Accounting Standards

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Session overview Every profession develops a body of

knowledge consisting of principles, which are considered as standard to be attained. Accounting is no exception. In India, the Institute of Chartered Accountants of India has developed Accounting Standards; based on the ‘generally accepted accounting standards’ to be used in preparation of financial statements.

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Session coverageDuring this session, we will learn: the importance of the accounting

standards in preparation of financial statements; and

application of AS 1 relating to ‘Disclosure of Accounting Policies’, and

application of AS 4 relating to ‘Events Occurring After the Balance Sheet Date’ for preparation of financial statements.

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Learning Objective At the end of the session, the learner will be

able to state the importance of Accounting Standards in the preparation of financial statements and application of AS 1 relating to ‘Disclosure of Accounting Policies’ and AS 4 relating to ‘Events Occurring After the Balance Sheet Date’ in the preparation of Financial Statements.

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Importance of Accounting Standards The users of the financial statements need an

assurance that the entities preparing their financial statements follow the accepted standards while presenting their financial information in the financial statements.

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LIST OF ACCOUNTING STANDARDS ISSUED SO FAR Institute of Chartered Accountants of India

has so far issued 29 Accounting Standards on the advise of the accounting Standards Board

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LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 1-Disclosure of Accounting PoliciesAS 2-Valuation of InventoriesAS 3-Cash flow StatementsAS 4-Contingencies and Events Occurring

After the Balance Sheet DateAS 5 -Net Profit or Loss for the Period,

Prior Period Items and Changes in Accounting Policies

AS 6-Depreciation AccountingRTI, Jaipur 7

LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 7-Accounting for Construction

ContractsAS 8-Accounting for Research and

DevelopmentAS 9-Revenue RecognitionAS 10-Accounting for Fixed AssetsAS 11-Accounting for the Effects of

Changes in Foreign Exchange RatesAS 12-Accounting for Government Grants

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LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 13-Accounting for InvestmentsAS 14-Accounting for AmalgamationsAS 15-Accounting for Retirement Benefits

in the financial Statements of EmployersAS 16-Borrowing CostsAS 17-Segment ReportingAS 18-Related Party DisclosuresAS 19-Leases

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LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 20-Earnings Per ShareAS 21-Consolidated Financial StatementsAS 22-Accounting for Taxes on IncomeAS 23-Accounting for Investments in

Associates in Consolidated Financial Statements

 AS 24-Discontinuing OperationsAS 25-Interim Financial Reporting

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LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 26-Intangible AssetsAS 27-Financial Reporting of Interests in

Joint VenturesAS 28-Impairment of AssetsAS 29-Provisions, contingent Liabilities and

Contingent Assets

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AS 1 – Disclosure of Accounting Policies

Fundamental Accounting Assumptions Accounting Policies

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Fundamental Accounting Assumptions Going concern Consistency Accrual

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Areas in which differing accounting Policies are encountered

Methods of depreciation, depletion and amortization;

Treatment of expenditure during construction;

Conversion or translation of foreign currency items;

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Areas in which differing accounting Policies are encountered

Valuation of inventories;

Treatment of goodwill;

Valuation of investments;

Treatment of retirement benefits;

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Areas in which differing accounting Policies are encountered

Recognition of profit on long-term contracts;

Valuation of fixed assets;

Treatment of contingent liabilities.

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Considerations in the selection of Accounting Policies Prudence Substance over formMateriality

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Accounting Standard-1All significant accounting policies

adopted in preparation and presentation of financial statements should be disclosed.

 he disclosure of significant accounting

policies as such should form part of the financial statement and the significant accounting policies should normally be disclosed in one place.  

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Accounting Standard-1        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.

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Accounting Standard-4This standard deals with treatment in

financial statements of:

Contingencies; and

Events occurring after the balance sheet date.

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Accounting Standard-4Does not apply to:(a)    Liabilities of life assurance and

general insurance enterprises arising from policies issued;

(b)   Obligations under retirement benefit plans; and

© Commitments arising from long-term lease contracts.

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Definitions A contingency is a

condition or situation, the ultimate outcome of which, gain or loss, will be known or determined only on the occurrence or non-occurrence of one or more uncertain future events.

Events after the balance sheet date are those significant events, both favourable and unfavourable, that occur between the balance sheet date and the date on which the financial statements are approved by the Board of Directors

represent material changes and commitments affecting the financial position of the enterprise

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