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Accounting Standards are different from Generally Accepted Accounting Principles (GAAP) or Accounting Concepts. They narrow down the areas of differences in accounting principles and provide standard accounting norms to be followed by accountants. ASB's main function is to formulate Accounting Standards to be issued under the authority of the council of the institute.
Accounting Standards are different from Generally Accepted Accounting Principles (GAAP) or Accounting Concepts. They narrow down the areas of differences in accounting principles and provide standard accounting norms to be followed by accountants. ASB's main function is to formulate Accounting Standards to be issued under the authority of the council of the institute.
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Accounting Standards are different from Generally Accepted Accounting Principles (GAAP) or Accounting Concepts. They narrow down the areas of differences in accounting principles and provide standard accounting norms to be followed by accountants. ASB's main function is to formulate Accounting Standards to be issued under the authority of the council of the institute.
Copyright:
Attribution Non-Commercial (BY-NC)
Verfügbare Formate
Als DOC, PDF, TXT herunterladen oder online auf Scribd lesen
Accounting standards are different from Generally Accepted
Accounting Principles (GAAP) or Accounting concepts. GAAP or Accounting Concepts are generally accepted accounting principles to achieve comparability and uniformity of the financial statements. They provide a number of alternative treatments for the same item. But accounting standards provide solutions to specific issues. Accounting standards narrow down the areas of differences in accounting principles and provide standard accounting norms to be followed by accountants.
ACCOUNTING STANDARDS – ICAIANDASB
The Institute of Chartered Accountants of India, fully recognizing the
need of harmonizing the diverse accounting policies and practices established ‘Accounting Standards Board’ on 21st April 1977 so that accounting as a language could develop along the right lines. Accounting Standard Board’s (ASB) main function is to formulate accounting standards to be issued under the authority of the council of the institute. Accounting Standards provide rules and criteria of accounting measurement. However the rules / criteria are intended to be used in a social system and hence are never intended to be rigid as in case of physical sciences. At the same time, they are intended to remove irrational and diverse accounting practices.
Constitution of ASB: The Constitution of ASB gives adequate
representation to all interested parties. At present, it consists of members of the council and representatives of industry, banks, Company Law Board, Central Board of Direct Taxes and the Comptroller of Auditor General of India, Security Exchange Board of India etc.
FUNCTIONS OF ASB: The following are the functions performed by
ASB. To formulate accounting which the council of ICAI in India may establish.
To propagate the Accounting Standards and persuade the
parties concerned to adopt them in the preparation and presentation of financial statements.
To issue guidance notes on the Accounting Standards and give
clarifications on issues arising there from.
To review the Accounting Standards at periodical intervals.
To specify the date of effect of each standard and the class of
enterprises to which it will apply. Unless otherwise stated, no standard will have retrospective application.
INDIAN ACCOUNTING STANDARDS
The following is the list of accounting standards issued by the
Institute of Chartered Accountants of India along with their status:
AS- Name of the Accounting Standards Status
Nos AS-1 Disclosure of Accounting Policies Mandatory AS-2 Valuation of Inventories Non-Mandatory AS-3 Changes in Financial Position Mandatory AS-4 Contingencies and Events Occurring Mandatory After the Balance Sheet Date AS-5 Prior Period and Extraordinary items and Mandatory changes in Accountancy Policies AS-6 Depreciation Accounting Mandatory AS-7 Accounting for Construction Contracts Mandatory AS-8 Accounting for Research and Mandatory Development AS-9 Revenue Recognition Mandatory AS-10 Accounting for Fixed Assets Mandatory AS-11 Accounting for the Effects of Changes in Mandatory Foreign Exchange Rates AS-12 Accounting for Government Grants Mandatory AS-13 Account for Investments Mandatory AS-14 Accounting for Amalgamations Mandatory AS-15 Accounting for Retirement Benefits in the Mandatory Financial Statements of Employees AS-16 Borrowing Costs Mandatory AS-17 Segment Reporting Mandatory AS-18 Related Party Disclosures Mandatory AS-19 Leases Mandatory AS-20 Earnings Per Share Mandatory AS-21 Consolidated Financial Statements Mandatory AS-22 Accounting for Taxes on Incomes Mandatory AS-23 Accounting for Investments in Associates Mandatory in Consolidated Financial Statements AS-24 Discontinuing Operations Non-Mandatory AS-25 Interim Financial Reporting Mandatory AS-26 Intangible Assets Mandatory AS-27 Financial Reporting of Interests in Joint Mandatory Ventures
A brief summary of the contents and purpose of the accounting
standards issued by the Institute of Charted Accountants of India are as follows:
ACCOUNTING STANDARD – 1: It deals with the disclosure in the
financial statements of significant accounting policies followed in the preparation and presentation of such statements. The purpose of this Standard is to promote better understanding of financial statements by such disclosure. Compliance of this Standards helps in facilitating a more meaningful comparison between financial statements of two different enterprises.
