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Accounting Standards
Introduction: The use of the word standard in accounting literature is of a recent origin what is
described as standard today, used to be generally known as principles a few years ago. The British introduced the term standards in place of principles. We know that financial statements are prepared to summarize the end-result of all the business activities by an enterprise during an accounting period in monetary terms. To compare the financial statements of various reporting enterprises poses some difficulties because of the divergence in the methods and principles adopted by these enterprises in preparing their financial statements. In order to make these methods and principles uniform and comparable to the extent possible standards are evolved and today there exist different sets of accounting standards which are followed by different countries mean to say respective countries use their own standards for accounting practice
Accounting Standards: Accounting Standards are the statements of code of practice of the regulatory
accounting bodies that are to be observed in the preparation and presentation of financial statements. Bromwich defines accounting standards as uniform rules for financial repo rting applicable either to all or to a certain class of entity promulgated by what is perceived of as predominantly an element of the accounting community specially created for this purpose. Standard setters can be seen as seeking to prescribe a preferred an accounting treatment from the available set of methods for treating one or more accounting problems. Other policy statement by the profession will be referred to as recommendation. Accounting standards deal mainly with financial measurements and disclosures used in producing a set of fairly presented financial statements. In this respect, accounting standards can be thought of as a system of measurement and disclosure. Without standards, comparisons between companies would be difficult. Objectives of Accounting Standards The basic objective is to remove variations in the treatment of several accounting aspects and to bringing standardization in presentation. They intent to harmonize the diverse accounting policies followed in the preparation and presentation of financial statements. They intent to standardize the diverse accounting policies and practices with a view to eliminate to the extent possible the non-comparability of financial statements and the reliability to the financial statements.
BY: VIKRAM.G.B Lecturer, P.G Dept of Commerce Vivekananda Degree College, Bangalore-55
2. Benefits to accountants and auditors: Accountants and auditors with the passage of time and a changing climate of opinion, have to work in an environment where they face the threat of stern sanctions and bad name to their profession. These result partly from changed penalties and remedies available under the company law and partly from the greater willingness of aggrieved parties and to take their causes before the courts. Given the increasing risks, the accounting profession realized that it needed to know what accounting standards are to prevail. Thus, accounting standards are beneficial to the business enterprises as well as accountants and auditors. 3. Determining managerial accountability: Accounting standards facilitate in determining specific corporate accountability and regulation of the company and thus help in measuring the effectiveness of managements stewardship. They help in assessing managerial skill in maintaining and improving the profitability of the company, they depict the progress of the progress of the company, its solvency and liquidity and generally they are important factors increasing the effectiveness of managements performance of its duties and of its leadership. 4. Reform in accounting theory and practice: Financial accounting has lacked, especially in the past, a coherent logical conceptual framework and structure for accounting measurements, financial reporting objectives and substantiated evidence on accounting practices and usefulness of accounting data. This encouraged the emerging intelligent of accounting to develop accounting theories, to improve existing practices or to rectify their defects.
Another classification of accounting standards may be based upon their method of preparation and enforcement. Such standards are: Evolutionary and voluntary compliance standards: Such standards have evolved as best practices and represent the conventional approach to accounting. As such, their general acceptability implies voluntary compliance by individual companies. Privately set standards: Private accountancy bodies may formulate standards and devise means for their enforcement. Other bodies such as trade associations or stock exchanges may set accounting standards for companies as a condition of membership or listing. Government standards: These standards may be laws relating to company accounting practices and disclosure, as in the case of the Indian Companies Act or tax rules defining taxable profit. The two classifications mentioned are complementary and not competitive. An important question with regard to standard setting is deciding whether standards should be set by government or a private sector body or a government backed agency.
BY: VIKRAM.G.B Lecturer, P.G Dept of Commerce Vivekananda Degree College, Bangalore-55
1. If government as a Standard Setter: It is argued that government should act as standard setter because government would be free of conflicts of interest. It can better enforce compliance with accounting standards in that it is backed by the enforcement power of law. Finally, government would act more quickly on pressing problems. 2. If private sector body as Standard setter: Certain opinions have also been advanced for giving standard setting task to private sector body because firstly, it is argued that government could neither attract enough high quality talent nor devote sufficient resources to standard setting. Secondly, government would be susceptible to undue political influence from special influence groups. Finally, a private sector body would be more responsive to the needs of diverse interests. 3. If some agency is involved in standard setting: Both government and private sector body have their own advantages and disadvantages as well. So in this situation it appears a governmental agency may prove useful as compared to standard setting in public and private sector.
