Business community across the globe needs common accounting language.
Difficult to compare financial statements of various enterprises due to different methods & principles.
To make these methods & principles uniform & comparable, standards are evolved.
Written documents issued by the expert institutes or other regulatory bodies covering various aspects of measurement, treatment, presentation and disclosure of accounting transactions.
Contain detailed rules to be adopted for accounting treatment of various items before presentation of financial statements.
Norms of accounting policies & practices
Furnish useful information to users of financial statements such as shareholders, creditors, lenders, management, competitors, researchers, society at large .
To eradicate variations in the treatment of accounting aspects and make the presentation standardized.
Harmonize diverse accounting policies to facilitate intra-firm & inter-firm comparison
Bring about uniformity, rationalization , comparability, transparency & adaptability in financial statements
Efficient functioning of economy
Financial reports should provide true & fair view
Help users for decision making purpose
SIGNIFICANCE OF AS:
Facilitate uniform preparation and reporting of financial statements
Raise the standard of audit
Government officials find accounting reports useful if they are concerned with economic planning, market analysis etc.
Institute Of Chartered Accountants of India (ICAI) constituted the Accounting Standards Board (ASB)
While formulating the AS, the ASB gives due consideration to International Accounting Standards (IASs) issued by IFRSs
The AS are issued under the authority of the Council of ICAI
ASB provides interpretations & guidance on issues arising from AS & review them at periodical intervals
To conceive of & suggest areas in which AS need to be developed
To assist the Council of the ICAI in evolving and establishing AS in India
Examine how far relevant IAS/IFRS can be adapted
To review at regular intervals, the AS as per changing conditions & if necessary, revise the same
To provide from time to time interpretations & guidance on AS
To carry out other functions relating to AS
No. of AS TITLE of AS AS-1 Disclosure of accounting policies AS-2 Valuation of inventories AS-3 Cash flow statements AS-4 Contingencies & events occurring after B/S date AS-5 Net profit/loss for the period, prior period items & changes in accounting policies AS-6 Depreciation accounting AS-7 Construction contracts AS-8 Accounting for R&D AS-9 Revenue recognition
AS-10 Accounting for fixed assets AS-11 The effects of changes in foreign exchange rates AS-12 Accounting for government grants AS-13 Accounting for investments AS-14 Accounting for amalgamations AS-15 Accounting for retirement benefits in the financial statements of employers AS-16 Borrowing cost AS-17 Segment reporting AS-18 Related party disclosures AS-19 leases
AS-20 Earning per share AS-21 Consolidated financial statements AS-22 Accounting for taxes on income AS-23 Accounting for investments in associates in consolidated financial 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
Indian GAAP IAS US GAAP Approach “ all inclusive” “ all inclusive” “ all inclusive” Comprehensive Income NA Is applicable Is applicable Extraordinary Items Required to present separately from ordinary a/c in P&L a/c NA Is applicable same as in Indian GAAP
Indian GAAP IAS US GAAP Accounting Policy Refers to specific accounting principles & methodology of applying them Is similar to the Indian GAAP definition Uses the term, “ accounting principles” to refer to accounting policy Disclosures An entity is required to disclose the accounting policy at one place An entity is required to disclose the accounting policy separately The practice is same as in IAS
Deals with disclosure of significant accounting policies followed in preparing and presenting financial statements
Affects the view of an enterprise statement
Recommended translation policies in respect of foreign currency items
Included in annual reports to shareholders
Facilitates a more meaningful comparison between financial statements of different enterprises.
Determination of the value at which inventories are carried in the financial statements until the related revenues are recognized.
( a) the accounting policies adopted in measuring inventories, including the cost formula used; and (b) the total carrying amount of inventories and its classification appropriate to the enterprise
This Statement deals with depreciation accounting and applies to all depreciable assets, except (i) forests, plantations. (ii) wasting asset extraction of minerals, oils, natural gas . (iii) expenditure on research and development. (iv) goodwill. (v) live stock.
Depreciation Depreciable assets Useful life Depreciable amount
Gross amount of each depreciable asset
Revaluation of depreciable assets
Change in method
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.
It does not deal with revenue arising from:
government grants and other similar subsidies
revenue of insurance companies arising from insurance contract
Sale of Goods
Rendering of Services
Proportionate completion method
Completed service contract method
The Use by Others of Enterprise Resources Yielding Interest, Royalties and Dividends
It mainly deals with accounting of fixed assets like:
Plant and machinery
Forests ,plantations and similar regenerative natural resources.
Wasting fixed assets including mineral rights, expenditure on exploration for or the extraction of minerals, oil, natural gas and similar non-regenerative resources.
Expenditure on real estate development.
Gross and the net book values of fixed assets at the beginning and end of an accounting period showing additions, disposals, acquisitions and other movements. Expenditure incurred on account of fixed assets in the course of construction or aqusition.