2. • 6/2/2023
• FINANCIAL STATEMENT IS ALSO
KNOWN AS FINAL ACCOUNTS
• WRITTEN RECORD- CONVEYS
BUSINESS ACTIVITIES &
FINANCIAL PERFORMANCE OF A
FIRM
• INCLUDES- BALANCE SHEET, P& L
A/C, CASH FLOW STATEMENT,
EXPLANATORY NOTES AND
SCHEDULES.
3. • OBJECTIVES OF FINANCIAL STATEMENT
• WHY THEY ARE MAINLY PREPARED
• PROVIDING NECESSARY INFORMATION – FINANCIAL
ACTIVITIES
• INFORMATION TO THE MANAGEMENT FOR PROPER
UTILIZATION OF RESOUTCES
• FINANCIAL PREDICTIONS
• EVALUATE EARNING CAPACITY
• FACILITATES DECISIONS – ACQUISITION, UTILIZATION,
REPLACEMENT OF FIXED ASSETS, EXPANSION OF FIRMS..…
• PROVIDING DATA TO THE GVT – TAXES , PRICE CONTROL..
• HELPS FROM DEVIATION – ACTUAL & BUDGETED
• HELPS IN PREPARING INTERNAL REPORTS & FORMULATION OF
POLICIES
• SAFEGAURDING THE INTEREST OF SHAREHOLDERS
• HELPS IN SETTLING DISPUTES
• HELPS IN CREDIT RATING AGENCIES
4. USERS OF FINANCIAL STATEMENTS:
owners
Management
Employees
Creditors
Banks & fin insti
Investors
Govt
sebi
5. ACCOUNTING STANDARDS
WHAT IS ACCOUNTING STANDARDS?
• IT IS A GUIDELINES TO BE FOLLOWED IN ACCOUNTING SYSTEM
• IT IS A RULES AND PRACTICES – FOLLOWED- WHILE RECORDING
ACCOUNTING AND FINANCIAL TRANSACTIONS.
• STANDARDIZING- HELPS IN EASY UNDERSATANDING OF THE
ACCOUNTING SYSTEM.
• IN INDIA, INSTITUTE OF CHARTERED ACCOUNTING OF INDIA
FORMULATES AND ISSUIES ACC.STANDS.
• IN U.S. , GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) IS
BEING USED.
• INTERNATIONAL COMPANIES , FOLLOWS INTERNATIONAL
FINANCIAL REPORTING STANDARDS (IFRS)
6. DEFINITION OF ACCOUNTING STANDARD:
ICAI:
ACCOUNTING STANDARDS ARE MORE THAN JUST A SKELETON
OR A FRAME WORK DEFINING WHAT SHOULD BE DONE IN
PREPARING FINANCIAL STATEMENTS.
THEY ALSO DRAW THE BOUNDARIES WITHIN WHICH ACCEPTABLE
CONDUCT LIES AND IN THAT AND MAY OTHER RESPECTS.
THEY ARE SIMILAR IN NATURE IN LAWS
7. NATURE OF AS:
AS A GUIDE
AS A DICTATOR
AS A SERVICE PROVIDER
AS A HARMONIZER
8. OBJECTIVES
• PROVIDING - STANDARD ACCOUNTING POLICIES
-VALUATION NORMS
- DISCLOSURE REQUIREMENTS
• PROVIDES INFORMATION – STAKEHOLDERS AND USERS
• ENHANCE QUALITY OF FINANCIAL REORTING BY PROMOTING
– COMPARABILITY, CONSISTENCY AND TRANSPARENCY
• DISCLOSURE OF ACCOUNTING POLICIES AND TREATEMENT S
• BETTER INTER AND INTRA FIRM COMPARISION OF
FINANCIAL STATEMENT
• ELIMINATION OF CREATING CREATIVE ACCOUNTING
9. ADVANTAGES:
• ACCOUNTING STANDARDS ARE HELPFUL TO THE INVESTORS
• RULES OF ACCOUNTING POLICIES HELPS THE PUBLIC ACCOUNTANTS (
CA OF INDIA) TO DEAL WITH THEIR CLIENTS FOR PREPARATION OF
STATEMENTS
• STANDARD OF AUDIT INCREASES IN CASE OF FIN. STATEMENTS
• DIFFICULT TO COMMIT FRAUDS
• HELPS TO MEASURE PERFORMANCE OF MANAGEMENT
• GOVERNMENT OFFICIALS ACCEPTS THE REPORT AS IT IS PREPARED
ACCORDING TO THE ACCOUNTING STANDARSDS
• THESE FINANCIAL STATEMENTS HELPS THE RESEARCHERS AND
CONSULTANTS FOR ECONOMIC FORECASTING
LIMITATIONS:
• RIGIDITY AND INFLEXIBILITY
• RESTRICTED SCOPE
• COSTLY
• TIME CONSUMING
10. TYPES OF ACCOUNTING STANDARD
BASED ON SUBJECT MATTER
- DISCLOSURE STANDARDS
-PRESENTATION STANDARD
-CONTENT STANDARD
• - DISCLOSURE
• -SPECIFIC
• -CONCEPTUAL
• BASED ON ENFORECEMENT
• EVOLUTIONARY & VOLUNTARY COMPLAIANCE
STANDARDS
• PRIVATELY SET STANDARDS
• GOVERNMENT STANDARDS
11. INTERNATIONAL ACCOUNTING STANDARDS
WORLD WIDE ACCEPTANCE & UNIORMITY - 2 ACCOUNTING BODIES
WERE BROUGHT INTO PICTURE
1) INTERNATIONAL ACCOUNTING STANDARD COMMITTEE (IASC)
2) INTERNATIONAL FEDERATION OF ACCOUNTANTS COMMITTEE
THE MAIN TASK:
• TO FORMULATE AND PUBLISH IN THE PUBLIC INTEREST
• ACCOUNTING STANDARDS TO BE OBSERVED IN THE PRESENTATION
OF FINANCIAL STATEMENT
• TO WORK GENERALLY FOR IMPROVEENT
• HARMONISATION OF REGULATION, ACC. STDS AND PROCEDURE
RELATING TO THE PRESENTATION OF FINANCIAL STATEMENTS
THIS IASC BROUGHT OUT 41 INTERNATIONAL STANDARDS OUT OF IT 34
ARE IN FORCE.
12. DIFFERENCE BETWEEN IFRS & GAAP
• LOCAL VS GLOBAL
• RULES VS PRINCIPLE
• INVENTORY METHOD
• INVENTORY WRITTEN DOWN REVERSAL
• FAIR VALUE REVALUATION
• IMPAIREMENT LOSSES
• INTANGIBLE ASSETS
• FIXED ASSETS
• INVESTMENT PROPERTY
• LEASE ACCOUNTING
