Indian Accounting Standards

 Introduction of Accounting Standards

 Objectives of Accounting Standards
 Types of Accounting Standards
Introduction

Written Documents issued by Government or Regulatory Body In India, issued by

ICAI on 21st April,1977 Initiated by Kumar Mangalam Birla, chairman committee of
Corporate Governance for Financial Disclosures Also initiated by Chair person of
NACAS

Objectives

Standardize the diverse Accounting Policies Add the reliability to the Financial Statement
Eradicate baffling variation in treatment of accounting aspects Facilitate inter-firm and
intra-firm comparison

Accounting Standards in Different Nations

In India, 32 Accounting Standards as IAS under NACAS. As per International, there are
41 Accounting Standards called as IFRS Adopted by 8 countries in the world 70 to 80
countries planning to adhere IFRS Clause 50 added to the listing agreement mandatory

Evolution and Types of AS Accounting Standards

Initiation

1. AS 1 to AS 15 1979 to 1995

2. AS 16 to AS 29 2000 to 2007

3. AS 30 to AS 32 Later part of 2007

 AS 1-Disclosure of Accounting Policies- Specific policies adapted to prepare FS.

Should be disclosed at one place purpose

Better understanding of FS

Better comparison analysis

 AS 2- Accounting for Inventories- Used for computation of Cost of inventories and to

show in BS till it is sold
Consists of :- Raw Materials , Work in progress, Finished goods, Spares, etc
 Measurements of Inventories- Determination of Cost of Inventories. Cost of purchase
(Purchase price, duties & taxes, freight inwards). Cost of conversion.

