As 1


Published on

Accounting Standard 1

Published in: Business, Technology
1 Comment
No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

As 1

  1. 1. ACCOUNTING STANDARDS<br />GROUP – 5<br />Amit Nopani<br />Animesh Albert Barwa<br />Challa Ravi Tej<br />Nitesh Kumar<br />Nupur Sharma<br />Prabhakaran Selvaraj<br />Swati Mishra<br />Vaibhav Pateriya<br />
  2. 2. What are accounting standards???<br />Are the principles governing accounting practices which determines the appropriate treatment of financial transactions.<br />No universally accepted set of standards: Standards conform to applicable laws, customs, usages & business environment. (GAAP, SAS, AAS, etc..)<br />Issued for use in presentation of Financial Statements like Balance Sheet, Profit & Loss a/c and other statements & explanatory notes.<br />The objective is to harmonise the diversified policies to make the system more useful & effective.<br />
  3. 3. BACKGROUND..<br />In India, Accounting Standards are prepared & issued by the ‘Accounting Standard Board’ (ASB) constituted by ICAI on 21st April, 1977.<br />The accounting standards have been granted legal recognition under the Companies Act, 1956.<br />The parallel international body is the ‘International Accounting Standards Committee’(IASC) & ICAI is a member of the IASC.<br />While formulating Standards, ASB takes into consideration the Standards issued by IASC, called ‘International Accounting Standards.’<br />
  4. 4. importance…<br />Uniformity & Standardisation: to reduce alternatives and bring uniformity.<br />For presenting True & fair picture of Financial statements<br />For easy interpretation & analysis of the Financial Statements.<br />For having same view point of presenter & reader of statements.<br />For meaningful comparison between two enterprises.<br />
  5. 5. List of Accounting standards…<br />AS 1: Disclosure of Accounting Principles.<br />AS 2: Valuation of Inventories.<br />AS 3: Cash Flow Statements.<br />AS 4: Contingencies and Events Occurring After the Balance Sheet Date.<br />AS 5: Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.<br />AS 6: Depreciation Accounting .<br />AS 7 (revised): Construction Contracts.<br />AS 8: Accounting for Research and Development.<br />AS 9: Revenue Recognition .<br />AS 10: Accounting for Fixed Assets.<br />AS 11 (Rev. 2003): The Effects Of Changes In Foreign Exchange Rates.<br />AS 12: Accounting for Government Grants.<br />AS 13: Accounting for Investments.<br />AS 14: Accounting for Amalgamations.<br />AS 15 (Rev. 2005): Employee Benefits.<br />AS 16: Borrowing Costs.<br />AS 17: Segment Reporting .<br />AS 18: Related Party Disclosures.<br />AS 19: Leases.<br />AS 20: Earnings Per Share.<br />
  6. 6. List of Accounting standards…<br />List of Accounting standards cont…<br />AS 21: Consolidated Financial Statements.<br />AS 22: Accounting for taxes on income.<br />As 23: Accounting for Investments in Associates in Consolidated Financial Statements.<br />AS 24: Discontinuing Operations.<br />AS 25: Interim Financial Reporting.<br />AS 26: Intangible Assets.<br />AS 27: Financial Reporting of Interests in Joint Ventures.<br />AS 28: Impairment of Assets.<br />AS 29: Provisions, Contingent Liabilities and Contingent Assets.<br />AS 30: Financial Instruments: Recognition and Measurement.<br />AS 31: Financial Instruments: Presentation .<br />
  8. 8. Disclosure of accounting principles<br />Accounting Standard (AS) 1<br />issued by the Accounting Standards Board<br />on ‘Disclosure of Accounting Policies’.<br /> The Standard deals with the disclosure of significant accounting policies followed in preparing and presenting financial statements.<br />
  9. 9. Disclosure of accounting principles: <br />Introduction…<br />All significant accounting policies adopted in the preparation and presentation of financial statements should be disclosed in one place.<br />There is no single list of accounting policies which are applicable to all circumstances.<br />Is required by law in some cases.<br />The nature and degree of disclosure vary between Corporate and Non-Corporate sectors.<br />In some cases it forms part of accounts, while in others it is given as supplementary information.<br />It also facilitates a more meaningful comparison between financial statements of different enterprises.<br />
