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Accounting standards
- 1. Accounting Standards Dr.R.Sridevi Assistant Professor Departmentof B Com PA Sri Ramakrishna College of Arts and Science Coimbatore
- 2. Accounting Standard Anaccounting standard is a common set of principles, standards and procedures that define the basis of financial accounting policies and practices. Accounting standards improve the transparency of financial reporting in all countries. Accounting Standards are issued/ amended by the Accounting Standards Board of ICAI, to establish uniform standards for preparation of financial statements, in accordance with Indian GAAP (Generally Accepted Accounting Practices), for better understanding of the users.
- 3. Accounting standardslay down the terms and conditions of accounting policies and practices by way of codes, guidelines and adjustments for making the interpretation of the items appearing in the financial statements easy and even their treatment in the books of account.
- 4. Need for AccountingStandards For bringing uniformity in accounting methods – method for depreciation For improving the reliability of the financial statements – true and fair view of business concern Simplify the accounting information – example AS 3(revised) for cash flow statement Prevents frauds and manipulations Helps auditors – basis for auditing
- 5. AS 4 –Contingencies and Events occurring after the balance sheet date AS 4 deals with treatment in the financial statements of: (A) contingencies (B) events which occur after balance sheet date Contingencies are situations or conditions, the eventual outcome of which, profit or loss, would be determined or known only on happening, or non- happening, of an uncertain future event(s). Events occurring after the balance sheet date These are those noteworthy events, favorable as well as unfavorable which occurs between balance sheet date and date on which such financial statements are considered and approved by the BoD (Board of Directors) in case of companies, and, by equivalent approving authorities
- 6. Accounting treatment anddisclosure contingent loss – prudent to account for such loss disclosed in the financial statements by way of notes
- 7. AS 5 Deals withthe following four specific items Profit of Loss from extraordinary activities – disclosed separately in FS showing the effect of overall profit/loss due to these activities Prior period items – the current period’s FS should show the effect of such items Changes in accounting estimates – change in estimate affects ordinary activities, it is disclosed under ordinary activities Changes in accounting policies – substantial effect and impact should be shown in the FS
- 8. AS 11 –Effect of changes in Foreign Exchange rates Exchange rate to be used Exchange differences must be recognized as income or as expense
- 9. AS 12 –Government Grants Capital Approach – treated as a part of capital or shareholder’s fund Revenue Approach – either credited to P&L a/c as other income or deducted from related expenses in the P&L a/c
- 10. AS 16 –Borrowing costs Interest and other costs incurred by an enterprise in connection with the borrowing of funds Disclosure Amount debited to P&L a/c Amount of BC capitalized during the year
- 11. AS 19 -Lease Disclosure in FS Financial lease – assets acquired on lease should be shown separately Operating lease – lease payment is recognized as an expense in the P&L a/c
- 12. AS 20 -EPS EPS is a financial ratio – earnings available on each equity share Disclosed with and without extraordinary items
- 13. AS 26 –Intangible Assets Intangible asset is an non-physical and non-monetary asset which is held for use in production Amortization should start when the asset is put into use Useful life of the asset does not exceed 10 years Disclosure – should be disclosed as a separate item
- 14. AS 29 –Provisions, Contingent Liabilities and Contingent Assets Ensures appropriate recognition and measurement for provision Sufficient information is disclosed in notes to the FS Disclosure – for each class of provision a. Amount at the beginning and at the end of the period b. Additional provisions made c. Amount used d. Unused amount reversed during the period
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