Accounting Standards Board

Introduction:-

Accounting standards are those accounting principles which are made and recommended or enforced by any authority such as the Institute of Chartered Accountants of India(ICAI) or under any law such as the companies act 1956 or Income tax act

The ICAI has explained the basic concepts related to the accounting standards as follows:-

  • *Accounting standard board
  • *Format for accounting standards
  • *Compliance with accounting standards
  • *Needs for accounting standards
  • *Reduce variation in treatment
  • *Additional disclosures
  • *Facilitates comparison

Accounting standard board:-

The ICAI constituted an accounting standards board(ASB) in 1977. The main function of ASB is to operate and prepare accounting standards taking into consideration the Indian laws, customs, and business environment, the international accounting standards issued by the international accounting standards committee, the purposes and limitations of published final accounts, and the role of the auditors.

Format of Accounting standards:-

Following are the format of accounting standards

  • *Statement of concepts
  • *Fundamental Accounting principles
  • *Manner in which the accounting principles have been applied
  • *Formulating the standards
  • *Presentation and disclosure
  • *Class of concern
  • *Date from which the standard will be effective

Compliance with the accounting standards:-

A chartered accountant has to ensure that the accounts audited by him comply witht the accounting standards or to report on non-compliance if any. In the initial years, the standards were recommendatory; however, in course of time, many have been made compulsory (mandatory).

Needs for accounting standards:-

The Accounting standard seeks to describe the accounting principles the valuation techniques and the methods of applying the accounting principles in the preparation and presentation of financial statements so that they may give a true and fair view.

Reduce variation in treatment:-

Standards reduce to a reasonable extent or determine altogether confusing variations in the accounting treatments used to prepare financial statements.

Additional Disclosures:-

There are certain areas where important information is not statutorily required to be disclosed. Standards may call for disclosure beyond that required by law

Facilitate comparison:-

The application of accounting standards would, to a limited extent, facilitate the comparison of financial statements of companies situated in different parts of the world and also of different companies situated in the same country.

Accounting standards:-

Accounting standards AS(issued till now)
-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
-AS 7 Accounting for Construction Contracts
-AS 8 Accounting for Research and Development (withdrawn)
-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
-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 cost
-AS 17 segment Reporting
-AS 18 Related party disclosures
-AS 19 Leases
-AS 20 Earning 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
-AS 26 Intangible assets
-AS 27 Financial reporting of interest in joint ventures
-AS 28 Impairment of assets
-AS 29 Provisions, contingent liabilities, and contingent assets
-AS 30 Financial instruments: Recognition and measurement
-AS 31 Financial instruments: Presentation
-AS 32 Financial instruments: Disclosures

The council of the institute of chartered accountants of India has so far issued 32 accounting standards. However, AS 8 on accounting for research and development has been withdrawn consequent to the issuance of AS 26 on intangible assets

Mandatory accounting standards:-

In assessing whether an accounting standard is applicable one must find the correct answer to the following three questions:-

*Does it apply to the enterprise concerned
*Does it apply to the financial statement concerned
*Does it apply to the financial item concerned

The preferences to the statements of accounting standards answer the above questions:-

-Commercial, business, industrial enterprise
-Enterprise mandated to apply accounting standards by law
-Listed companies
-Insurance companies
-Enterprise not mandated to apply accounting standards by law
-Compliance with income-tax law
-Compliance with the law
-Material items

IND AS 23 stands for Borrowing cost

The qualifying asset are given below:-

°Inventories
°Manufacturing plants
°Intangible assets
°Power generation facilities
°Investment properties

The non-qualifying asset is given below:-

°Financial assets
°Inventories that are manufactured
°Inventories that are produced
°Asset that are ready to use or for sale when acquired

Indian accounting standard (Ind AS 23) Borrowing cost is applied in accounting for borrowing cost.

Capitalization begins when an entity meets all of the following conditions:-

-Expenditure for the asset
-Borrowing cost is incurred
-Prepare the asset for use

General information about segments profit/loss, assets/liabilities, basis of measurement

-Revenues from external customers
-Revenue from transactions with other operating segments of the same entity
-Interest revenue
-Interest expense
-Depreciation
-Amortisation
-Material items of income and expense
-Entity interest in the profit or loss of associates and joint
-Ventures accounted for by the equity method
-Income tax expense
-Income
-Material non-cash items other than depreciation and amortization

Reconciliation:-

-Total of the reportable segment’s revenues to the entity revenue
-Total of the reportable segments measurement of profit and loss
-Total of the reportable segments’ assets to the entity assets
-Total of the reportable segments liabilities to the entity liabilities
-Total of the reportable segments amount for every other material item of information

Value and valuation:-
-Value
-Price value
-Cost value
-Standard of value
-Book value
-Market value
-Economic value
-Valuation
-Basis of valuation
-Premise of valuation

Contents of CFS:-

-Consolidated balance sheet
-Consolidated statements of profit and loss
-Notes, other statements, and explanatory material that form an integral part thereof
-Consolidated cash flow statement

Steps in consolidation vide AS 21:-

1)Eliminate parents cost of investment and portion of equity share
2)Calculate goodwill
3)Capital reserve arising on investment
4)Calculate minority interest
5)Analyse profits of the subsidiary into profits before and after the acquisition
6)Make intra group adjustments
7)Treatment of investment
8)Consolidate profit and loss statements
9)Hamonise Reporting dates
10)Harmonise Accounting policies

Consolidated profit and loss statement:-
a]From the date of control
b]Till the date of cessation of control
c]Cumulative preference dividend
d]Profit and loss on disposal of investment
e]Notes in CFS

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