Introduction: 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). 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 Convergence with IFRS The inception of the idea of convergence of Indian GAAP with IFRS was made by the Prime Minister of India Dr. Manmohan Singh by committing in G20 to align Indian accounting standards with IFRS. Thereafter ICAI has decided to converge its Accounting Standards with IFRS for accounting periods commencing on or after 1 April 2011 in a phased manner as envisaged the Roadmap to IFRS formulated by the Ministry of Corporate Affairs. For smooth transition to IFRS, ICAI has taken up the matter of convergence with the National Advisory Committee on Accounting Standards and various regulators such as the RBI, SEBI and IRDA, CBDT. IASB, the issuer of IFRS, is also supporting the ICAI in its endeavours towards convergence. It has been decided that there shall be two sets of Accounting Standards under the Companies Act. The new set of standards which have been converged with IFRS are now known as Indian Accounting Standards or Ind AS. The Ministry of Corporate Affairs has notified the 35 Ind AS on 25 February 2011. The text of the 35 Ind AS are now available at the Ministry of Corporate Affairs portal. At the same time The Ministry of Corporate Affairs haven't specified the date of implementation of the same. This reluctance of The Ministry of Corporate Affairs to notify the date even when the proposed date is less than a month away is seen as rooted in the strong lobbying by the Corporates in India to defer the implementation. But the president of ICAI. CA.G.Ramaswamy expects that it will be notified soon and there wont be any deferment. Formation of the accounting standards board: 1) The institute of chartered accountant of India (ICIA) recognizing the need to harmonize the diverse accounting policies and practices in use in India, constituted the Accounting Standards Board (ASB) on 21st April, 1997. 2) The composition of the ASB is fairly broad based and ensures participation if all interest groups in the standard-setting process. Apart from the elected members of the Council of the ICIA nominated on the ASB, the following are represented on the ASB: Nominee of the Central Government representing the Department of Company Affairs on the council of the ICAI. Nominee of the central government representing the Office the Comptroller and Auditor General of India on the council of the ICAI Representative of the Institute of Cost and Work Accountants of India. Representative of the Institute of Company Secretaries of India. Nominee of the Central Government representing the central board of Direct Taxes in the council of the ICAI. Representative of the Industry Associations (1 from Associate Chambers of Commerce and Industry), 1 from Confederation of Indian Industry and 1 from Federation of Indian Chambers of Commerce and Industry (FICCI). Representative of Reserve bank of India. Representative of Controller General of Accounts. Representative of Academic Institutions ( 1 from Universities and 1 from Indian Institute of Management) Representative of Financial institutions. Eminent professionals co-opted by the ICIA (they may be in practice or in industry, government, education, etc.) Chairman of the search committee and the Chairman of the Expert Advisory Committee of the ICAI, if they are not otherwise members of the ASB. Representative of any other body, as considered appropriate by the ICAI.

Objectives and Functions of the Accounting Standards Board: 1. To conceive and suggest areas in which accounting standards need to be developed. 2. To formulate Accounting Standards with a view to assisting the council of the ICAI in evolving and establishing Accounting Standards in India 3. To examine how far the relevant International Accounting Standard can be adapted while formulating the Accounting Standards and to adapt the same. 4. To review at regular intervals, the Accounting Standard from the point of view of acceptance or changed conditions and if necessary revise the same. 5. To provide from time to time, interpretations and guidance on V. 6. To carry out such other functions relating to Accounting Standards 7. To formulate Accounting Standards so that such standards may be established by the ICAI in India. 8. The ASB is responsible for propagating the Accounting Standards and of persuading the concerned parties to adopt them in the preparation and presentation of financial statements. Scope of Accounting Standards: 1. Efforts will be made to issue Accounting Standards which are in conformity with the provisions of the applicable laws and customs, usages and business environment in India. 2. The Accounting Standards by their very nature cannot and do not override the local regulations which govern the preparation and presentation of financial statements in the country. However the ICAI will determine the extent of disclosure to be made in the financial statements and the auditor's report thereon. 3. The Accounting Standard is intended to apply only to items which are material. Any limitations with regard to the applicability of a specific Accounting Standard will be made clear by the ICIA from time to time. The date from which a particular standard will come into effect as well as the class of enterprise to which it will apply will also be specified by the ICAI. 4. The Institute will use its best endeavours to persuade the Government, appropriate authorities, industrial and business community to adopt the Accounting Standards in order to achieve uniformity in preparation and presentation of financial statements. 5. In formulation of Accounting Standards the emphasis would be on laying down accounting principles and not detailed rules for application and implementation thereof. 6. The ASB may consider any issue requiring interpretation on any Accounting Standard. Interpretations will be issued under the authority of the council. The authority of Interpretation is as same as that of Accounting Standard to which it relates. Procedure for issuing an Accounting Standard: 1) The ASB determines the broad areas in which Accounting Standards need to be formulated and the priority in regard to the selection thereof. 2)In the preparation of Accounting Standard, the ASB will be assisted by Study Groups constituted to consider specific subjects. In the formation of Study Groups, provision will be made for wide participation, by the members of the Institute and others. 3) The draft of the proposed standards normally include the following: Objective of the standard Scope of the standard Definition of the terms used in the standards Recognition and Measurement of principles, wherever applicable Presentation and disclosure requirements

