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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 coverage• During 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 Policies• AS 2-Valuation of Inventories• AS 3-Cash flow Statements• AS 4-Contingencies and Events Occurring After

the Balance Sheet Date• AS 5 -Net Profit or Loss for the Period, Prior

Period Items and Changes in Accounting Policies• AS 6-Depreciation Accounting

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LIST OF ACCOUNTING

STANDARDS ISSUED SO FAR • AS 7-Accounting for Construction Contracts• AS 8-Accounting for Research and Development• AS 9-Revenue Recognition• AS 10-Accounting for Fixed Assets• AS 11-Accounting for the Effects of Changes in

Foreign Exchange Rates• AS 12-Accounting for Government Grants

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LIST OF ACCOUNTING

STANDARDS ISSUED SO FAR • AS 13-Accounting for Investments• AS 14-Accounting for Amalgamations• AS 15-Accounting for Retirement Benefits in the

financial Statements of Employers• AS 16-Borrowing Costs• AS 17-Segment Reporting• AS 18-Related Party Disclosures• AS 19-Leases

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LIST OF ACCOUNTING

STANDARDS ISSUED SO FAR • AS 20-Earnings Per Share• AS 21-Consolidated Financial Statements• AS 22-Accounting for Taxes on Income• AS 23-Accounting for Investments in

Associates in Consolidated Financial Statements

•  AS 24-Discontinuing Operations• AS 25-Interim Financial Reporting

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LIST OF ACCOUNTING

STANDARDS ISSUED SO FAR • AS 26-Intangible Assets

• AS 27-Financial Reporting of Interests in Joint Ventures

• AS 28-Impairment of Assets

• AS 29-Provisions, contingent Liabilities and Contingent Assets

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Accounting Standard (AS 1) – Disclosure of Accounting

Policies

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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-1

All 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 (AS) 4 - Contingencies and Events

Occurring After the Balance Sheet Date

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Accounting Standard-4

• This standard deals with treatment in financial statements of:

Contingencies; and

Events occurring after the balance sheet date.

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Accounting Standard-4

• Does 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