Session 2019-2020

ACCOUNTING STANDARDS SETTING

PROCESS IN INDIA

BAM 703

Seminar & Group Discussion

Presented to: Presented By:

Prof. Pramod Kumar Abhishek Jain
(Course Teacher) Akrati Agarwal
Aman Singh

DAYALBAGH EDUCATIONAL INSTITUTE

(Deemed university)
Dayalbagh, Agra

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 CONTENTS
S.N Particulars Page
o No.

1 Introduction 3
2 Standards Setting Bodies In India 3-4

3 India’s Standing Committee On International Financial 4

Standards And Codes

4 Advisory Groups In India 5

5 Standards Set By ASB 5-6

6 Existing Procedure For Setting Standards 6-9

7 List Of Accounting Standards Issued By ASB Of ICAI 10-11

8 Conclusion 12

9 Defined Role 12

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 INTRODUCTION
ICAI, the most important accounting body in India, has constituted the Accounting
Standards Board (ASB) in 1977. Accounting Standard Setting and Issuing procedure
is initiated by the ICAI and it is fully:

 Consultative (Advising) and

 Transparent

In the Standard Setting process ASB will consider the following International
Standards while drafting the Standard.

1. International Accounting Standards (IAS)

2. International Financial Reporting Standards (IFRS)

And finally ICAI will incorporate them in our

 Applicable Laws,

 Customs,

 Usages & Business Environment.

Council of ICAI doesn’t have any power to amend the Draft of the Accounting
Standard formulated by the ASB without its consent. Hence, ASB has independent
power to formulate the Accounting Standard.

Standards Setting Bodies in India:

In India, we have standard setting bodies which are, in practice, the national
regulators, who have the legal authority to set and implement regulatory rules and
procedures in the financial sector. For example..,

 the Reserve Bank of India (RBI) is responsible for regulation and supervision
of banks and other financial institutions and money, foreign exchange and
Government securities markets.
 The Securities and Exchange Board of India (SEBI) is charged with the duty
to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market by measures as it deems
fit.
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  The Insurance Regulatory and Development Authority (IRDA) is entrusted
with the task of protecting the interests of the policy holders, to regulate,
promote and ensure orderly growth of the insurance industry
 The Ministry of Corporate Affairs, provides legal framework for
incorporation and proper functioning of companies, surveillance over the
working of corporate sector to ensure financial health and compliance with
statutory provisions, prescribing cost audit rules and appointment of cost
auditors, investigation of complaints, coordination with other regulatory bodies
such as other Government departments and autonomous institutions like SEBI,
RBI, ICAI, Institute of Company Secretaries (ICS) and Institute of Cost and
Works Accountants of India (ICWAI)

Further, we have self-regulatory organizations such as the Indian Banks

Association (IBA), Fixed Income Money Market and Derivatives Association of
India (FIMMDA), Association of Merchant Bankers of India (AMBI),
Association of Mutual Funds of India (AMFI), Foreign Exchange Dealers
Association of India (FEDAI), Primary Dealers Association of India (PDAI),
clearing house associations and stock exchanges, among others, which play a
critical role in developing codes of conduct and setting and maintaining standards for
different segments of the financial system with a view to promoting and protecting
interests of institutions, investors and depositors in India.

India’s Standing Committee on International Financial

Standards and Codes:

to promote and assist in the task of adoption and implementation of International

Financial Standards in India, a Standing Committee on International Financial
Standards and Codes was set up on December 8, 1999.

The Committee has been entrusted with the task of monitoring developments in global
standards and codes being evolved by standards setting bodies as part of the effort to
create a sound international financial architecture and to consider all aspects of
applicability of these standards to Indian Financial System.

The Committee is also assigned with the task of periodically reviewing the progress in
regard to the codes and practices and making available its reports to all concerned
organisations in public and private sectors with an aim of sensitizing public opinion
and creating awareness for the concerned subject areas.

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 Advisory Groups in India:
To assist the Standing Committee, Advisory Groups were constituted in different
areas of the financial system under the Chairmanship of eminent experts

The Advisory Groups had, in general, the following terms of reference:

(i) To study present status of applicability and relevance and compliance of relevant
standards and codes,

(ii) To review the feasibility of compliance and the time frame over which this could
be achieved given the prevailing legal and institutional practices,

(iii) To compare the levels of adherence in India in industrialised and also emerging
economies particularly to understand India’s position and prioritise actions on some of
the more important codes and standards, and

(iv) To chalk out a course of action for achieving the best practices.