4) The ASB will consider the preliminary draft prepared by the Study Group and if any revision of the draft is required on the basis of deliberations, the ASB will make the same or refer the same to the Study Group.

5) The ASB will circulate the draft of the Accounting Standard to the council members of the ICAI and the following specified bodies for their comments. Department of Company Affairs (DCA) Comptroller and Auditor General of India (C&AG) Institute of Cost and Work Accountants of India (ICWA) Central Board of Direct Taxes (CBDT) The Institute of Company Secretaries of India (ICSI) Associated Chambers of Commerce and Industry ( ASSOCHAM), Confederation of Indian Industry (CII) and Federation of Commerce and Industry (FICCI) Reserve Bank of India (RBI) Securities and Exchange Board of India (SEBI) Standing Conferences of Public Enterprises (SCOPE) India's Bank Association (IBA) Any other body considered relevant by the ASB keeping in view the nature of the Accounting Standard.

6) The ASB will hold a meeting with the representatives of specified bodies to ascertain their view on the draft of the proposed Accounting Standard. 7) On the basis of comments received and discussion with the representatives of specified bodies, the ASB will finalize the Exposure Draft of the proposed Accounting Standard. 8) The Exposure Draft of the opposed standard will be issued for comments by the members of the Institute and the public. The Exposure draft will specifically be sent to specified bodies (as listed above), stock exchanges, and other interest groups as possible. 9) After taking into consideration the comments received, the draft of the proposed standard will be finalized by the ASB and submitted to the Council of the ICAI. 10) The council of the ICAI will consider the final draft of the proposed Standard, and if found necessary, modify the same in consultation with the ASB. The Accounting Standard on the relevant subject will then be issued by the ICAI. 11) For a substantive revision of an Accounting Standard, the procedure followed for formulation of a new Accounting Standard, as detailed above, will be followed. 12) Subsequent to issuance of an Accounting Standard, some aspect(s)may require revision which are not substantive in nature. For this purpose, the ICAI may make limited revision to an Accounting Standard .The procedure followed for the limited version will substantially be the same as that to be followed for formulation of an Accounting Standard, ensuring that sufficient opportunity is given to various interest groups and general public to react to the proposal for limited revision. ACCOUNTING STANDARDS: AS 1: Disclosure of accounting policies a) Accounting policies refer to the specific accounting principles and the method of applying those principles adopted by the enterprises in the preparation and presentation of financial statements. b) In the absence of disclosure of accounting policies, it can be presumed that the financial statements are prepared on the basis of the fundamental accounting assumptions like Going Concern, Consistency and Accrual. AS 2: Valuation of Inventories a) The term inventory includes finished goods, work-in-progress, raw materials and stores, spares and consumables. b) This standard is not applicable for work-in-progress arising out of construction contracts and business of service providers, financial instruments like shares, bonds which are held as stock-in-trade and inventories like livestock, agricultural and forest products, mineral oils, ores and gases. c) The value of inventory to be shown in the balance sheet must be the lower of cost and net realizable value.

