LOVELY PROFESSIONAL UNIVERSITY

MITTAL FACULTY OF BUSINESS AND ARTS

Course code :ACC312 Course title : ADVANCE ACCOUNTNG

Academic task : 1 Academic task title: ADVANCE ACCOUNTING

Date of allotment : 26/08/23 Date of submission :8/09/2023

Student roll number:RQ7E30A24 Student reg no : 12104836

Term:1 Section: Q7E30

Max marks: 30 Marks obtained

Evaluation parameters

STUDENT NAME :Netsai Trish Chikonhi

1.Company Profile

ORIENTAL AROMAT

Oriental Aromatics Limited manufactures and distributes a range of chemicals, compounds, and other
aroma chemicals. The Company offers synthetic camphor, terpineols, pine oils, resins, and other
chemicals ranging from flavours, fragrances, pharmaceuticals, soaps, cosmetics, rubber, tyre, paints,
and varnishes.

• Vision of the Company.

The company aspires to become a global player in the speciality aroma chemicals and use these
synergies to become one of the most prominent fragnance and flavour companies .

• Mission of the Company

the company is on a mission to elevate everyday experiences by delivering quality flavours used in
products. Their main dedication is to delight the senses and making every moment more
vibrant ,bringing back all memories and igniting a sprk for the future .

• Business of the Company (Products).

Fragrance
Flavour
Aroma Chemicals
Camphor

• Management of the Company (BOD)of Oriental Aromatics Ltd.

Parag Satoskar Chief Executive Officer.

Dharmil A Bodani Chairman & Managing Director
Harshvardhan A Piramal Independent Director
Prakash V Mehta Independent Director
Satish K Ray Executive Director – Operations
Ranjit A Puranik Independent Director
Amruda V Nair Independent Director
Shyamal A Bodani Executive Director

• Competitors

Oriental Aromatics Ltd. CAMAL.

Alkyl Amines Chemicals Ltd. ALKAMI.
Ambani Organics Ltd. AMBORG.
Archit Organosys Ltd. SHRCHL.
AVI Products India Ltd. AVIPHO.
Balaji Amines Ltd. BALAMI.
BASF India Ltd. BASIND.
Crestchem Ltd. CRELTD.

2. Identification and Interpretation of Accounting standards

AS 7 : CONTRUCTION CONTRACTS

AS 7 defines a construction contract as a contract negotiated primarily for the construction or assembly
of assets which are substantially related or interdependent in structure, engineering and
operation.Contract revenue recognition: Under AS 7, contract revenue is to be recognized when:

The financial benefits associated with the deal will likely flow to the organisation.

Measures of Contract Costs: Revenues and costs associated with construction contracts are generally
calculated using the percentage-of-completion method. This method recognizes revenues and expenses
based on when the contract is completed. The procedure is as follows:

Percentage of completion = (total cost to date) / (total expected cost) .

Loss Recognition: If total contract costs are likely to exceed total contract revenues, the expected loss
can readily be recognized as an expense

Contract Costs: Contract costs include direct assignable costs specific to bringing the contract to its
current completed state. These costs can include materials, labor, and expenses.

Disclosure: AS 7 requires full disclosure in the financial statements, including information about the
amount recognized in the contract, the methods for determining the completed status, the amount of the
contract cost and profitability recognition, plus any advance payments and deposits received

Contract Modifications: Modifications to contracts, terms, and differences are recognized when they
are likely to be lucrative and reliable
INTERPRETATION

In this company revenue was recognized after good ansd services were transferred to customers .
There was sale of goods in the company and also importing and exporting of products

AS 14

Accounting Standard 14 caters to accounting for amalgamations and the treatment of the resulting
goodwill or the reserves. This standard is directed principally to companies although some of its
requirements also apply to financial statements of other enterprises.This standard does not deal with
cases of acquisitions. Such acquisitions may take place when the acquiring company purchases whole
or part of the shares or whole or part of the assets of the acquired company.The fact that differentiates
an acquisition from amalgamation is that the acquired company is not dissolved. That is, it continues to
exist as a separate legal entity.
There are two types of amalgamation :