Determination of Net realisable value Comparison of cost and net realisable

 AS 3- Cash Flow Statements Incoming and outgoing of cash Act as barometer to judge
surplus and deficit Explain Cash flow under 3 heads :-4. Cash flow from operating
activities5. Cash flow from financing activities6. Cash flow from investing activities
 AS 4- Contingencies and eventsoccurring after BS date For maintaining Provision of
Bad debts Generally uses Conservative concepts of Accounting like Bankruptcy, frauds
& errors.
 AS 5- Net profit or loss for the period,prior period items and change inAccounting
policies Ascertain certain criteria for certain items Include income and expenditures of
Financial year Consists of 2 component4. Profit and loss of ordinary activities5. Profit
and loss of extra ordinary activities
 AS 6- Accounting for Depreciation A non-cash expenditure Distribution of total cost
to its useful life Occurs due to obsolescence Different methods of computation5.
Straight line method ( SLM )6. Written-down value or diminishing value (WDV)
 AS 7- Construction Contract Contract specifically negotiated for construction of Asset or
combination of Assets closely inter-related
 AS 8- Accounting for R&D To deal with treatment of Cost of research and development
in the financial statements, identify items of cost which comprise R&D costs lays down
condition R&D cost may be deferred and requires specific disclosures to be made
regarding R&D costs.
 AS 9- Revenue Recognition Means gross inflow of cash and other consideration like
arising out of :-2. Sale of goods3. Rendering services4. Use of enterprise resources by
other yielding interest, dividend and royalities.
 AS 10- Accounting for Fixed Assets Called as Cash generating Assets Expected to used
for more than a Accounting period like land, building, P/M, etc Shown at either
Historical or Revalued value
 AS 11- Effect of change in FOREXRates Classification for Accounting treatment:-2.
Category I: Foreign currency transactions: a) buying and selling of goods or services b)
lending and borrowing in foreign currency c) Acquisition and disposition of assets6.
Category II: Foreign operations: a) Foreign branch b) Joint venture c) Foreign
Subsidiary10. Category III: Foreign Exchange contracts: a) For managing Risk/hedging
b) For trading and Speculation
 AS 12- Accounting for Govt. Grants Assistance provided by Govt. in cash or in kind
like2. Grants of Assets like P/M, Land,etc3. Grants related to depreciable FA4. Tax
exemptions in notified area
 AS 13- Accounting for Investments Assets held for earning incomes like dividend,
interest, rental for capital appreciation, etc It involves:-3. Classification of Investment4.
Cost of Investment5. Valuation of Investment6. Reclassification of Investment7. Disposal
of Investment8. Disclosure of Investment in FS
 AS 14- Accounting for Amalgamation Section 391 to 394 of Companies Act, 1956
governs the provision of amalgamation. Disclosures:3. Names and nature of
 amalgamating companies4. Effective date of amalgamation5. Method of Accounting
used6. Particulars of scheme sanctioned under a statute
 AS 15- Employees Benefits All forms of consideration given by enterprise directly to the
employees or their spouses, children or other dependants, to other such as trust, insurance
companies in exchange of services rendered.
 AS 16- Borrowing Costs Interest and cost incurred by an enterprise in connection to the
borrowed funds. Availed for acquiring building, installed FA to make it useable and
saleable.
 AS 17- Segment Reporting It consists of 2 segment:-2. Business segment3. Geographical
segment Information and different risk and return reporting.
 AS 18- Related party disclosure Related party are those party that controls or
significantly influence the management or operating policies of the company during
reporting period Disclosure:3. Related party relationship4. Transactions between a
reporting enterprises and its related parties.5. Volume of transactions6. Amt written off in
the period in respect of debts
 AS 19- Accounting for Leases Agreement between Lessor And Lessee Two types of
leases:3. Operating lease4. Finance lease Different from Sale Classification to be made
at the inception
 AS 20- Earning per share Earning capacity of the firm Assessing market price for
share AS gives computational methodology for determination and presentation of EPS 2
types of EPS
 AS 21- Consolidated Balance Sheet Accounting for Parent and Subsidiary company in
single entity Disclosure:-3. List of all subsidiaries4. Proportion of ownership interest5.
Nature of relation whether direct or indirect
 AS 22- Accounting for taxes andincome Tax accounted for period in which are
accounted It should be accrued and not liability to pay Deals in 2 measurements:-4.
Current tax5. Deferred tax
 AS 23- Accounting for investments inAssociates in CFS Objectives to set out principles
and procedures for recognizing the investment associates in CFS of the investors, so that
effect of investments in associates on financial position of group is indicated.
 AS 24- Discontinuing operations Establishes principles for reporting information about
discontinuing operations Covers discontinuing operations rather than discontinued
operation
 AS 25-Interim Financial Reporting (IFR) Reporting for less than a year i.e 3 months
Clause 41 says publish financial results on quarterly basis Objective is to provide
frequently and timely assessment
 AS 26- Intangible Assets No physical existence Can not be seen or even touched 3
featured as per AS4. Identifiable5. Non-monetary assets6. Without physical substance
 AS 27- Financial Reporting of interestin Joint Venture What is joint venture? Three
types of JV in case of Financial reporting
 AS 28- Impairment of Assets Weakening of Assets value Occurs when carrying cost
more than recoverable amt Carrying cost = Cost of assets –Accumulated Depreciation
 AS 29- Provision, contingent liabilitiesand assets Provisions:- It is a Liability Settlement
should result in outflow Liability is result of obligating event Contingent liabilities:-
 Obligation arises of past event Existence confirmed when actually occurred of uncertain
future Contingent Asset Same as Contingent liability
 Financial Instruments
 AS 30 – Recognition and Measurement
 AS 31 – Presentation
 AS 32 – Disclosures Has not been made mandatory (expected in 2009)