d) The cost of inventory includes the cost of purchase like purchase price, duties and taxes and other expenditures directly attributable to the acquisition, cost of conversion like direct labor, direct expenses and allocation of fixed and variable production overheads incurred in converting material into finished goods and other costs incurred in bringing the inventories to their present location and condition. e) The net realizable value refers to the estimated selling price of the inventory in the ordinary course of business less estimated cost of completion and estimated cost necessary to make the sale. f) The enterprise can either follow FIFO or weighted average method of costing for ascertaining the cost of inventory and when it is impractical to calculate the cost, the enterprise can follow either standard costing method or retail method. AS 3: Cash Flow Statement a) Cash Flow Statement depicts the inflow and outflow of cash. This statement helps in analyzing the ability with which an enterprise can raise cash and utilize it effectively. It helps in assessing the liquidity and solvency position of the enterprise. b) This standard is applicable for enterprises having more than 50 crores turnover in a financial year and also for listed companies. c) All inflows and outflows of cash and cash equivalents must be classified into operating activities (the principal revenue producing activities), investing activities (activities of acquisition and disposal of long term assets and other investments) and financing activities (activities that result in the change in size and composition of capital employed). d) Cash includes cash-in-hand and demand deposits. e) Cash equivalents include short term highly liquid investments having a maturity period of less than 3 months which can be readily converted into cash. AS 4: Contingencies and Events occurring after the Balance Sheet Date a) Contingency refers to a situation existing on a balance sheet date, but the outcome of which can be known only after the happening or non-happening of certain events in future. The outcome can either be a loss or a gain. b) Events after the balance sheet date are events which occur between the balance sheet date and the date on which the financial statements are approved by the Board of Directors or any other authority that can approve the financial statements. c) In case of contingencies, if the expected outcome is a contingent gain, then it is covered under AS 29 and if the expected outcome is a contingent loss which is high then a provision must be made for such loss, if the loss is reasonable then a disclosure of such loss must be made in the financial statements and if the loss is remote then no accounting treatment is required. d) In case of events occurring after the Balance Sheet Date, all the assets and liabilities should be adjusted if they provide additional information materially affecting the determination of the amounts relating to the conditions existing on the balance sheet date. e) The nature of contingency, the uncertainties affecting the future outcome and the estimate of the financial effect should be disclosed in the financial statements. AS 5: Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies

a) Net profit or loss must be disclosed to indicate the result from ordinary activities and extraordinary items. Ordinary activities are those which are incidental to the main business and extraordinary items are those incomes and expenses that arise from transactions that are clearly distinct from ordinary activities. They are items that are not expected to occur frequently. b) Prior period items are incomes and expenses arising in the current period as a result of an error or omission in the preparation of financial statements of one or more prior periods. They have to be disclosed in a manner that their impact on current profit or loss can be perceived. c) Changes in accounting estimates must be disclosed which have been revised. The effect of change must be disclosed in respect of ordinary and extraordinary activities. d) The changes in accounting policies having material effect should also be disclosed. AS 6: Depreciation Accounting a) Depreciation is an accounting treatment for replacing assets. It is applicable for all the depreciable assets except forests and plantations, goodwill, livestock etc.