Standards set by ASB:

Recognising the need to harmonies the diverse accounting policies and practice in
India and keeping in view the international development in the field of accounting, the
Institute of Chartered Accountants of India constituted the Accounting Standards
Board (ASB) in April 1977.

The ASB is entrusted with the following functions:

(1) To formulate accounting standards which may be established by the Council of

ICAI in India. While formulating standards, the ASB is required to take into
consideration the applicable laws, customs and usages and business environment; it is
also required to give due consideration to International Accounting Standards issued
by IASC and to integrate them, to the extent possible, in the light of the conditions and
practices prevailing in India.

(2) To propagate the Accounting Standards and persuade the concerned parties to
adopt them in the preparation and presentation of financial statements.

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(3) To issue guidance notes on the Accounting Standards and give clarifications on
issues arising therefrom.

(4) To review the Accounting Standards at periodical intervals.

The date from which a particular standard will come to effect, as well as the class of
enterprises to which it will apply, will also be specified by the Institute. Unless
otherwise stated, no standard will have retrospective application.

Normally before formulating the standards, ASB will hold discussions with the
representatives of the Government, Public Sector Undertakings, Industry and other
organisations, for ascertaining their views.

An exposure draft of the proposed standard will be prepared and issued for comments
by members of the Institute and the public at large. After considering the comments
received, the draft of the proposed standard will be finalised by ASB and submitted to
the Council which will study it, modify it if necessary and issue it under its own
authority.

Existing Procedure for Setting Standards:

The existing procedure for formulating and issuing accounting standard
followed by the Accounting Standards Board of the ICAI is as follows:

STEP 1:

ASB determines the broad areas in which Accounting Standards need to be formulated
and the priority with regard to issuance thereof. In other words, ASB Identify the area
where the Accounting Standard to be formulated or amended as of today accounting
needs of the Industry

STEP 2:

In the preparation of Accounting Standard, ASB is assisted by Study Groups

constituted to consider specific subjects. In the formation of Study Groups, provision
is made for wide participation by the members of the Institute and others. ASB will
constitute Study Groups, which will prepare the Preliminary Draft that includes

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  Objective & Scope of Proposed Accounting Standard.
 Definition of the Terms used in the Standard.
 Recognition & Measurement of Accounting Principles, and where such
principles are applicable.
 Presentation and disclosure requirements of the Accounting Standard.

The Preliminary Draft prepared by the Study Group will be deliberated (carefully

consider) by the ASB.

STEP 3:

The Board considers the draft as submitted by the study group and finalizes the same
for issue to all members of the Council of the ICAI as well as to the bodies listed
below for their comments.

Bodies are:
Associated Chambers of Commerce and Industry, Federation of Indian
Chambers of Commerce and Industry, Institute of Cost and Works Accountants of
India, Standing Conference of Public Enterprises, Institute of Company Secretaries of
India, Central Board of Direct Taxes, Department of Company Affairs, Comptroller
and Auditor General of India, Reserve Bank of India, Indian Banks’ Association,
Securities and Exchange Board of India, Confederation of Indian industries.

STEP 4:

ASB holds a meeting with the representatives of specified outside bodies listed above
to ascertain their views.

STEP 5:

On the basis of the comments received from the Council members as well as the
outside bodies, the Board finalizes the Exposure Draft and exposes it for public
comments.

 To all members of the profession through the medium of their Journal.

 To principal Chambers of Commerce and Industry through direct
communications.
 To all recognised Stock Exchanges through direct communication.
 To the Institute of Cost and Works Accountants of India through direct
communication.

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  To the Institute of Company Secretaries of India through direct
communication.
 To the Ministry of Corporate Affairs, Central Board of Direct Taxes and
the Comptroller and Auditor General by direct communication.
 To principal financial institutions, Reserve Bank of India, Life Insurance
Corporation, General Insurance Corporation, Unit Trust of India and
Indian Banks’ Association by direct communication.
 To all Regional Councils and Branches of the ICAI by direct
Communication.
 To all Council Members.
 To Securities and Exchange Board of India by direct communication.