ACCOUNTING STANDARD – 2: It deals with the principles of
valuing inventories. Presently, the standard is recommendatory in nature. The standard intends that the methods of methods of inventory valuation as far as possible should be practicable, logical and consistently followed. The Standards lays down the various methods of valuation in respect of different types of inventories. It also described the elements of cost that are to be considered in the valuation of the inventory. The standard also requires disclosure in respect of policies of stock valuations and whether they have been consistently followed. Whether such policies are fair and proper and in accordance with the normally accepted accounting policies and are consistently followed year after year. Any deviation in the method of valuation of inventory as compared to the earlier year is also required as a disclosure under this standard.
ACCOUNTING STANDARD – 3: It deals with the preparation of an
additional statement, which summarises for a given period, the sources and application of funds of an enterprise. Such a statement is desired by the standards to be attached with the Balance Sheet and Profit and Loss Account of each year. This statement is either in the form of fund flow statement or cash flow statement and is helpful in providing information relating to movements of funds of the enterprise during the period for which the financial statements are prepared. This statement summarises the effect of funds and their flow on the financial results of an enterprise. In India, though there is no legal requirement to publish a statement of changes in financial position along with balance sheet, yet there is a growing practice to publish such a statement along with financial statements in line with the standards.
ACCOUNTING STANDARD – 4: It deals with the treatment in
financial statements of contingencies and events occurring after the balance sheet date. Contingencies are events whose outcome will be known only on their occurrence. Let us say, a case in High Court, Penalty proceedings under law etc are events whose outcome will be known only on their occurrence. Events occurring after the balance sheet date are events which confirm a particular.
Position existing on the balance sheet date. Let us say, insolvency of
a debtor, recovery from whom was considered as doubtful as on the date of balance sheet. The Standard lays down that contingencies must be provided if the loss due to it can be reasonably estimated. The standard also states that assets and liabilities should be adjusted for events occurring after the balance sheet date if they establish the conditions existing on the balance sheet date. ACCOUNTING STANDARD – 5: It deals with the treatment in the financial statements of prior period and extraordinary items and changes in accounting policies. Prior period items are debits or credits which arise in the accounts of current year as a result of a mistake or omission in the preparation of financial statement of one or more earlier years. Extraordinary items are unusual items distinct from the day to day activities of an entity. The standard also lays down that any change in the accounting policy used in preparation of financial statement should be reported and its impact on the profit or loss of the entity should also be reported. Let us say, an entity changes its method or accounting from cash system to mercantile system. In such cases, the standard lays down that not only the change should be stated in the financial statement but the effect of such change on the profit / loss depicted by the profit and loss account of that year must also be stated.
ACCOUNTING STANDARD – 6: It deals with the accounting for
depreciation and the disclosure requirements in connection therewith. It suggests various methods of depreciation in respect of various types of fixed assets. It states that the depreciation method should be selected carefully, systematically and consistently applied from year to year. It also lists the factors which affect depreciation and the treatment to be given if a method of depreciation is changed. The standard also lays down treatment in case of revaluation of assets.
ACCOUNTING STANDARD – 7: It deals with the accounting for
Construction Contracts. Contract Accounting is complicated because the contract period exceeds a single year in most cases. This poses serious accounting problems relating to revenue, treatment of advances received, work-in-progress etc. in the financial statements. The standard recognizes two methods of accounting for construction contract, namely, the percentage of completion method and the completed contract method. The standard explains the relevance of both the methods of accounting and the method which is more appropriate under a given set of circumstances. It states the essential ingredients of these two methods and also deals with the disclosures to be made in this regard.
ACCOUNTING STANDARD – 8: It deals with the treatment of costs
incurred on research and development of a product or a service by an entity in the financial statements of the year of such research and development and the subsequent accounting years. The Standards identifies items of cost which should form part of research and development costs. It also lays down the conditions under which research and development costs may be deferred i.e., written off in accounts over a specified number of years. It also states that specific disclosures should be made regarding research and development costs that are incurred and their treatment in financial statements.