b) The amount of depreciation is based on historical cost, expected useful life of the asset and the estimated residual value. c) The cost of depreciable asset refers to the total cost spent in connection with the acquisition of the asset, its installation, commissioning as well as for the additional items and improvements. d) The expected useful life refers to the period over which it is expected to be used. e) Any addition or extension to the existing class of assets which becomes an integral part of the existing asset, then it is to be depreciated over the remaining useful life of the existing asset. f) The methods of depreciation to be followed can either be on straight line method or on written down value basis. g) The financial statements should disclose the total cost of each class of assets, its depreciation and accumulated depreciation and the depreciation method used. AS 7: Construction Contracts a) Accounting for construction contracts deals with the allocation of revenues and cost to accounting periods over the duration of the contract. b) The profit or loss of a completed contract = contract value contract cost. c) The contract revenue includes the price agreed as per the contact. d) The contract cost includes specific cost like material cost, labour cost and those specifically associated attributable cost to the contract. e) The percentage of completion method is used for accounting construction contracts. f) The financial statements of the contractors should disclose the method which is followed in ascertaining the contract cost and revenues. AS 9: Revenue Recognition a) It deals with the recognition of revenue arising out of the ordinary activities of an enterprise. b) Revenue from sale of goods must be recognized only when: The seller has transferred the ownership of goods to the buyer for a certain price. The seller does not retain any effective control of ownership of the transferred goods. There is no uncertainty in the collection of the amount of consideration. c) Revenue from services must be recognized as the service is performed and completed and there exists no uncertainty in terms of receiving the payments. d) Revenue in the form of interest, royalties and dividends should be recognized only when there is no significant uncertainty as to its collectability and measurability exists. e) If there is uncertainty in the collection of revenue, then a provision must be created. f) The financial statement must disclose the postponement of any revenue recognition and the circumstances necessitating such postponement. AS 10: Accounting for Fixed Assets a) It deals with the accounting of fixed assets like land, buildings, plant and machinery, vehicles, furniture and fittings, goodwill, patents, trademarks and designs. b) The gross & net book value of fixed assets at the beginning and the end of an accounting period showing additions, disposals and acquisitions should be disclosed. c) The fixed assets are to be shown in the financial statements either at the historical cost or the revalued price. d) The historical cost includes the purchase price, and other direct costs incurred in bringing the asset to the working condition for its intended use. e) Any subsequent expenditure on the a fixed asset should be added to the book value only if they increase the future benefits from the existing assets beyond its previous standard of performance. If not, then they must be charged to the P/L account. f) On the disposal of a fixed asset or when no future benefit is expected to be received from a fixed, then they should be eliminated from the financial statements. g) Any loss on retirement or gain or loss on disposal should be recognized in the P/L account. h) In case of revaluation of Fixed Asset, If revaluation results in an increase in the book value, then the amount of increase must be credited to the revaluation reserve. If revaluation results in a decrease in the book value, then the amount of decrease must be charged to P/L account.

AS 11: Accounting for the effects of changes in foreign exchange rates. a) This accounting standards deal with the translation of a foreign currency into a reporting currency (Indian Currency). It is done for accounting of transactions in foreign currencies and also translating the financial statements of foreign branches for inclusion in financial statements of the enterprise. b) It deals with the translation of financial statement of foreign operations. c) It also deals with the accounting of foreign exchange contracts. d) The foreign currency transaction must be translated at the exchange rate prevailing on the date of transaction. But, for the purpose of balance sheet: Monetary Items translated at the exchange rate prevailing on the date of balance sheet. Non-Monetary Items translated at the exchange rate prevailing on the date of transaction. e) An enterprise should disclose: The amount of exchange difference included in the net profit or loss. The amount accumulated in foreign exchange translation reserve. Any reasons for difference, if the reporting currency is different from the foreign currency. AS 12: Accounting for Government Grants a) It deals with subsidies, cash incentives and duty drawbacks. b) Government grants will not be recognized until there is an assurance from the enterprise to comply with the conditions attached to the grants and also until the receipt of the grants. c) Grants related to specific fixed assets should be deducted from its gross value. d) Grants related to revenue should be treated accordingly in the P/L account. e) Grants that become refundable because of non-fulfilment of the condition should be accounted for as an extraordinary item. f) When monetary grants for assets are to be refunded the gross value of the asset must be increased by the amount of refund and depreciation on increased value to be claimed over remaining useful life of the asset. g) When monetary grants related to revenue are to be refunded, the amount of refund must be charged to P/L account.

AS 13: Accounting for Investments a) Investments are assets held for earning income by way of dividend, interest and rentals for the purpose of capital appreciation and other benefits. b) The investments are classifieds into long term and short term investments. c) Current investments are those investments which are readily realisable and which are held for not more than one year. d) Long term investments are those which are not readily realisable and which are held for more than one year. e) The investments acquired must be recorded at the purchase price plus the acquisition charges. f) If the investments are acquired by issue of shares, the fair value of shares will be considered as the purchase price. g) Current investments must be shown at cost price or realisable value whichever is lower. h) Long term investments must be shown at cost price. i) When investments are disposed off, the difference between the carrying value and net sale proceeds must be treated accordingly in the P/L account. j) Long term investments can be reclassified into current investments and the value of such transfer should be at cost price or carrying value whichever is lower. k) Likewise current investments can be reclassified into long term investments and the value of such transfer should be at cost price or fair value whichever is lower.

