Introduction

• Accounting standards are authoritative

standards for financial reporting and are
the primary source of generally accepted
accounting principles (GAAP).
Accounting standards specify how
transactions and other events are to be
recognized, measured, presented and
disclosed in financial statements.
 Objectives
The basic objective of Accounting Standards
is to remove variations in the treatment of
several accounting aspects and to bring
about standardization in presentation.
They intent to harmonize the diverse
accounting policies followed in the
preparation and presentation of financial
statements by different reporting
enterprises so as to facilitate intra-firm and
inter-firm comparison
 Introduction of AS-1
• This Standard deals with the disclosure of
significant accounting policies followed in
preparing and presenting financial
statements.
• The disclosure of some of the accounting
policies followed in the preparation and
presentation of the financial statements is
required by law in some cases.
Certain fundamental accounting assumptions
underlie the preparation
and presentation of financial statements
• Going Concern
• Consistency
• Accrual
As per AS-1 accounting polices are specific
accounting principles adopted by the
enterprise in preparation and presentation
of financial statements.
What are the significant accounting
polices
• Method of depreciation
• Valuation of tangible and intangible assets.
• Valuation of inventories
• Employees stock option
• Contingent liability
• Tax liability
• provisioning
• Treatment of retirement benefits
Investments : current investments are
valued at lower of than fair value, and long
term investments at cost.
Retirement benefits: monthly contributions
to provident funds, gratuity, pension should
be charged against revenue. All
contributions in respect of employee
retirement benefit should be statutorily
deposited to government.
Foreign currency transactions: should be
recorded at exchange rate prevailing at that
date. Gains/ losses of fluctuations should
be recognized in profit & loss account.
Lease rentals: equipment taken on lease ,
rentals payable are segregated into cost of
assets and interest component by applying
IRR method.
 Main Principles
• All significant accounting policies adopted
in the preparation and presentation of
financial statements should be disclosed.
• The disclosure of the significant
accounting policies as such should form
part of the financial statements.
• Any change in the accounting policies which has
a material effect in the current period or which is
reasonably expected to have a material effect in
later periods should be disclosed.

• It would be helpful to the reader of financial

statements if they are all disclosed as such in
one place instead of being scattered over
several statements, schedules and notes.
 To summarize
• All significant accounting policies adopted
in the preparation and presentation of
financial statements should be disclosed.
• The disclosure of the significant
accounting policies as such should form
part of the financial statements and the
significant accounting policies should
normally be disclosed in one place.
• Any change in the accounting policies which has
a material effect in the current period or which is
reasonably expected to have a material effect in
later periods should be disclosed.
• If the fundamental accounting assumptions, viz.
Going Concern, Consistency and Accrual are
followed in financial statements, specific
disclosure is not required. If a fundamental
accounting assumption is not followed, the fact
should be disclosed.