Financial accounting standards

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Financial accounting standards

  1. 1. A standard is an agreed, repeatable way of doing something. It is a published document that contains a technical specification or other precise criteria designed to be used consistently as a rule, guideline, or definition. Standards are created by bringing together the experience and expertise of all interested parties. Standards are designed for voluntary use and do not impose any regulations. However, laws and regulations may refer to certain standards and make compliance with them compulsory.
  2. 2. Accounting Standards are formulated with a view to harmonize different accounting policies and practices in use in a country The objective of Accounting Standards is, therefore, • to harmonize the diverse accounting practices, methods, procedures by achieving uniformity and consistency in internal and external reporting practices • to guide the preparers in the preparation of financial statements • to reduce the accounting alternatives in the preparation of financial statements • providing meaningful information to various users of financial statements • enable them to make informed economic decisions
  3. 3.  To ensure understandability and reliability of financial statements  To ensure comparability of financial statements  To help assess managerial efficiency  To decrease the chances of fraud and insufficient disclosures of vital information
  4. 4. An older set of standards stating how particular types of transactions and other events should be reflected in financial statements. International accounting standards are accounting standards issued by the International Accounting Standards Board (IASB) and its predecessor, the International Accounting Standards Committee (IASC). Listed companies, and sometimes unlisted companies, are required to use the standards in their financial statements in those countries which have adopted them. Since 2001, the new set of standards has been known as the international financial reporting standards (IFRS) and has been issued by the International Accounting Standards Board (IASB).
  5. 5. 1966 The history of international accounting standards really began in 1966, with the proposal to establish an International Study Group comprising the Institute of Chartered Accountants of England & Wales (ICAEW), American Institute of Certified Public Accountants (AICPA) and Canadian Institute of Chartered Accountants (CICA). 1967 In February 1967 this resulted in the foundation of the Accountants International Study Group (AISG), which began to publish papers on important topics every few months and created an appetite for change
  6. 6. 1973 In June 1973 the International Accounting Standards Committee (IASC) came into existence, with the stated intent that the new international standards it released must "be capable of rapid acceptance and implementation world- wide". The IASC survived for 27 years, until 2001, when the organisation was restructured and the IASC was replaced by the International Accounting Standards Board (IASB). Between 1973 and 2000 the International Accounting Standards Committee (IASC) released a series of standards called 'International Accounting Standards' in a numerical sequence that began with IAS 1 and ended with IAS 41 Agriculture which was published in December 2000
  7. 7. 1997 The Standards Interpretations Committee (SIC) was established in 1997 to consider contentious accounting issues that needed authorative guidance to stop widespread variation in practice. 2001 The IASC restructured their organisation at the end of the twentieth century, which resulted in the formation of the International Accounting Standards Board (IASB). These changes came into effect on 1 April 2001
  8. 8. 2001 At the time the IASB stated that they would adopt the body of standards issued by the Board of the International Accounting Standards Committee (which would continue to be designated 'International Accounting Standards' ), but any new standards would be published in a series called International Financial Reporting Standards (IFRS) Standards Interpretations Committee (SIC) has been replaced by Internations Financial Reporting Interpretation Committee (IFRIC)
  9. 9. A set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS are issued by the International Accounting Standards Board. IFRS are sometimes confused with International Accounting Standards (IAS), which are the older standards that IFRS replaced. (IAS were issued from 1973 to 2000.) 29 +11 +8 +16 IAS (revised) SICs IFRS IFRICs IFRS
  10. 10. Common basis of comparison Clarity and Productivity Consistent financial reporting basis Improved access to international capital markets Lower cost of capital Escape multiple reporting Reflect true value of acquisitions Level of confidence Benchmarking with global peers Merger and Takeover activity Investnents
  11. 11. The Accounting Standards Board (ASB) of the Institute of Charted Accountants of India(ICAI) formulates (AS) based on the IFRS keeping in view the local conditions including legal and economic environment and The level of preparation of the industry and the accounting professionals
  12. 12. In line with global trend, the Institute of Chartered Accountants of India (ICAI) has proposed a plan for convergence with IFRS w.e.f. April 1, 2011 In India, ICAI has issued a document entitled ‘Concept paper of convergence with IFRS in India’ to evaluate the need for Indian GAAP to change to IFRS The paper recognises the advantages arising from convergence to various stakeholders
  13. 13. Convergence means to achieve harmony with IFRS i.e. National Accounting Standards comply with all the requirements of IFRS Convergence doesn’t mean that IFRS should be adopted word by word Adding disclosure requirements or removing optional treatments do not create non compliance with IFRS. But, such changes must be made clear so that the users are aware of them
  14. 14. Indian Accounting Standards, (abbreviated as Ind AS) are a set of accounting standards notified by the Ministry of Corporate Affairs which are converged with International Financial Reporting Standards (IFRS). These accounting standards are formulated by Accounting Standards Board of Institute of Chartered Accountants of India. Now India will have two sets of accounting standards viz. existing accounting standards under Companies (Accounting Standard) Rules, 2006 and IFRS converged Indian Accounting Standards(Ind AS).
  15. 15. The Ind AS are named and numbered in the same way as the corresponding IFRS. NACAS recommend these standards to the Ministry of Corporate Affairs. The Ministry of Corporate Affairs has to spell out the accounting standards applicable for companies in India. As on date the Ministry of Corporate Affairs notified 35 Indian Accounting Standards (Ind AS). But it has not notified the date of implementation of the same. Indian Accounting Standard
  16. 16. Reporting under IFRS is applicable for accounting periods beginning on or after April 2011 Keeping in view the complexity of IFRSs , the IACI is of the view that IFRSs should be adopted for public interest entities i.e. listed entities, banks, insurance companies on or after 1st April 2011 The numbers of existing accounting standards may be given in brackets for the purpose of easier identification The IFRSs when adopted will take into account the interpretations issued by IASB

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