STEP 6:

After taking into account the comments received from various quarters, the draft of
the proposed standard is finalised by the Board and submitted to the Council for its
consideration. Means, Exposure Draft will be issued in public and the comments of
the public will be considered.

STEP 7:

After consideration of the public comments Exposure Draft will be forwarded to

the Council of ICAI for approval.

STEP 8:

Council of ICAI will verify the Final Draft if any alteration is to be done then the
draft will be modified with the consent of ASB.

STEP 9:

Finally, the Accounting Standard will be on issued on the specified area where it need
was found by the ICAI. The Council of the Institute considers the final draft of the
proposed Standard, and if necessary, modifies the same in consultation with ASB.

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The Accounting Standard on the relevant subject is then issued under
the authority of the Council.

The Advisory Group on Accounting and Auditing set up by Reserve Bank of India in
its report (January 2001) has proposed the following procedure for standard setting in
India.

Existing Standards:

In India, the Accounting Standards Board (ASB) of the Institute of Chartered

Accountants of India (ICAI) is responsible for setting Accounting Standard (AS).

The ASB comprises members of the Central Council of ICAI as well as certain
members from the professional, industry and various other segments and government
agencies.

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 List Of Accounting Standards Issued By ASB Of ICAI
The ASB of ICAI has issued 32 accounting standards so far. The list of accounting
standards issued is given hereunder:

1. AS-1 Disclosure of Accounting Policies.

2. AS-2 (Revised), Valuation of Inventories.

3. As-3 (Revised) Cash Flows Statements.

4. AS-4 (Revised) Contingencies and Events Occurring after the Balance Sheet Date.

5. AS-5 (Revised) Net Profit or Loss for the Period, Prior Period Items and Changes in
Accounting Policies.

6. AS-6 (Revised) Depreciation Accounting.

7. AS-7 (Revised) Accounting for Construction Contracts.

8. AS-8 Accounting for Research and Development. (Withdrawn and included in

AS26)

9. AS-9 Revenue Recognition.

10. AS-10 Accounting for Fixed Assets.

11. AS-11 (Revised) Accounting for the effects of changes in Foreign Exchange
Rates.

12. AS-12 Accounting for Government Grants.

13. AS-13 Accounting for Investments.

14. AS-14 Accounting for Amalgamations.

15. AS-15 Employee Benefits (Revised) 2005.

16. AS-16 Borrowing Costs.

17. AS-17 Segment Reporting.

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18. AS-18 Related Party Disclosures.

19. AS-19 Leases.

20. AS-20 Earnings per Share.

21. AS-21 Consolidated Financial Statements.

22. AS-22 Accounting for Taxes on Income.

23. AS-23 Accounting for Investments in Associates in Consolidated Financial

Statements.

24. AS-24 Discontinuing Operations.

25. AS-25 Interim Financial Reporting.

26. AS-26 Intangible Assets.

27. AS-27 Financial Reporting of Interest in Joint Venture.

28. AS-28 Impairment of Assets.

29. AS-29 Provisions, Contingent Liabilities and Contingent Assets.

30. AS-30 Financial Instruments: Recognition and Measurement.

31. AS-31 Financial Instruments: Presentation.

32. AS-32 Financial Instruments: Disclosures.

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 CONCLUSION
The Institute of Chartered Accountants of India (ICAI), has decided to conform to the
International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB), London, for all accounting periods commencing
on or after April 1, 2011.

As in countries like Australia, New Zealand and members of the European Union
(EU), the IFRSs will also be adopted in India for listed/public interest entities such as
banks, insurance companies and others.

With this decision India joins the 102 countries that presently employ IFRSs in their
preparation of financial statements. By 2011, this number is expected to reach 150. Of
the 32 accounting standards issued by ICAI, 25 are already based on International
standards. Hence, the transition to IFRSs should not pose a problem for Indian
accountants.

ICAI will further consult with the National Advisory Committee on Accounting
Standards established by the Ministry of Corporate Affairs, Government of India, and
various regulators such as the Reserve Bank of India, the Insurance Regulatory and
Development Authority and the Securities and Exchange Board of India, to facilitate
the transition.

Defined role:
Though this presentation is the consolidate efforts of all the group members but some
specified roles are:

1) ABHISHEK JAIN:
 PPT Preparation
 Data Search

2) AKRATI AGARWAL:
 Script making
 Data search

3) AMAN SINGH
 Topics division
 Data search

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