IntroductionAccounting is a language that communicates the performance and financial position of any organization.The institute of chartered accountant of India(ICAI)issued the accounting standard in India.The accounting standard suggest the role of recognition Measurement, Treatement presentation and disclosure of accounting transaction in the financial statement of an organization.
The council of Institute of Chartered Accountant of India(ICAI) constitute the Accounting Standard Board (ASB) in April 1977,which performs the function of preparation of the accounting standard in India. The ASB comprises representative from Industries, The Central Board of Direct taxes, the Company Law board, the Comptroller and auditor General .
Introduction Fundamental of accounting Assumption. Nature of accounting policies. Areas in Which Differing Accounting Policies are Encountered.
Scope. Objective. Measurement of inventories- Cost inventories . Cost purchase. Cost convention. Other cost.
The term “contingencies” used in this Statement is restricted to conditions or situations at the balance sheet date, the financial effect of which is to be determined by future events which may or may not occur. The accounting treatment of a contingent loss is determined by the expected outcome of the contingency Events which occur between the balance sheet date and the date on which the financial statements are approved, may indicate the need for adjustments to assets and liabilities as at the balance sheet date or may require disclosure..
Definitions The following terms are used in this Statement with the meanings- Ordinary activities Extraordinary items Prior period items Accounting policies This Statement deals with, among other matters, the disclosure of certain items of net profit or loss for the period. These disclosures are made in addition to any other disclosures required by other Accounting Standards
Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable asset arising from use, effluxion of time through technology and market changes. Depreciable amount of a depreciable asset is its historical cost, or other amount substituted for historical cost in the financial statements, less the estimated residual value. The method of depreciation is applied consistently to provide comparability of the results of the operations of the enterprise from period to period.
Accounting Standard (AS) 8, Accounting for Research and Development, is withdrawn from the date of AS 26, Intangible Assets, becoming mandatory for respective enterprises.
Revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends. This Statement deals with the bases for recognition of revenue in the statement of profit and loss of an enterprise.
Fixed assets often comprise a significant portion of the total assets of an enterprise, and therefore are important in the presentation of financial position. The cost of a fixed asset should comprise its purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Fixed asset should be eliminated from the financial statements on disposal or when no further benefit is expected from its use and disposal.
An enterprise may carry on activities involving foreign exchange in two ways. This Statement does not deal with the presentation in a cash flow statement of cash flows arising from transactions in a foreign currency . A foreign currency transaction should be recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Introduction;- Two broad approaches may be followed for the accounting treatment of government grants: - It is generally considered appropriate that accounting for government grant should be based on the nature of the relevant grant. Grants which have the characteristics similar to those of promoters‟ contribution should be treated as part of shareholders‟ funds.
Enterprises hold investments for diverse reasons. For some enterprises, investment activity is a significant element of operations, and assessment of the performance of the enterprise may largely, or solely, depend on the reported results of this activity. For current investments, any reduction to fair value and any reversals of such reductions are included in the profit and loss statement. Long-term investments are usually of individual importance to the investing enterprise. The carrying amount of long-term investments is therefore determined on an individual investment basis
This statement deals with accounting for amalgamations and the treatment of any resultant goodwill or reserves. This statement is directed principally to companies although some of its requirements also apply to financial statements of other enterprises. In the case of an „amalgamation in the nature of purchase‟, the balance of the Profit and Loss Account appearing in the financial statements of the transferor company, whether debit or credit, loses its identity.
The objective of this Statement is to prescribe the accounting treatment for borrowing costs. This Statement does not deal with the actual or imputed cost of owners‟ equity, including preference share capital not classified as a liability. Borrowing costs are capitalised as part of the cost of a qualifying asset when it is probable that they will result in future economic benefits to the enterprise and the costs can be measured reliably.
The objective of this Statement is to establish principles for reporting financial information, about the different types of products and services an enterprise produces and the different geographical areas in which it operates. The requirements of this Statement are also applicable in case of consolidated financial statements. An enterprise should comply with the requirements of this Statement fully and not selectively.
This Statement should be applied in reporting related party relationships and transactions between a reporting enterprise and its related parties. No disclosure is required in consolidated financial statements in respect of intra-group transactions. Disclosure of transactions between members of a group is unnecessary in consolidated financial statements because consolidated financial statements present information about the holding and its subsidiaries as a single reporting enterprise
This Statement should be applied by enterprises whose equity shares or potential equity shares are listed on a recognised stock exchange in India. This Statement requires an enterprise to present basic and diluted earnings per share, even if the amounts disclosed are negative (a loss per share). Basic earnings per share should be calculated by dividing the net profit or loss for the period attributable to equity shareholders by weighted average number of equity shares outstanding during the period.
This Statement should be applied in the preparation and presentation of consolidated financial statements for a group of enterprises under the control of a parent . A parent which presents consolidated financial statements should present these statements in addition to its separate financial statements. Consolidated financial statements should be prepared using uniform accounting policies for like transactions and other events in similar circumstances.
This Statement should be applied in accounting for taxes on income. This includes the determination of the amount of the expense or saving related to taxes on income in respect of an accounting period and the disclosure of such an amount in the financial statements. This Statement does not specify when, or how, an enterprise should account for taxes that are payable on distribution of dividends and other distributions made by the enterprise. Tax expense for the period, comprising current tax and deferred tax, should be included in the determination of the net profit or loss for the period.
This Statement should be applied in accounting for investments in associates in the preparation and presentation of consolidated financial statements by an investor. This Statement does not deal with accounting for investments in associates in the preparation and presentation of separate financial statements by an investor.
This Statement applies to all discontinuing operations of an enterprise. A discontinuing operation may be disposed of in its entirety or piecemeal, but always pursuant to an overall plan to discontinue the entire component. The objective of this Statement is to establish principles for reporting information about discontinuing operations.
The objective of this Statement is to prescribe the minimum content of an interim financial report and to prescribe the principles for recognition and measurement in a complete or condensed financial statements for an interim period. This Statement does not mandate which enterprises should be required to present interim financial reports, how frequently, or how soon after the end of an interim period.
An intangible asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. The definition of an intangible asset requires that an intangible asset be identifiable. This Statement should not be applied to expenditure in respect of termination benefits also.
The objective of this Statement is to set out principles and procedures for accounting for interests in joint ventures and reporting of joint venture assets, liabilities, income and expenses in the financial statements of ventures and investors. A venturer should disclose a list of all joint ventures and description of interests in significant joint ventures. ◦ This Statement should be applied in accounting for interests in joint ventures and the reporting of joint venture assets, liabilities, income and expenses in the financial statements of venturers and investors, regardless of the structures or forms under which the joint venture activities take place.
The objective of this Statement is to prescribe the procedures that an enterprise applies to ensure that its assets are carried at no more than their recoverable amount . This Statement applies to assets that are carried at cost. It also applies to assets that are carried at revalued amounts in accordance with other applicable Accounting Standards. This Statement does not permit an impairment loss to be reversed for goodwill because of a change in estimates.
This Statement applies to financial instruments (including guarantees) that are not carried at fair value. This Statement defines provisions as liabilities which can be measured only by using a substantial degree of estimation. This Statement should be applied in accounting for provisions andcontingent liabilities and in dealing with contingent assets.
We understood the way accounting standards are created importance of adhering to them. We then went through the key accounting standards. One can see of the each accounting standards can be read and applied on a case to case basis. This indeed the need for a right attitude primary stakeholders a proactive regulator and other institutional mechanisms intermediary and related systems.