Accounting Theory and Practices

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Financial accountancy (As seen by the COB) (or financial accounting) is

the field ofaccountancyconcerned with the preparation offinancial

statementsfor decision makers, such asstockholders,suppliers,banks,

employees,government agencies, owners, and other stakeholders. Financial

capital maintenance can be measured in eithernominal monetaryunitsorunits of constant purchasing power. The fundamental need for

financial accounting is to reduceprincipal-agent problemby measuring and

monitoring agents' performance and reporting the results to interested users.

Financial accountancy is used to prepare accounting information for people

outside the organization or not involved in the day-to-day running of the

company.Management accountingprovides accounting information to help

managers make decisions to manage the business.

In short, Financial Accounting is the process of summarizing financial datataken from an organization'saccounting recordsand publishing in the form of

annual (or more frequent) reports for the benefit of people outside the

organization.

Financial accountancy is governed by both local and international accounting

standards.

Financial accountants produce financial statements based onGenerallyAccepted Accounting Principlesof a respective country. In particular cases

financial statements must be prepared according to theInternational

Financial Reporting Standards.

Financial accounting serves the following purposes:

producing general purpose financial statements

producing information used by the management of a business entity for

decision making, planning and performance evaluation

producing financial statements for meeting regulatory requirements

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Financial reporting is the process of preparing and distributing financial

information to users of such information in various forms. The most common

format of formal financial reporting arefinancial statements. Financial

statements are prepared in accordance with rigorously

appliedstandardsdefined by professional accounting bodies developedaccording to the legal and professional framework of a specific locale.

Accounting Standards (ASs)

AS 1 Disclosure of Accounting Policies

AS 2 Valuation of Inventories

AS 3 Cash Flow Statements

AS 4 Contingencies and Events Occuring after the Balance Sheet Date

AS 5 Net Profit or Loss for the period,Prior Period Items and Changesin Accounting Policies

AS 6 Depreciation Accounting

AS 7 Construction Contracts (revised 2002)

AS 8 Accounting for Research and Development

AS 9 Revenue Recognition

AS 10 Accounting for Fixed Assets

AS 11 The Effects of Changes in Foreign Exchange Rates (revised2003),

AS 12 Accounting for Government Grants

AS 13 Accounting for Investments

AS 14 Accounting for Amalgamations

AS 15 (revised 2005) Employee Benefits

Limited Revision to Accounting Standard (AS) 15, Employee Benefits

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(revised 2005)

AS 15 (issued 1995)Accounting for Retirement Benefits in theFinancial Statement of Employers

AS 16 Borrowing Costs

AS 17 Segment Reporting

AS 18, Related Party Disclosures

AS 19 Leases

AS 20 Earnings Per Share

AS 21 Consolidated Financial Statements

AS 22 Accounting for Taxes on Income.

AS 23 Accounting for Investments in Associates in ConsolidatedFinancial Statements

AS 24 Discontinuing Operations

AS 25 Interim Financial Reporting

AS 26 Intangible Assets

AS 27 Financial Reporting of Interests in Joint Ventures

AS 28 Impairment of Assets

AS 29 Provisions,Contingent` Liabilities and Contingent Assets

AS 30 Financial Instruments: Recognition and Measurement andLimited Revisions to AS 2, AS 11 (revised 2003), AS 21, AS 23, AS26, AS 27, AS 28 and AS 29

AS 31, Financial Instruments: Presentation

Accounting Standard (AS) 32, Financial Instruments: Disclosures, andlimited revision to Accounting Standard (AS) 19, Leases

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International Financial Reporting Standards (IFRS) are principles-based

Standards, Interpretations and the Framework (1989)[1]adopted by

theInternational Accounting Standards Board(IASB).

Many of the standards forming part of IFRS are known by the older name

of International Accounting Standards (IAS). IAS were issued between 1973

and 2001 by the Board of theInternational Accounting Standards

Committee(IASC). On 1 April 2001, the new IASB took over from the IASC

the responsibility for setting International Accounting Standards. During its

first meeting the new Board adopted existing IAS and SICs. The IASB has

continued to develop standards calling the new standards IFRS.