International accounting standards

 An Introduction
 Presentation of Financial Statements This standard deals with the presentation and
disclosure of accounts
 Inventories This standard deals with the valuation and disclosure of inventories and
related matters
 This standard is not followed any more. It is replaced by IAS – 27 and IAS – 28 This
standard was about consolidated financial statements
 This standard is not followed any more. It is replaced by IAS – 16 and IAS – 22 and IAS
– 38 The standard was about Depreciation
 This standard is replaced by IAS – 1 The standard was about information to be disclosed
in financial statements
 This standard is superseded by IAS – 15 The standard was about accounting responses to
changing prices
 Cash flow Statements This standard is related to the making of cash flow statement. It
includes the formats and methods allowed and disclosure needed
 Net Profit or Loss for the period, Fundamental errors and changes in accounting policies
The items related to Income Statement and changes in accounting policies and methods
 along with the errors which are categorized as fundamental errors are included in this
standard
 Superseded by IAS – 38 The standard was about research and development cost
 Events after the balance sheet date This standard is related to the issues that arise after the
completion of balance sheet but the effect reaches to past accounting record
 Construction Contracts This is a part of job order costing and several matters which arise
because of the extension of the contracts to more than one year are included in this
standard
 Income Taxes Income tax laws may be different in countries following these standards.
This standard discusses that how this matter is to be handled and how the effect of taxes
is to be shown in financial statements
 Superseded by IAS – 1 Presentation of current assets and current liabilities
 Segment Reporting This standard deals with the reporting the company’s performance
and position by segments i.e. by products, areas etc.
 Information reflecting the effects of changing prices This standard is related to the effect
of changing in prices and the impact on the organization
 Property, Plant and Equipment It deals with the issues related to the timing of recognition
of assets, their carrying amounts and depreciation charges
 Leases This standard prescribes for lesser and lessee the appropriate accounting policies
and disclosure
 Revenue This deals with the recognition of revenue i.e. time, amount and heads which
should or should not be included in the head.
 Employee Benefits This standard is related to the accounting and disclosure of employees
benefits. This contains the liability towards them and the expense related to them
 Accounting for government grants and disclosure of government assistance Whenever
there are any government grants and assistances those are to be accounted for and
disclosed in a specific manner the standards deals with such accounting and disclosure.
 The effects of changes in foreign exchange rates The enterprises dealing in foreign
currency or having operations in foreign countries both are discussed in this standard.
 Business Combinations The accounting and disclosure in case of acquisition and mergers
when an acquirer can not be identified are covered in this standard.
 Borrowing Costs The standard deals with the treatment of the borrowing cost i.e. whether
it should be expensed out in the year of occurrence or conditions in which this cost can be
capitalized.
 Related Party disclosures Enterprises which are directly or indirectly controlled by
reporting enterprises are considered related party and that is what is included in this
standard.
 Superseded by IAS – 29 and IAS - 30
 Accounting and reporting by retirement benefits plans It is applicable to those enterprises
where retirement benefit plans are prepared.
 Consolidated financial statements and accounting for investments in subsidiaries It is
related to the accounting presentation and disclosure of financial statements of group of
enterprises working under a parent company.
 Accounting for investments in associates This standard is related to the accounting for an
investor who has made investment in associated companies
 Financial Reporting in hyperinflationary economics This standard is only related to those
countries’ economies who have hyperinflationary economies
 Disclosure in the financial statements of banks and similar financial institutions The
standard is related to the accounting and disclosure needed in the statements of banks and
financial institutions
 Financial Reporting for interest in Joint Ventures This standard is related to recording the
assets, liabilities, income and expenses in the books of venturers and investors regardless
of the form of the joint venture
 Financial Instruments – Disclosure and Presentation The standard is related to all types of
financial assets i.e. recognized or unrecognized. The disclosure and presentation of such
financial assets is included in this standard.
 Earnings Per Share – EPS This standard is applied to those enterprises whose shares are
publicly traded and who are in the process of issuing ordinary shares.
 Interim Financial Reporting This standard does not mention that for which companies it
is mandatory to issues interim financial reports but those companies are required to
publish interim financial reports whose shares are publicly traded.
 Discontinuing Operations This standard applies to all discontinuing operations of all
enterprises
 Impairment of Assets This standard is applied to the impairment of all assets other than
those which are exempted the list is provided in the standard.
 Provisions, Contingent Liabilities and Contingent Assets All provisions, contingent
liabilities and assets are to be created and maintained in the accounts of a company in the
light of this standard.
 Intangible Assets Except a few exceptions this standard is applicable to all intangible
assets.
 Financial Instruments – Recognition and Measurement This is related to recognizing the
value, gain/losses on financial instruments
 Investment Property This standard is related to recognition measurement and disclosure
in investment property
 Agriculture – Effective January 1 2003 The standard is applied to biological assets
agricultural produce and products that are the result of agricultural activity.