ACCOUNTING STANDARD – 9: It deals with the basis for
recognition of revenue i.e. income and the time when income can be said to have arisen. It also states the quantum of income to be credited to profit and loss account. The statement also shows how revenue is to be recognized from the various activities carried on by the enterprise. Let us say, from sale of goods, rendering of services, use by others of enterprise resources yielding interest, royalties, and dividends etc.
ACCOUNTING STANDARD – 10: It deals with the accounting for
fixed assets and specifies the disclosures to be made in the financial statement in relation thereto. It lays down the elements of cost that should form a part of the book value in respect of a particular asset purchased and used by an enterprise. It also states when the fixed assets should be written off and treatment, if any, on revaluation of fixed assets.
ACCOUNTING STANDARD – 11: It deals with accounting for
transaction in foreign currencies in the financial statements prepared by an enterprise and with translation of the financial statements of foreign branches prepared in foreign currency into Indian Rupees for the purpose of including them in the financial statements of the Head office in India. Rules with respect to foreign currency translation (conversion) and difference arising, if any, from conversion of foreign currency into Indian rupees is also dealt with the standard.
ACCOUNTING STANDARD – 12: It deals with accounting for
Government grants received by an entity and how should such grants be presented in the financial statement. Such grants may be in the form of subsidies, cash incentives etc. The various approaches to the grant as suggested by the Standard would depend upon the purpose for which the grant is received and conditions that have to be fulfilled to obtain and enjoy the grant. Treatment of withdrawal of grants is also laid down in the standard.
ACCOUNTING STANDARD – 13: It deals with accounting for
investments made by entity and their presentation in the financial statement. The standard defines current and long term investments and their basis of classification. To the extent the standard relates to current investments, it is also applicable to shares, debentures and other securities held as stock-in-trade, with suitable modification as specified in the standard itself. The standard lays down the criteria for bifurcation between current and long term investments and how they are to be classified as such.
ACCOUNTING STANDARD – 14: It deals with accounting for
amalgamation and the treatment of any resultant good will or reserves in the books of account, arising out of such amalgamation transaction. Amalgamation means formation of a new company to take over the existing business of two or more companies. The standard does not deal with cases of acquisitions, whereby the acquired company is not dissolved and its separate entity continues to exist. The standard lays down the methods of amalgamation and the accounting adjustment under each method. ACCOUNTING STANDARD – 15: It deals with accounting for retirement benefits provided to employees in the financial statements of employers. Retirement benefits would include provident fund, superannuation/pension, and gratuity, leave encashment, post retirement health and welfare schemes. This statement does not apply to those retirement benefits for which the employer’s obligations cannot be reasonably estimated.
ACCOUNTING STANDARD – 16: It deals with the accounting
treatment for borrowing costs. According to this standard the financial statements should disclose:
The Accounting Policy for Borrowing costs.
The Amount of borrowing costs capitalized during the period.
ACCOUNTING STANDARD – 17: It deals with the accounting for
reporting financial information about the different types of products and services an enterprise products and the different geographical areas in which it operates.
ACCOUNTING STANDARD – 18: It deals with the accounting
requirements for disclosure of related party relationship and transactions between a reporting enterprise and its related parties. The statutes governing an enterprise often require disclosure in financial statements of transactions with certain categories of related parties like directors or key management personnel of an enterprise especially their remuneration and borrowings due to their fiduciary nature of the relationship with the enterprise.
ACCOUNTING STANDARD – 19: It deals with the accounting for
lessees and lessors, the appropriate accounting policies and disclosures in relation to finance leases and operating leases. ACCOUNTING STANDARD – 20: It deals with the accounting for the determination and presentation of earnings per share, which will improve comparison of performance among different enterprises for the same period and among different accounting periods for the same enterprise.
ACCOUNTING STANDARD – 21: It deals with the accounting for
preparation and presentation of consolidated financial statements.
ACCOUNTING STANDARD – 22: It deals with the accounting for
treatment of taxes on income.
ACCOUNTING STANDARD – 23: It deals with the accounting for
recognizing in the consolidated financial statements.