IFRS are considered a "principles based" set of standards in that they

establish broad rules as well as dictating specific treatments.

International Financial Reporting Standards comprise:

International Financial Reporting Standards (IFRS)standards issued

after 2001

International Accounting Standards (IAS)standards issued before 2001

Interpretations originated from the International Financial ReportingInterpretations Committee (IFRIC)issued after 2001

Standing Interpretations Committee (SIC)issued before 2001

Conceptual Framework for the Preparation and Presentation of Financial

Statements (2010)

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Recent Developments For Financial AccountingStandardsPosted by Geo H. in Monday, August 15, 2011

A review of the latest developments in the world of financial accountingstandards for REIT was recently done. NAREIT Senior Vice- President forfinancial standards, George Yungmann, sat withREIT.comto review such

standards.

Yungmann has pointed out that process has been slowed by changes at thetop of both the International Accounting Standards Board (IASB) andthe Financial Accounting Standards Board (FASB). By saying process, hepertains to the project being carried out by the IASB and FASB regarding theglobal convergence of financial accounting reporting standards.

Yungmann said, Were going to be well into 2012 before these standards getissued.

A major impact on REIT may be felt due to some of the proposed changes toaccounting for leases, Yungmann noted.

The new proposal would essentially require that lessors report the sale of theright to use the property. There would be a gain or a loss recognized at leaseinception or lease commencement, and there would be no rental incomereported over the term of the lease. Thats a very dramatic change not only inthe proposal, but in the way lessors report, and we do not believe that

accounting will produce useful financial statements,said Yungmann.

According to Yungmann, exposure drafts will be reviewed by NAREIT andcomments will be issued regarding its partners in the Real Estate EquitySecuritization Alliance (REESA).

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(3) Change in accounting principles, procedures and presentation for quarterly

consolidated financial

statements

- Change in accounting standards

1. From the current fiscal year, the Company adopts the Accounting Standards for

Quarterly Financial

Statements (Corporate Accounting Standards No. 12 issued on Mach 14, 2007)

andthe Guides for

Adopting the Accounting Standards for Quarterly Financial Statements

(Corporate Accounting

Standards Adoption Guide No. 14 issued on Mach 14, 2007). The Company also

follows the Rules for

Quarterly Consolidated Financial Statements to prepare its quarterly consolidated

financial statements.

2. In and before fiscal 2007, finance lease transactions other than those for which

ownership is deemed to

be transferred to the lessee had been accounted for by the accounting method

used for ordinary lease

transactions. From the first quarter of fiscal 2008, the Company and its domestic

consolidated

subsidiaries adopt the Accounting Standards for Lease Transactions (Corporate

Accounting Standards

No. 13 revised on March 30, 2007) and the Guide for Adopting the Accounting

Standards for Lease

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Transactions (Corporate Accounting Standards Adoption Guide No. 16 revised on

March 30, 2007),

earlier than the time schedule required by these rules. Accordingly, these lease

transactions were

accounted for by the accounting method used for ordinary sales transactions. This

change will have only

minor impact on operating income, ordinary income and net income before tax

and other adjustments.

3. From the first quarter of fiscal 2008, the Companyadopts the Practical Solution

on Unification of

Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial

Statements (ASBJ

Practical Issues Task Force No. 18 issued on May 17, 2006). According to this rule,

the Company made

necessary adjustments to its quarterly consolidated financial statements. By the

adoption of this rule,

balance of retained earnings at beginning of fiscal 2008 decreased by 1,476

million. In addition,

operating income decreased by 6,860 million, and ordinary income and net

income before tax and other

adjustments decreased by 6,862 million respectively.

4. From the first quarter of fiscal 2008, the Company and its domestic consolidated

subsidiaries in Japan

adopt the Accounting Standards for Valuation of Inventories (ASBJ Statement

No. 9 issued on July 5,

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2006), and use the value method to devaluate a book value for decreasing

profitability. By the adoption

of this rule, operating income, ordinary income and net income before tax and

other adjustments

decreased by 1,288 million respectively.

