Accounting Standards

Introduction
• Traditional Business:
• Manufacturing
• Trading in Goods and merchandise
• New Businesses:
• Software Development
• Banking
• Insurance
• E-Commerce
• Different Practices and Policies being followed, it is difficult to make a
comparison between the results of two entities or enterprises
Example
Particulars X Ltd (Rs.) Y Ltd (Rs.)

Net Profit (before Depreciation) 5,00,000 5,00,000

Depreciation by Straight Line Method 2,00,000 --

Depreciation by Written Down Value Method -- 3,00,000

Net Profit (after Depreciation) 3,00,000 2,00,000

Accounting Standard Board (ASB)
• ASB was constituted to harmonise the diverse accounting policies and
practices
• The main function of ASB is to formulate Accounting Standards (AS)
• ASB after due discussion and deliberation formulates the Accounting
Standards
• Before issuing the AS, gives due consideration to International
Accounting Standards and tries to intergrate them to the extent
possible in the light of conditions and practices prevailing in India
Applicability of Accounting Standards
• Accounting Standard are used in the presentation of the General
Purpose Financial Statements issued to the public
• The responsibility of preparation of financial statements are for
adequate disclosure is that of the management of the enterprises
• These financial statements duly approved by the management are
audited by Statutory Auditors.
• AS issued by ICAI:
• Partnership Firms/ LLP
• Ministry of Corporate Affairs (MCA)
• Limited Companies
Scope of Accounting Standards
• AS are issued with the provisions of:
• Applicable Laws
• Customs
• Usage
• Business Environment of India
• AS are intended to apply only to items which are MATERIAL
• AS comes into effect from PARTICULAR DATE
Procedure of Issuing AS
• ASB determines the broad areas in which AS need to be formulated
and the priority
• It holds dialogues with the representatives of the government, PSUs,
Industry etc.
• Exposure Draft (ED) of the proposed standard will be prepared and
issued to public at large for comments.
• The draft contains:
• Definitions of the terms used therein
• Manner in which the accounting principles, for which the standard is issued are to
be applied
• Presentation and disclosure requirements in complying with the standards
• Class of enterprises to which the standard will apply and the date from which the
standard will be effective
• After taking consideration comments received the draft of the proposed
standard will be finalized and submitted to the Council of ICAI.
• The Council of ICAI considers the final draft of the proposed standard and
after modification, if any issue the same
Compliance with the Accounting Standards
• Accounting Standard are recommendatory in character and wide
publicity
• The ICAI has made it mandatory for its members to ensure that the AS
are implemented in the preparation and presentation of Financial
Statement
List of Accounting Standards

AS 1 Disclosure of Accounting Policies AS 13 Accounting for Investment

AS 2 Valuation of Inventories AS 14 Accounting for Amalgamation
AS 3 Cash Flow Statements AS 15 Accounting for Retirement Benefits in the
financial Statements of employers
AS 4 Contingencies and events occurring after the AS 16 Borrowing Costs
Balance Sheet Date

AS 5 Net Profit or Loss for the period items and AS 17 Segment Reporting
Changes in Accounting Policies

AS 6 Deleted (Depreciation Accounting) AS 18 Related Party Disclosure

AS 7 Accounting for Construction Contracts AS 19 Leases
AS 9 Revenue Recognition AS 20 Earnings per Share
AS 10 Property, Plant and Equipment AS 21 Consolidated Financial Statement
AS 11 Accounting for effects in changes in foreign AS 22 Accounting for taxes on income
exchanges rates

AS 12 Accounting for Government Grants AS 23 Accounting for investments in associates in

Consolidated Financial Statements
AS 24 Discounting Operations AS 27 Financial Reporting in
interests in Joint Venture
AS 25 Interim Financial AS 28 Impairment of Assets
Reporting
AS 26 Intangible Assets AS 29 Provisions, Contingent
Liabilities and Contingent
Assets

Of the above AS 1, AS 6, AS 9 and AS 10 are prescribed in the syllabus

Accounting Standard 1 (AS – 1)
Disclosure of Accounting Policies
• Introduction
• Fundamental Accounting Assumptions
• Going Concern
• Consistency
• Accrual
• What are Accounting Policies
• The number of acceptable alternative accounting principles are
eliminated, it is normally not possible in view of the different
environment and circumstances faced by the enterprises
• Consideration in selection of Accounting Policies
• Important consideration in regard to the above selection are:
• Prudence
• Substance over form
• Materiality
• Disclosure of Accounting Policies
Accounting Standard 6 (AS-6)
Depreciation Accounting
NOTE: AS-6 Depreciation Accounting has been deleted and paragraphs therin
have been incorporated into AS - 10 ‘Property, Plant and Equipment’. This
revised AS – 10 has come into effect from the accounting year beginning on 1st
April 2016 for Companies and from the accounting year beginning on 1st April
2017 for entitles other than Companies.

The provisions related to depreciation are therefore included in the discussion

of AS 10