AS 18: Related Party Disclosure a. Related party refers to any party that controls or can significantly influence the management or the operating policies of the company. The relationship is said to exist between :

Parent co. and subsidiary co. Joint venture partners. Investors and investee. Associates. Relative in case of individual enterprises which includes spouse, son, daughter, sister father, mother.

b. Any related party relationship and transactions between them should be disclosed in the financial statements.

AS 19: Accounting for leases a). Lease is an agreement where one party called lessor who owns the asset gives the right to use the asset to another party called the lessee who uses the asset for given period of time for a consideration called rent. b). A finance lease is a capital lease or long term lease .It is like an installment loan. There is a legal commitment to pay for the entire cost of the loan these agreements are non-cancellable . The lessor buys a particular asset on the instructions given by the lessee which the lessor otherwise would not have thought of buying. c). An operating lease is a lease where the lessee uses the asset of a lessor only for a short period of time . These assets are already available with the lessor and the lessor does not buyit exclusively for the lessee. d). For accounting for finance lease : In the books of lessor The net investment is treated as revenue recievable . The interest is recognized as revenue over the period of lease .

In the books of lessee : The leased asset is treated as the asset of lessee. Each lease payment is apportioned between the finance charge (interet ) and the principal amount Depreciation is charged as per AS 6

e). For accounting for operating lease : In thebooks of lessor The leased asset should be shown as a fixed asset in the financial statements of the lessor. Depreciation as per AS 6 must be charged . Income from lease should be recognized as income and should be shown in the balance sheet. Expenses relating to the lease should be transferred to the P/L account.

In the books of lessee: Lease payment must be recorded as expenditure and charged to P/L account

AS 20: Earnings per share (EPS) a.It is a ratio that gives the information regarding the earnings available to each equity share . b.It is applicable to the enterprises whose equity shares are listed on a recognized stock exchange . c.As per this standard an enterprise should disclose both the basic EPS and the diluted EPS. d.Basic EPS = Net profits for the year

no. of equity shares outstanding at the beginning of the year e. Diluted EPS = Adjusted net profits Adjusted No. of equity shares

AS 21: Consolidated financial statements a.This standard necessitates the preparation of consolidated P/L account and balance sheet . b.The parent co. (enterprises having one or more subsidiaries)must prepare consolidated financial statements. c.The financial statements must disclose the following : The list of all subsidiaries. Proportion of ownership interest. Nature of relationship between parent and subsidiary co. whether direct control or control through subsidiaries. Name of the subsidiary in which the reporting dates are different . The different accounting policies applied for the preparation of consolidated financial statements and reasons for not consolidating.

AS 24 : Discounting operations: a.This standard defines discounting operations as: Disposing of substantially in tis entirely such as sellind the components in a single transaction or by a de-merger or spin off of ownership. Terminating asset through abandonment. Selling of the components assets and selling its liabilities individually.

AS 25 : Interim financial reporting a.Interim financial reports mean financial reports containing either a set of financial statements or set of condensed financial statements for an interim period. b.Interim period is a period of reporting shorter than the full financial year . c.The objective of this standard is to prescribe minimum content for interim financial reporting and prescribe principles of recognition and measurement in a complete or condensed financial statement . d.It provides the formats foe condensed balance sheet and profit and loss account and cash flow statement.

