Accounting Standards

AS -1

 If the fundamental accounting concepts such as

• Going Concern

• Consistency

• Accrual System
Are followed then no specific disclosure is required but if any
of the above are not followed then such facts needs to be disclosed.
AS-2

 It classifies inventories as

• Raw Material and components

• Work in progress
• Finished goods
• Stores and spares

 AS-2 is not applicable to

• Work in progress arising out of construction contracts

• Work in progress arising in the ordinary course of business for
service providers
• Financial instruments held as stock in trade such as shares,
debentures etc
• Livestock, Agriculture & forest products, mineral oils, ores and
gas

 It requires the application of either FIFO or Weighted average

method for valuation of inventories.

AS-4
 The amount of contingent loss should be provided for in the
P&L Account if :

• Events occurring subsequent to the date of financial statements

confirm that an asset has been impaired or a liability has been
incurred on that date.
• A reasonable estimate of the resulting loss can be made

 AS-4 does not cover certain contingencies such as life assurance

and general insurance liabilities in respect of the policies issued
 AS-4 defines the events occurring after the balance sheet date
as those events that take place after the date on which the
balance sheet has been drawn up but before approval of the
financial statements by the approving authority

AS-5

 Prior period items are defined as the material charges or

credits which arise in the current period as a result of errors
or omissions in the preparation of the financial statements of
one or more periods

 The nature and amount of prior period items should be

separately disclosed in the current statement of profit and loss
so that the impact of these items on current profit /loss can be
easily assessed

 Extra ordinary items are defined as gains or losses arising

from transactions that are distinct from the ordinary activities
of the business and are both material and not expected to
recur frequently or regularly
  An organization can change an accounting policy only under
any of the following circumstances:
• If the adoption of a new accounting policy is require by the
statute.
• If the adoption of a new accounting policy to comply with
an accounting standard
• If the organization is of the opinion that the change would
result in a more appropriate presentation of the financial
statement

AS-6

 Applicable to all assets except the following

• Forests and plantations
• Wasting Assets
• Expenditure on research and development
• Goodwill
• Live stock
• Land

The amount of depreciation to be charged is determined on the

basis of the following three factors:
• Historical cost
• Expected useful life of the asset
• Estimated residual value of the depreciable asset
 Depreciable assets are the assets which :
• Are expected to be used during more than one accounting
period and
• Have a limited useful life and
• Are held by an enterprise for use in the production or
supply of goods and services, for rental to others, or for
administrative purposes and not for the purpose of sale in
the ordinary course of business.
AS – 9

 It is concerned with the recognition of revenue arising in the

course of the ordinary activities of the enterprise from :
• The sale of goods
• The rendering of services
• The use by others of enterprise resources yielding
interest, royalties and dividends

 The standard does not deal with

• Revenue arising from construction contracts
• Revenue arising from Hire purchase, lease agreements
• Revenue arising from government grants and other
similar subsidies
• Revenue of insurance companies arising from insurance
contracts.
 Conditions for recognizing revenue in case of sale of goods
• The property in goods is transferred for a price
• All significant risks and rewards have been transferred
and no effective control is retained.
• No significant uncertainty exists regarding the amount of
consideration
• It is reasonable to expect ultimate collection of
consideration
 Conditions for recognizing revenue in case of services
• Service is recognized either on completed service or
proportionate completion method
• No significant uncertainty exists regarding the amount of
consideration
• It is reasonable to expect ultimate collection of
consideration
 Conditions for recognizing revenue in case of interest, royalties
and dividend
o No significant uncertainty exists regarding the amount of
consideration
 o It is reasonable to expect ultimate collection of
consideration
 Basis of recognition
• Interest on Time proportion
• Royalty of accrual basis
• Dividend when owners right to receive payment is
established

AS-16

 Borrowing costs are interest and other costs incurred by an

enterprise in connection with the borrowing of funds. This
includes

o Interest and commitment charges on bank borrowings

o Amortization of discounts or premiums related to
borrowings
o Amortization of ancillary costs
o Finance charges in respect of assets acquired under finance
lease.
o Exchange difference arising from foreign currency
borrowings