ACCOUNTING STANDARD – 24: It deals with the accounting for
reporting information about discontinuing operations, thereby enhancing the ability of users of financial statements to make projections of an enterprise’s cash flows, earnings – generation capacity, and financial position by segregating information about discontinuing operations from information about continuing operations. The standard is recommendatory in nature at present.
ACCOUNTING STANDARD – 25: It deals with the accounting for
minimum content of an interim financial report and also the principles for recognition and measurement in the financial statements for an interim period. According to this standard an interim period is a financial reporting period shorter than a full financial year. Interim financial report means a financial report containing either a complete set of financial statements (Balance Sheet, Profit & Loss Account, Cash Flow Statement and required notes) or a set of condensed financial statements (Condensed Balance Sheet, Condensed Profit and Loss Account, Condensed Cash Flow Statement and Selected explanatory notes). Condensed statements should include, at a minimum, each of the headings and sub-headings of the recent annual financial statements along with necessary information.
ACCOUNTING STANDARD – 26: It deals with the accounting
treatment for intangible assets that are not dealt with especially in another Accounting Standard. The standard requires an enterprise to recognize an intangible asset subject to fulfillment of certain conditions.
ACCOUNTING STANDARD – 27: It deals with the accounting for
interests in joint ventures and reporting of joint venture assets, liabilities, income and expenses in the financial statements of ventures and investors.
State whether the following statements are True or False
1. The Purpose of Accounting Standard-1 is to provide better
understanding of financial statements.
2. Accounting Standard-2 deals with the principles of inventory
valuation
3. Accounting Standard-6 deals with the accounting for
construction contracts.
4. Accounting Standard-10 deals with the accounting for fixed
assets.
5. Accounting Standard-14 deals with accounting for Government
grants.
6. Accounting Standard-15 deals with accounting for retirement
benefits of employees.
7. Accounting Standard-20 deals with accounting for consolidated
financial statements.
8. Accounting Standard-26 deals with accounting for intangible
assets. INTERNATIONAL ACCOUNTING STANDARDS
International Accounting Standards Committee (IASC) came into
existence on 29th June, 1973 when 16 accounting bodies from nine nations (called as founder members) signed the agreement and constitution for its formation. The committee has it headquarters at London.
The objective of the committee is “to formulate and publish in the
public interest standards to be observed in the presentation of audited financial statements and to promote their world wide acceptance and observance”. The formulation of such standards will bring uniformity in terminology, approach and presentation of results. This will not only help in a correct understanding and exchange of economic and financial but also in facilitating a smooth flow of international investment.
The committee has so far laid down standards regarding the
following matters:
IAS 1 Disclosure of accounting policies
IAS 2 Valuation and presentation of inventories
IAS 3 Consolidated financial statements
IAS 4 Depreciation accounting
IAS 5 Information to be disclosed in financial statements
IAS 6 Accounting responses to changing prices
IAS 7 Statement of changes in financial position.
IAS 8 Unusual and prior period items and changes in
accounting policies.
IAS 9 Accounting for research and development activities.
IAS 10 Contingencies and events occurring after balance sheet
date.
IAS 11 Accounting for construction contracts
IAS 12 Accounting for taxes on income
IAS 13 Presentation of current assets and current liabilities
IAS 14 Reporting of financial information by segments.
IAS 15 Information reflecting the effects of changing prices.
IAS 16 Accounting for property, plant and equipment.
IAS 17 Accounting for leases.
IAS 18 Revenue recognition.
IAS 19 Accounting for retirement benefits in the financial
statements of employers. IAS 20 Accounting for government grants and disclosure of government Assistance IAS 21 Accounting for effects of changes in foreign exchange rates.
IAS 22 Accounting for business combinations.
IAS 23 Accounting of borrowing costs.
IAS 24 Related party disclosures.
IAS 25 Accounting for investments.
IAS 26 Accounting and reporting of retirement benefit plans.
IAS 27 Consolidated financial statements and accounting for
investments in subsidiaries. IAS 28 Accounting for investment in associates.
IAS 29 Financial reporting in hyper-inflationary economics.
IAS 30 Disclosure in the financial statements of banks and
similar financial institutions
IAS 31 Financial reporting of interests in joint ventures.
IAS 32 Financial instruments: Disclosure and Presentation.
IAS 33 Earnings per share.
IAS 34 Interim Financial Reporting.
IAS 35 Discontinuing Operations.
IAS 36 Impairment of Assets
IAS 37 Provisions, Contingent liabilities and Contingent Assets.
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