  10. 10. Fundamental accounting assumptions<br />Following are the Fundamental Accounting Assumptions. If any assumptions is not followed in the financial statements, the fact should be disclosed.<br />GOING CONCERN:The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future.<br />CONSISTENCY: To achieve comparability of the financial statements of enterprise through time, the accounting policies are followed consistently from one period to another. If any changes are there they must disclose it.<br />ACCRUAL: Revenues and costs are recorded in the financial statements of the periods to which they relate.<br />
  11. 11. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED<br />FIXED ASSETS & DEPRECIATION:<br />Cost of fixed assets includes the incidental expenses related to the acquisition and installation of the assets & pre-operative expenses capitalized and allocated to Fixed Assets.<br />Fixed assets are stated at cost of purchase less depreciation. <br />Dep. Methods: Straight line, Written Down Value, Sum of the year’s digits, <br /> Production Units method.<br />Plant and Machinery % per annum<br />Office Equipments % per annum<br />Computer & Software % per annum<br />Vehicles % per annum<br />Leasehold improvements % per annum<br /><ul><li>Fixed assets costing less than Rs.5,000/- are fully depreciated in the year of purchase.</li></li></ul><li>AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…<br />USE OF ESTIMATES:<br />The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of income and expenditure.<br />☼ Actual results could differ from those estimates<br />☼ Any revision to accounting estimates will be recognized<br /> prospectively in future periods<br />
  12. 12. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…<br />BASIS OF PREPARATION OF FINANCIAL STATEMENTS: <br />The financial statements should comply with<br />the mandatory accounting standards and statements<br /> issued by the Institute of Chartered Accountants of India<br /> and relevant provisions of the Companies Act, 1956<br /> to the extent applicable.<br />
  13. 13. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…<br />EXPENDITURE DURING CONSTRUCTION PERIOD:<br />In some cases all the incidental expenditure on Construction of Assets during Project stage are accumulated and allocated to the cost of asset on completion of the project.<br />In some cases the expenditure is divided in 2 parts:<br />Direct & Indirect. Direct exp. is allocated to cost of assets & Indirect exp is charged to revenue.<br />
  14. 14. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…<br />VALUATION of INVENTORIES<br /> Inventories are valued at lower of cost and net realisable value. The basis of determining cost is set out below:<br />Stores and spares “Weighted Average Basis”<br /> Raw materials & components “Weighted Average Basis”<br /> Packing materials “Weighted Average Basis”<br /> Work-in-progress “Cost of Raw materials, conversion cost and appropriate share of production Overheads.<br />
  15. 15. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…<br />REVENUE RECOGNITION<br />Revenue from the sale of products is recognized at the point of dispatch of goods from the factory<br />Revenue from job works/services is recognized on completion of respective job work/service.<br />Export incentives and other incomes are recognized on accrual basis.<br />
  19. 19. TREATMENT OF GOODWILL</li></li></ul><li>CONSIDERATIONS IN THE SELECTION OF ACCOUNTING POLICIES<br />Financial statements prepared and presented should represent a true and fair view.<br />The major considerations governing the selection and application of accounting policies are: <br />PRUDENCE<br />SUBSTANCE OVER FORM<br />MATERIALITY<br />
  20. 20. PRUDENCE:<br />Profits are recognised only when realised but provision is made for all known liabilities and losses<br />SUBSTANCE OVER FORM:<br /> Accounting transactions and events should be governed<br /> by their substance and not merely by the legal form.<br /><ul><li>MATERIALITY:
  21. 21. Financial statements should disclose all “material” items, which might influence the decisions of the users. </li></li></ul><li>disclosure of accounting policies<br />Summarize…<br />To ensure proper understanding of financial statements<br />Such disclosure should form part of the financial statements.<br />It would be helpful to the reader of financial statements if they are all disclosed at one place.<br />Any change in an accounting policy which has a material effect should be disclosed<br />The amount by which any item in the financial statements is<br /> affected by such change should also be disclosed<br />
  22. 22. Thank you…<br />
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.