• .Amalgamation in the Nature of Merger

For an amalgamation to be termed as Merger, following conditions need to be satisfied:

Upon amalgamation, all assets and liabilities of the transferor company become the assets and
liabilities of the transferee company. Here the Transferor Company means the company that gets
amalgamated into another company. On the other hand, the Transferee Company is a company into
which the Transferor Company gets amalgamated.
Shareholders having not less than 90% of the face value of equity shares of the Transferor Company
become the equity shareholders of the Transferee Company by the way of amalgamation.
The shareholders of the Transferor Company who get ready to become equity shareholders of the
Transferee Company receive consideration. Such a consideration is given wholly in the form of equity
shares in the Transferee Company. However, cash may be paid with regards to any fractional shares.
Upon valuation, business of the Transferor Company is intended to be carried out by the Transferee
Company .
No changes or adjustments are intended to be made in the book values of assets and liabilities of the
Transferor Company when such assets and liabilities are consolidated in the financial statements of the
Transferee Company. Such adjustments however are made only for maintaining uniformity of
accounting polices.
• .Amalgamation in the Nature of Purchase

These include amalgamations where one company acquires another company. Accordingly, the
shareholders of the company being acquired do not continue to hold proportionate equity shares in the
combined companyAlso, the business of the acquired company is also not proposed to be continued
upon such amalgamation

• Methods of Accounting for Amalgamation

1.Pooling of Interest Method

This method is used in circumstances when an amalgamation fulfills the criteria for a merger as
mentioned above. As per this method, assets, liabilities and reserves of the Transferor Company are
recorded at their existing carrying amounts by the Transferee Company.
2.Purchase Method

There are two ways in which Transferee Company accounts for Amalgamation under the purchase
method. These include accounting for amalgamation:

• Either by incorporating assets and liabilities at their existing carrying amounts or by

• Consideration
INTERPRETATION

Goodwill arising on account of amalgamation depicts a payment that is made as a result of an

expectation of a future income. Thus, it is suitable to treat it as an asset that can be amortized to income
on a systematic basis over the useful life of the asset that it why it was recorded as an asset in this
company .

AS 19
Lease accounting

Afinance lease should be recognized as an asset and a liability in the balance sheet of the lessee at the
inception of the lease. The asset should be recognized at an amount equal to the present value of the
minimum lease payments, while the liability should be recognized at the same amount. In a lease, the
lessor and lessee reach an agreement granting the lessee the right to use a particular asset in exchange
for a single payment or a series of payments made for a specified time. Except for a few lease types
that are described below, AS 19 deals with accounting policies that apply to all forms of leases.
There are two types of leases;
Finance Lease
A finance lease is one in which the asset owner absorbs all risks and benefits. Eventually, the title may
or may not be transferred.

Operating Lease
Any lease which is not a finance lease is referred to as an operating lease.

INTERPRETATION

The Company leased land and buildings . AS 19 requires the seller (lessee) to defer and amortise the
excess of sale proceeds over the carrying price of the asset over the lease term in proportion to the
depreciation of the leased asset.The assets were amortised which means their sale proceeds exceeded
carrying price
AS 22
ACCOUNTING FOR TAXES ON INCOME
It is applied when there are differences between taxable income and accounting income. If taxable
income is greater than accounting income, then it will result in deferred tax asset. And if accounting
income is greater than taxable income, then it will result in deferred tax liability.