(4) Litigation and Other Legal Matters (Correction for transfer pricing taxation)

On June 28, 2006, Takeda received a notice of correction for transfer pricing

taxation from the Osaka Regional

Taxation Bureau (ORTB). ORTB concluded that profits earned in the U.S. market in

relation to product supply

and license transactions for Prevacid between Takeda and TAP were under-

allocated to Takeda over the six

fiscal years from the year ended March 31, 2000 through the year ended March 31,

2005. Total taxable income

assessed was 122.3 billion and additional tax due, including local and other taxes,

was approximately 57.1

billion. Takeda paid these additional taxes in July 2006. However, in protest

against this corrective action,

Takeda filed a request for reinvestigation with ORTB on August 25, 2006.

On July 8, 2008, Takeda filed with the National Tax Agency a request for mutual

discussion with the U.S. to

eliminate the double taxation arising from this tax correction in Japan. In

connection with this filing, Takeda

took a process to temporarily suspend the protest filed with ORTB.

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Revised standards

Accounting Standard (AS) 7*(revised 2002)

Construction Contracts

Accounting Standard (AS) 7, Construction Contracts (revised 2002), issued by the

Council of the Institute of Chartered Accountants of India, comes into effect in

respect of all contracts entered into during accounting periods commencing on or

after 1-4-2003 and is mandatory in nature from that date. Accordingly, Accounting

Standard (AS) 7, Accounting forConstruction Contracts, issued by the Institute in

December 1983, is not applicable in respect of such contracts. Early application of

this Standard is, however, encouraged.

Objective

The objective of this Statement is to prescribe the accounting treatment of revenue

and costs associated with construction contracts. Because of the nature of the

activity undertaken in construction contracts, the date at which the contract activity

is entered into and the date when the activity is completed usually fall into different

accounting periods. Therefore, the primary issue in accounting for construction

contracts is the allocation of contract revenue and contract costs to the accounting

periods in which construction work is performed. This Statement uses the

recognition criteria established in the Framework for the Preparation and

Presentation of Financial Statements to determine when contract revenue and

contract costs should be recognised as revenue and expenses in the statement of

profit and loss. It also provides practical guidance on the application of these criteria

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Accounting Standard (AS) 11*(revised 2003)

The Effects of Changes in Foreign Exchange Rates

Accounting Standard (AS) 11, The Effects of Changes in Foreign Exchange Rates

(revised 2003), issued by the Council of the Institute of Chartered Accountants of

India, comes into effect in respect of accounting periods commencing on or after 1-

4-2004 and is mandatory in nature from that date. The revised Standard supersedes

Accounting Standard (AS) 11, Accounting for the Effects of Changes in Foreign

Exchange Rates (1994), except that in respect of accounting for transactions in

foreign currencies entered into by the reporting enterprise itself or through its

branches before the date this Standard comes into effect, AS 11 (1994) will continue

to be applicable.

Objective

An enterprise may carry on activities involving foreign exchange in two ways. It may

have transactions in foreign currencies or it may have foreign operations. In order to

include foreign currency transactions and foreign operations in the financial

statements of an enterprise, transactions must be expressed in the enterprises

reporting currency and the financial statements of foreign operations must be

translated into the enterprises reporting currency.

The principal issues in accounting for foreign currency transactions and foreign

operations are to decide which exchange rate to use and how to recognise in the

financial statements the financial effect of changes in exchange rates

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Accounting Standard (AS) 15* (revised 2005)

Employee Benefits

Accounting Standard (AS) 15, Employee Benefits (revised 2005), issued by the

Council of the Institute of Chartered Accountants of India, comes into effect in

respect of accounting periods commencing on or after April 2006 and is mandatory

in nature from that date.

Objective

The objective of this Statement is to prescribe the accounting and disclosure for

employee benefits. The Statement requires an enterprise to recognise:

(a) a liability when an employee has provided service in exchange for employee

benefits to be paid in the future; and

(b) an expense when the enterprise consumes the economic benefit arising from

service provided by an employee in exchange for employee benefits