AS 26: Intangible assets a.These are those assets which are non-monetary in nature which are held for use in production or supplying of goods and services for rentals to others or administrative purposes. b.It is applicable for goodwill, patents, trademarks, and copyrights, rights under licensing rights like motion picture films, video recording play, and manusript. c.Cost of an intanfi ble asset: If acqired separately - it includes purchase price and other direct expenses. If required in exchange of asset - the fair value of assets given up is considered. If required by the issue of shares - the fair value of shares or fair value of intangible assets whichever is more evident

 d. e.

is to be considered. If internally generated - a sum total of all the expenses incurred in its generation . Intangible assets must be carried at cost less than any amount amortised. They must be amortised under the straight method over ten years.

f. An intsngible asset must be eliminated from balance sheet when it is disposed off or when no future economic benefit are expected from the use of the intangible asset. g. The research costs must be treated as expenses and charged to P/L account and development costs must be capitalized.(AS 8)

AS 27: Financial reporting of interest in joint venture a.It is defined as a contractual agreement whereby two or more parties carry on an economic activity under joint control. b.It is of three types: Jointly controlled operations Jointly controlled assets Jointly controlled entities

c. A distinction between an investor and a ventureis made. A investor ia a person who cannot exercise any control over the joint venture transactions. A venture is a person who can exercise contro; over the affairs of the joint venture agreement . d. All the details about the joint venture parties , their proportion of interest, the amounts of capital commitments, treatement of contingencies have to be disclosed in the financial statements.

AS 28: Impairment of assets a.It refers to weakening in value of asset. b.An asset is said to be impaired when carrying amount of asset is more than recoverable amount. c.Carrying amount is the amount at which the asset is shown in the balance sheet. d.Recoverable amount is higher of net selling price and value in use . e.Net selling price is the amount abtainable from the sale of asset less cost of disposal. f.Value in use is the present value of estimated future cash flows arising from use of the asset plus the scrap value at the end of its useful life. g.If the asset is carried at the historical cost . Impairment loss=carrying amount (historical cost less depreciation or amortization ) minus recoverable amount . In this case the amount of impairment loss should be charged to the profit and loss account and deducted from the asset in the balance sheet. h. If the asset is carried at the revalued cost Impairment loss =carrying amount (revalued amount less depreciation or amortization )minus recoverable amount. In this case the amount of impairment loss must be deducted from the asset in the balance sheet and adjusted against the revaluation reserve and balance if any must be charged to the profit and loss account .

AS 29: Provision , contingent liabilities and contingent assets a. b. A provision is a liability which can be measured only by using a substantial degreeof estimation . A contingent liability is a possible obligation as a result of past event the existance of which will be confirmed only by the occurance or non occurance of one or more uncertain future events which are not totally under the control of the enterprise . A contingent asset is a possible asset that arises from a past event , the existence of which will be comfirmed only by the occurence or non-occurrence of one or more uncertain future events which are not totally under the control of the enterprise For recognizing the provision in the financial statemants the following conditions should be fulfilled : There has to be a present obligation as a result of past events. The present obligation must exist on the balance sheet date. The present obligations must be probable of causing the outflow of resources. For recognizing contingent liabilities in the financial statements the conditions will be the opposite of what is applicable for provision. A contingent asset is recognized only when the realization of income is virtually certain.

c.

d.

e. f.

AS 30: Financial intruments : recognition and measurement a. b. c. d. The objective of this standard is to recognize and measure financial statements A financial asset or financial liability at fair value through profit and loss is a financial asset or liability that is held for trading , held to maturity investments are also financial assets.It also includes loans and recievables. Recognition of financial assets and liabilities in the balance sheet is when they become a party to the contractual provision of the instruments. The financial assets and financial liabilities are measured at its amortised cost.

AS 31 : Financial instrumunts: presentation a) The objective of this standard is to establish priciples for presenting financial instrumunts as liabilities or equity and for offsetting financial asset and financial liabilities b) It applies to the classification of financial instruments from the perspective of the issuer into financial assets, financial liabilities and equity intruments. c) The classification of related interest, dividends, losses and gains and the circumstances in which financial assets and financial liabilities should be offset. AS 32: Financial instruments : disclosures a) The objective of this standard is to prescribe the disclosure requirements for financial instruments in the balance sheet and profit and loss account . b) The disclosure requirements are for: Different categories of financial assets. Different categories of financial liabilities. Re-classification of financial assets. De-recognition of financial assets and financial liabilities. Hedge accounting. Disclosures of accounting policies. Risk disclosures.