Accounting Standards

Dr. P. S. Vohra
Associate Professor
Ph.D. , MBA(Finance), M.Com, L.L.B., C.S.
1
Meaning
of Accounting Standards

Accounting
Standards
are written
policy
documents
issued by an
Expert
accounting
body or
By Government
or other
Regulatory
body.



2
They always cover the following aspects -

1. The way of Recognition of transactions
& events in the financial statement.

2. Financial measurement of these
transaction and events.

3. Presentation of these transactions and
events in the financial statement in that
manner which is meaningful &
understandable to the reader.
Overview
of Accounting Standards in India
The Institute of Chartered Accountants of India (ICAI),
is a premier body of Accounting in the Country, they have
constituted the Accounting Standard Board (ASB) on 21
st

April 1977.

The main function of ASB is to formulate Accounting
Standards for regulating the accounting functions and
practice in India.

The council of the Institute of Chartered Accountants of
India has so far, issued 32 accountings standards.

3
Objectives
of Accounting Standards
1. Eliminate the non comparability of
financial statement and provides the
reliability of financial statements.

2. Provide a set of standard of accounting
policies, for valuation norms of
accounting event and their disclosure
requirements.

3. To provide the way to prepare the
financial statements in accordance with
accepted accounting principles.


4
Scope of Accounting Standard
1. If a particular standard in not in accordance with some law
due to an amendment in the law, then the provisions of the
said law will exist and the financial statement should be
prepared in conformity with such law.

2. The Accounting standard also abides the other regulations
which govern the preparation and presentation of financial
statement and related to auditors reports.

3. The accounting standards are applied to all items which are
material and essentials. Any limitation of AS in regards of
their applicability use to rectify by ICAI time to time.
5
Merits of Accounting Standards
1. Accounting Standards reduce or eliminate the variations in
the accounting functions which are available to prepare the
financial statements.

2. There are certain areas where important information are
not statutorily required to be disclosed, even in that case
Accounting Standards may call for disclosure beyond that
limitations.

3. The accounting standards facilitate comparison of financial
statement of companies situated in different parts of the
world and also in between different companies situated in
the same country.

6
Demerits of Accounting Standards
1. There are various alternatives to solve a single problem, in
this case it is difficult to select the appropriate
alternative.

2. There may be also some trend in AS for rigidity and non
flexibility in applying the Accounting Standards.

3. Accounting Standards cannot override the law. The
standards are required to be framed within the ambit /
domain of established statutes.
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List of
Indian Accounting Standards
AS1: Disclosure of Accounting Policies

AS2: Inventory Valuation

AS3: Cash Flow Statements

AS4: Events occurring after Balance Sheet date

AS5: Profit or Loss for the period, Prior Period
Items & changes in Accounting Policies

AS6: Depreciation Accounting

AS7: Construction Contracts





8
AS 9: Revenue Recognition

AS10: Accounting for Fixed Assets

AS11: Effect of changes in Foreign Exchange Rate

AS12: Government Grants

AS13: (Withdrawal)

AS14: Accounting for Amalgamation

AS15: Employee Benefits

AS16: Borrowing Costs

AS17: Segment Reporting
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AS18: Related Party Disclosures

AS19: Leases

AS20: Earning per Share

AS21: Consolidated Financial Statements & Accounting
for Investment in subsidiary

AS22: Taxes on Income

AS23: Accounting for Investments in Associates

AS24: Discontinuing Operation

AS25: Interim Financial Reporting


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AS26: Intangible Assets

AS27: Financial Reporting of Interest in Joint Ventures

AS28: Impairment of Assets

AS29: Contingent Liabilities &Contingent Provisions

AS30: Financial Instruments- Measurement &Recognition

AS31: Financial Instruments- Presentation

AS32: Financial Instruments- Disclosures

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Changes in Accounting Policy
in accordance to A.S.

A change
in accounting
polices should
be made if it
follows 2
conditions

12

1. If it required by statues for
compliance with an accounting
standards.

2. If it is considered that the
change would result in a more
appropriate presentation of
the financial statement of the
organization.

Detail
of
Accounting Standards
13

Accounting Standard 1


The main features of
A.S. 1
announced by the
Accounting Standard Board
(ASB),
Regarding

Disclosure of
Accounting Policies.

14
A.S. 1 are primarily
based on interpretation
of Following 3
Principals particular
for making accounting
policies for any
organization

Going Concern

Consistency

Accrual

Accounting Standard 2

This standard was
originally issued in
June 1981.

In the initial years
this accounting
standards was
recommendatory only.

However, it has
become mandatory in
respect of account
for periods
commencing on or
after 1
st
April 1999.

15
The standard specifies .

1. The methods of computation
of cost of inventories.

2. The Cost and the Market Price
whichever is Low will be value
of Inventory / stock to be
represented in the financial
statements.


Accounting Standard 3

This standard was
originally issued in June
1981 as AS 3 Changes
in financial positions.
But it was revised in
1997 as Cash Flow
statement.
In the initial years this
accounting standard
was recommendatory.
It has become
mandatory in respect
of account for the
periods commencing on
or after 1
st
April 2001.


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The standard is concerned with
the provision of information
about the changes in cash and
cash equivalents of an enterprise,
through Cash inflows and Cash
outflows.

Scope
An enterprise should prepare a
cash flow statement for present
the financial statement of each
period.
Accounting Standard 4
This standard was
first originally issued
in Nov. 1982.

In the initial years,
this accounting
standard was
recommendatory.

It has come
mandatory in respect
of account for the
periods commencing
on or after 1
st
April
1995.



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The Standard specifically deals
with the treatment in financial
statement for

1. Provision for Contingencies

2. Events occurring after the
balance sheet

Accounting Standard 5
(Revised)

The standard was
originally first issued
in November 1982.

In the initial years
this accounting
standard was
recommendatory.

It has become
mandatory in respect
of account for the
periods commencing on
or after 1
st
April 1996.


18
Objectivities of the standard is to
prescribe the

Classification & Disclosure of
certain items in Profit & Loss
account (P&L A/C).

So that all enterprises prepare
and present Profit & Loss a/c on an
Uniform basis.

Accounting Standard 6

This standard was
originally issued in
November 1982.

It was later on
revised in 1994.

The revised
standard has
become mandatory
in respect of
accounts for the
period
commencing on or
after 1
st
April
1995.

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Features
1. The standards applies for calculation
of Depreciation to all Depreciable
Assets.

2. The Depreciable amount of a
Depreciable asset should be allocated
on a Systematic basis to Each
Accounting Period during the Life of
the asset.

3. The Deprecation Method should be
applied consistently from period to
period.

Accounting Standard 9

This standards deal
with the basis for
Recognition
Of
Revenue
in the
Profit & Loss account
of an enterprise.


20
The standard is concerned with the
recognition of revenue arising either
.

The sale of goods

The rendering of service

The other incomes yield from..
Interest
Royalties
Dividend
Accounting Standard 10
This standard
deal with the
Disclosure of
the status of
the
Fixed Assets
in terms of the
Value.


21
It deals with
Accounting Treatment of
Fixed Assets acquired on basis of ..

1. On hire-purchase basis

2. Fixed assets owned jointly

3. Acquired for a consolidated price

4. Goodwill etc