• Accounting income (loss) is the net profit or loss for a period, as

reported in the statement of profit and loss, before deducting income
tax expense or adding income tax saving.
• Taxable income (tax loss) is the amount of the income (loss) for a
period, determined in accordance with the tax laws, based upon which
income tax payable (recoverable) is determined.
• Tax expense (tax saving) is the aggregate of current tax and deferred
tax charged or credited to the statement of profit and loss for the
period.
• Current tax is the amount of income tax determined to be payable
(recoverable) in respect of the taxable income (tax loss) for a period.
• Deferred tax is the tax effect of timing differences.
• Timing differences are the differences between taxable income and
accounting income for a period that originate in one period and are
capable of reversal in one or more subsequent periods.
• Permanent differences are the differences between taxable income
and accounting income for a period that originate in one period and
do not reverse subsequently
INTERPRETATION

If taxable income is greater than accounting income, then it will result in deferred tax asset. And
if accounting income is greater than taxable income, then it will result in deferred tax liability.In
this Company it was Deferred tax liability which means the Company Income was less and
Taxable Income was greater.
AS 24
ACCOUNTING FOR DISCOUNTING OPERATIONS

Indian Accounting Standard 24 requires disclosures to be made by a parent entity regarding its
transactions with associates, joint ventures or subsidiaries, collectively referred to as Related party.
Hence related party refers to an entity or person that is related to the reporting entity.

Objective of the standard

The objective of this standard is to bring to notice the fact that an entity’s financial statements and
profit or loss can be affected by transactions with the related party transactions and disclose outstanding
balances including commitments to such parties.
INTERPRETATION
As per AS24 ,relationships between parent and subsidiaries should be disclosed irrespective of whether
there have been any transactions or not and subsidiaries in this company were PT .ORIENTAL
AROMATICS ,INDONESIA ,ORIENTIAL AROMATICS AND SONS LIMITE INDIA If the entity’s
parent or the ultimate controlling party does not produce consolidated financial statements, then the
next senior parent must be named in the consolidated financial statements for public use.
An entity must report the compensation to the key management personnel in total and each of the
categories such as short term employee benefits, post-employment benefits, termination benefits, share-
based payment, and other long-term benefits.
If key management services are obtained from another entity, then only the amounts incurred for the
provision of such services shall be disclosed.

CASE STUDY ON AMALGAMATION AS 14

Flipkart and Myntra merger case look at added the 2 largest e-tailers of India together. The merger
made it feasible for each traders Flipkart and Myntra to bolster their parts. Thus, Flipkart reinforced its
shape of product imparting at the same time as Myntra were given a hazard to leverage its
infrastructure. Moreover, the Flipkart and Myntra merger case look at turned into involved in a
imaginative and prescient to compete with Amazon.

The reasons why Flipkart acquired Myntra are:

The acquisition of Myntra by Flipkart allowed Flipkart to venture into the fashion space which was an
untapped market by Flipkart before the entities could merge. Thus, this helped Flipkart to exploit a
market which was unavailable to it earlier.
Flipkart had the plans to diversify its business into the fashion industry since diversification is key in
achieving consistent long term growth and profitability. Diversification is crucial for companies who
have their presence in mature industries where future growth is possible.

As Flipkart had plans to make its foray into the fashion industry, it was a cost efficient ploy to acquire
Myntra, rather than building its own fashion business from the scratch. It is always cheaper for the
acquirer to acquire another company instead of building a similar company on its own.

Since Myntra was very successful in the fashion industry and due to its competitive edge over Amazon
and Snapdeal, it was an attractive buy for Flipkart.

The acquisition of Myntra made Flipkart a leader in the fashion industry. The merger of Flipkart and
Myntra happened in mid- summer of 2014 when Flipkart, the biggest e-retailer announced its merger
with the Indian e-commerce industry, Myntra. Myntra was its competition and a leading company in
apparel and fashion.

The co-founders of Flipkart claimed that the future of fashion is e-commerce in India and Myntra has
significant knowledge along with excellent team and good relation with lifestyle brands. Even after the
merger, Flipkart and Myntra work as individual entities and decided to grow together as leaders in
lifestyle and fashion industry.

It is vital to realise that Myntra became now no longer on the market on the time while Flipkart
approached it however it became continual on obtaining handiest Myntra despite the fact that Jabong
became on the market at that time. Flipkart's patience may be attributed to the reality that Myntra
became ranked number one withinside the style enterprise in phrases of income at the same time as
Jabong ranked range.