iii) Its proportion of the ownership interest held in those
entities and a description of how that ownership
interest has been determined.
(c) A description of the method used to account for the
controlled entities, joint ventures and associates listed
under (b).
24-34. [Refer to Appendix 1]

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Appendix 1
Note: This Appendix is not a part of the Accounting Standard for Local
Bodies. The purpose of this Appendix is only to bring out the major
differences, if any, between Accounting Standard for Local Bodies (ASLB) 34
and the corresponding International Public Sector Accounting Standard
(IPSAS) 34, ‘Separate Financial Statements’.
Comparison with IPSAS 34, ‘Separate Financial
Statements’
1. The following paragraphs of IPSAS 34 have been deleted. In order to
maintain consistency with the corresponding IPSAS 34, the paragraph
numbers have been retained:
(i) Paragraphs 24-31 pertaining to transitional provision have been
deleted as a separate ASLB 33, ‘First-time Adoption of ASLBs’
has been issued that contains all transitional provisions at one
place.
(ii) Paragraphs 32-33 pertaining to effective date have been deleted
as ASLB 21 would become mandatory for Local Bodies in a
State from the date specified by the State Government
concerned.
2. IPSAS 34 allows the entities to use the equity method to account for
investment in subsidiaries, joint ventures and associates in their
Separate Financial Statements (SFS). This option is not given in ASLB
34, as the equity method is not a measurement basis like cost and fair
value but is a manner of consolidation and therefore would lead to
inconsistent accounting conceptually.
3. Paragraph 2A has been inserted with regard to applicability of ASLBs
in line with other issued ASLBs.
4. ASLB 34 makes a reference to the Guidance on ‘Financial
Instruments’ and various ASLBs that are yet to be formulated/ issued.
The clarification on obtaining guidance in regard to those ASLBs has
been incorporated in the ASLB.
5. The footnotes have been appended in the Standard for the concepts of
‘investment entity’, ‘restructuring/ reorganisation’, and ‘issuance of
equity instruments’ for clarification with regard to their applicability/
relevance in the context of Local Bodies in India.

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