BY: VIKRAM.G.B Lecturer, P.G Dept of Commerce Vivekananda Degree College, Bangalore-55
ICAI: The institute of chartered accountants of India on April 21, 1975 established accounting standard board. The main function assigned to the ASB was to formulate accounting standards from time to time. However ICAI with ASB is carrying a good work of formulation and issuance of accounting standards. The Institute of Chartered Accountants of India (ICAI) is a statutory body established under the Chartered Accountants Act, 1949 (Act No. XXXVIII of 1949) for the regulation of the profession of chartered accountancy in India. Accounting Standard and SEBI: Securities and Exchange Board of India was established in 1982 and it deals with the formulation of laws, by laws, rules and amendments for the purpose of giving smooth and strong support to stock market. SEBI also focuses on protecting to interest of investor. Accounting Standard and Income Tax Act 1961: Section 145 of the income tax Act 1961 deals with the method of accounting to be adopted for computing the income under the head of Profit and gains from business and Profession. The finance Act 1995 had amended section 145 w.e.f. from 1 st April 1997. Accounting standard and company law: Accounting standards and company bill 1997, 415(2) of the companys bill 1999 now (withdrawn) proposed prescription of accounting standard by the central government in consultation with the national Advisory committee on Accounting Standards (NACAS) established with sub- clause of the clause 415, companies bill 1997 defines Accounting Standards to means standards of Accounting recommended by the institute of chartered Accountants on India constituted under the chartered Accountants Act 1949 as may be prescribed by the control government in consultations with NACAS, established under sub-section (1) of the clause 415, companies bill 1997 define.
BY: VIKRAM.G.B Lecturer, P.G Dept of Commerce Vivekananda Degree College, Bangalore-55
Meeting with the representatives of specified outside bodies to ascertain their views on the draft of the proposed Accounting Standard. Finalization of the Exposure Draft of the proposed Accounting Standard on the basis of comments received and discussion with the representatives of specified outside bodies. Issuance of the Exposure Draft inviting public comments. Consideration of the comments received on the Exposure Draft and finalization of the draft Accounting Standard by the ASB for submission to the Council of the ICAI for its consideration and approval for issuance. Consideration of the draft Accounting Standard by the Council of the Institute, and if found necessary, modification of the draft in consultation with the ASB. The Accounting Standard, so finalized, is issued under the authority of the Council.
ACCOUNTING STANDARDS ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA IS AS BELOW: AS 1: AS 2: AS 3: AS 4: AS 5: AS 6: AS 7: AS 8: AS 9: AS 10: AS 11: AS 12: AS 13: AS 14: AS 15: AS 16: AS 17: AS 18: AS 19: Disclosure of accounting policies. Valuations of Inventories. Cash Flow Statements Contingencies and events occurring after the Balance Sheet Date. Net Profit or loss for the period, Prior period items and Changes in accounting Policies. Depreciation accounting Construction Contracts. Accounting for Research and Development. Revenue Recognition Accounting For Fixed Assets. The Effect of Changes In Foreign Exchange Rates. Accounting For Government Grants. Accounting for Investments. Accounting For Amalgamation. Employee Benefits. Borrowing Cost. Segment Reporting. Related Party Disclosures. Accounting For Leases.
BY: VIKRAM.G.B Lecturer, P.G Dept of Commerce Vivekananda Degree College, Bangalore-55
AS 20: AS 21: AS 22: AS 23: AS 24: AS 25: AS 26: AS 27: AS 28: AS 29: AS 30: AS 31: AS 32:
Earning Per Share. Consolidated Financial Statement. Accounting For Taxes on Income. Accounting for Investment in associates in Consolidated Financial Statement. Discontinuing Operation. Interim Financial Reporting. Intangible assets. Financial Reporting on Interest in joint Ventures. Impairment Of assets. Provisions, Contingent, liabilities and Contingent assets. Financial instrument, Financial Instrument: presentation. Financial Instruments, Disclosures and to accounting standards. Limited revision
BY: VIKRAM.G.B Lecturer, P.G Dept of Commerce Vivekananda Degree College, Bangalore-55