Kishichand Chellaram College Bachelor in Banking and Insurance Subject: Financial AccountsTopic : Procedure of listing accountingstandards and list out some standards.
IntroductionWhat is accouting standards?The term standard denotes a discipline, which provides bothguidelines and yardsticks for evaluation.Accounting Standards are the statements of code of practice ofthe regulatory accounting bodies that are to be observed in thepreparation and presentation of financial statements.As guidelines, accounting standard provides uniform practicesand common techniques of accounting. As a general rule,accounting standards are applicable to all corporate enterprises.
The Institute of Chartered Accountant of India (ICAI)constituted the Accounting Standards Board (ASB) in April, 1977for developing accounting standardsASB is entrusted with the responsibility of formulatingstandards on significant accounting matters keeping in view theinternational developments, and legal requirements in India.The main function of the ASB is to identify areas in whichuniformity in standards is required
1. Determine the broad areas in which Accounting Standards need to be formulated and the priority in regard to the selection thereof.2. . For the preparation of the Accounting Standards, the CASLB will be assisted by Study Groups constituted to consider specific subjects.3. The draft of the proposed standard will normally include thEfollowing:a. Objective of the Standard,b. Scope of the Standard,c. Definition of the terms used in the Standard,d. Recognition and measurement principles, wherever applicable,e. Deviations, if any,
The ASB will circulate the draft of the Accounting Standard/AccountingStandards Interpretation for Local Bodies to the Council members of theICAI and the following specified bodies for their comments:The ASB will hold a meeting with the representatives of the selectedspecified bodies to ascertain their views on the draft of the proposedAccounting Standard/Accounting Standards
On the basis of comments receivedand discussion with the representativesof specified bodies, the ASB will finalisethe Exposure Draft of the proposedAccounting Standard.The Council of the ICAI will considerthe final draft of the proposedStandard/Interpretation, and if foundnecessary, modify the same inconsultation with the ASb.
List Of Accounting StandardsTill date, the IASC has brought out 40 accountingstandards.Of the 41 IASs issued so far, 29 are at present in force,the remaining standards have been withdrawn. Apartfrom this, 8 IFRSs have also been issued by the IASB.Corresponding to the IASs/IFRSs, so far, 30 IndianAccounting Standards on the following subjects havebeen issued:.
AS-2 :Valuation of Inventories (June 1981). This standard deals with the principles of valuing inventories for the financial statements.
AS-3 :(Revised) Cash flow statement (June 1981, Revised in March 1997). This standard deals with the financial statement which summaries for a given period the sources and applications of an enterprise.
AS-4 : Contingencies and events occurring after the Balance Sheet date (November 1982, Revised in April, 1995) This standard deals with the treatment of contingencies and events occurring after the balance sheet date.
AS-5 : Net profit or loss for the period, prior period (period before the date of balance sheet) items and changes in accounting policies (November 1982, Revised in February 1997). This standard deals with the treatment in financial statement of prior period and extraordinary items and changes in accounting policies.
AS-6 : Depreciation Accounting (November 1982). This standard applies to all depreciable assets. But this standard does not apply to assets in the category of forests, plantations and similar natural resources and wasting assets.
AS-7 : Accounting for construction contracts (December 1983, revised in April 2003). This standard deals with accounting for construction contracts in the financial statements of contractors.
AS-8 : Accounting for Research and Development (January 1985). This standard deals with the treatment of costs of research and development in financial statements.
AS-9 Revenue Recognition (November 1985). This standard deals with the bases for recognition of revenue in the statement of profit and loss of an enterprise.
AS-10: Accounting for fixed assets (November 1991).This standard deals with recognition of fixed assetsgrouped into various categories, such as land,building, plant and machinery, vehicles, furniture andgifts, goodwill, patents, trading and designs.
AS-11 :Accounting for the effects ofchange in foreign exchange Rates.(August1991 and Revised in 1993). This standarddeals with the issues relating toaccounting for effect of change in foreignexchange rates.AS-12 :Accounting for Government grants(April 1994). This standard deals with theaccounting for government grants.
AS-13 :Accounting for investments (September 1994). Thisstandard deals with accounting aspect concerninginvestments in the financial statements. These includeclassification, determination of cost for initialrecognition, disposal and re-classification of investment.AS-14 :Accounting for amalgamation (October 1994). Thisstandard deals with accounting treatment of anyresultant goodwill or reserves in amalgamation ofcompanies.AS-15 :Accounting for retirement Benefits in the financialstatements of employers (January 1995). This standarddeals with accounting for retirement benefits in thefinancial statements of employers.
AS-16 :Borrowing Costs (April 2000). This standard dealswith the uses involved relating to capitalization ofinterest on borrowing for purchase of fixed assets.AS-17 :Segment reporting (October 2000). This standardapplies to companies which have an annual turnover ofRs 50 crores or more. These companies have to presentfinancial statements and consolidated financialstatements.
AS-18 :Related party disclosures (October 2000 revised1st July 2003).This standard requires certain disclosurewhich must be made fortransactions between theenterprise and related parties.AS-19: Leases (January 2001). This standard deals withthe accounting treatment of transactions related tolease agreements.AS-20 :Earning per share (April 2001). This standarddeals with the presentation and computation ofearning per share (EPS).
Compliance with Accounting Standards Accounting Standards issued by the ICAI have legal recognition through the companies Act,1956,whereby every company is required to comply with the accounting standardsand the statutory auditors of every company arerequired to report whether the accounting standardshave been complied or not.
The companies act,1999 has inserted new sub- sections 3A, 3B and 3C to section 211,with a view to ensure that the financial statements are prepared in accordance with theaccounting standards. The new sub-sections as inserted are reproduced below:Section 211 (3A): Every profit and loss account and balancesheet of the company shall comply with the accountingstandards.Section 211 (3B): Where the profit and loss account and thebalance sheet of the company do not comply with theaccounting standards.Section 211 (3C): Here the accounting standards specified bythe institute of Chartered Accountants of India shall bedeemed to be the Accounting Standards until the accountingstandards are prescribed by the central government
CONCLUSIONSThe basic purpose of listing out accounting standards is tofacilitate the provision of financial information about entities toenable investors, analysts, creditors and the entities themselves tomake informed decisions about the allocation of resources.Clearly, while accounting standards assist preparers of financialstatements by providing a framework within which to constructthe statements, their prime importance is to assist users of thestatements to make meaningful assessments about the financialposition of an entity. Effective financial reporting, which isessential to investor confidence, can only be achieved if it isunderpinned by relevant and well designed accounting standards.Accounting standards facilitate both the efficient day-to-dayoperations of individual business entities and contribute to theefficient operation of capital markets.
Accounting standards that result in the provision of accurate andcomparable information about the true financial performance andposition of entities promote investor confidence and marketintegrity, thereby ultimately reducing the costs of capitalthroughout the economy. Public confidence in the integrity ofthe financial reporting framework is central to maintaining andexpanding a sophisticated domestic capital market.