Accounting Standards.

Made By:
MBA (HR Ist Sem ).
Under the guidance of Ma'am Vasudha Kumar.
Agenda of Discussion.
Introduction to Accounting Standards.

Objectives of Accounting Standards.

Types of Accounting Standards.

Introduction.
Written Documents issued by Government or
Regulatory Body.
In India, issued by ICAI on 21st April, 1977.
Initiated by Kumar Mangalam Birla, chairman
committee of Corporate Governance for Financial
Disclosures.
Also initiated by Chair person of NACAS.
Objectives.
҉ Standardize the diverse Accounting Policies.
҉ Add the reliability to the Financial Statement.
҉ Eradicating baffling variation in the treatment of
accounting aspects.
҉ Facilitate inter-firm and intra-firm comparison
Accounting Standards in Different
Nations.
ᴥ In India, 32 Accounting Standards as IAS under
NACAS.
ᴥ As per International, there are 41 Accounting
Standards called as IFRS.
ᴥ Adopted by 8 countries in the world.
ᴥ 70 to 80 countries planning to adhere IFRS.
ᴥ Clause 50 added to the listing agreement
mandatory.
Evolution and Types of Accounting
Standards (AS)
Accounting Initiation
Standards
1. AS 1 to AS 15 1970 to 1995.
2. AS 16 to AS 29 2000 to 2007.
3. AS 30 to AS 32 Later part of
2007.
AS 1- Disclosure of Accounting
Policies.
 Specific policies adapted to prepare FS.
 Should be disclosed at one place.
 Purpose :-
1. Better understanding of FS.
2. Better comparison analysis.
3. Mostly needed w.r.t Depreciation.
AS 2- Accounting for Inventories.
 Used for computation of Cost of Inventories and
to show in BS till it is sold.
Consist of :-
1. Raw Material.
2. Work in Progress.
3. Finished Goods.
4. Spares, etc.
Measurement of Inventories.
 Determination of Cost of Inventories
Cost of purchase ( Purchase price, duties &
taxes, freight .

inward)
Cost of conversion.
 Determination of Net realisable value.
 Comparison of cost and net realisable.
 AS 3- Cash Flow Statement.
 Incoming and Outgoing of cash.
 Act as a barometer to judge surplus and deficit.
 Explain Cash flow under 3 heads:-

1. Cash flow from operative activities.

2. Cash flow from financing activities.
3. Cash flow from investing activities.
AS 4- Contingencies and events
occurring after BS date.
 For maintaining Provision of Bad Debts.
 Generally uses Conservative concepts of
Accounting like Bankruptcy, frauds and errors.
AS 5- Net profit or loss for the period, prior
period items and change in Accounting policies.
 Ascertain certain criteria for certain items.
 Include income and expenditures of Financial year.
 Consists of 2 component.
1. Profit and loss of ordinary activities.
2. Profit and loss of extra ordinary activities.
 As 6- Accounting for Depreciation.
 A non-cash expenditure.
 Distribution of total cost to its useful life.
 Occurs due to obsolescence.
 Different methods of computation.

1. Straight line method (SLM).

2. Written- down value or diminishing value
(WDV).
AS 7- Construction Contract.
 Contract specially negotiated for construction of
Asset or combination of Assets closely inter-
related.
AS 8- Accounting for R&D
 Todeal with the treatment of Cost of research and
development in the financial statement, identify
items of cost which comprise R&D costs lays
down condition R&D cost may be deferred and
requires specific disclosures to be made regarding
R&D costs.
AS 9- Revenue Recognition.
 Means gross inflow of cash and other
consideration like arising out of :-
1. Sales of goods.
2. Rendering services.
3. Use of enterprise resources by other yielding
interest, divided and royalties'.
AS 10- Accounting for Fixed Assets.
 Called as Cash generating Assets.
 Expected to used for more than a Accounting
period like land, building, P/M, etc.
 Show at either Historical or Revalued value.
AS 11 – Effect of change in FOREX
Rates
Classification for Accounting treatment:-
1. Category I: Foreign currency transaction.
a) Buying and selling of goods or services.
b) Leading and burrowing in foreign currency.
c) Acquisition and disposition of assets.
2. Category II: Foreign operation:
a) Foreign branch.
b) Joint venture.
c) Foreign Subsidiary.
3. Category III: Foreign Exchange contract:
a) For managing Risk/hedging.
b) For trading and Speculation.
AS 12- Accounting for Govt. Grants.
 Assistance provided by Govt. in cash or in kind
like.
1) Grants of Assets like P/M, Land, etc.
2) Grants related to depreciable FA.
3) Tax exemptions in notified area.
AS 13- Accounting for Investments.
 Assets held for earning incomes like dividend, interest,
rental for capital appreciation, etc.
 It involves:-

1. Classification of investment.
2. Cost of Investment.
3. Valuation of Investment.
4. Reclassification of Investment.
5. Disposal of Investment.
6. Disclosure of Investment in FS.
AS 14- Accounting for Amalgamation
 Section 391 to 394 of Companies Act, 1956 governs
the provision of amalgamation.
 Disclosures:

1. Names and nature of ambulation companies.

2. Effective date of amalgamation.
3. Method of Accounting used.
4. Particulars of scheme sanctioned under a statute.
AS 15- Employees Benefits.
 All forms of consideration given by enterprise
directly to the employees or their spouses, children
or other dependents, to other such as trust,
insurance in exchange of services rendered.
AS 16- Borrowing Costs.
 Interestand cost incurred by an enterprise in
connection to the borrowed funds.
 Availed for acquiring building, installed FA to
make it useable and saleable.
AS 17- Segment Reporting.
 Itconsist of 2 segments :-
1) Business segment.
2) Geographic segment.
 Information and different risk and return reporting.
AS 18- Related party disclosure.
 Related party are those that control or significantly
influence the management or operating policies of the
company during reporting period.
 Disclosures.

1. Related party relationship.

2. Transactions between a reporting enterprises and
its related parties.
3. Volume of transaction.
4. Amount written off in the period in respect of debts.
AS 19- Accounting for Leases.
 Agreement between Lessor and Lessee.
 Two types of leases:

1) Operating lease.
2) Finance lease.
 Different from Sale.
 Classification to be made at the inception.
AS 20- Earning per share.
 Earning capacity of the firm.
 Assessing market price for share.
 AS gives computational methodology for
determination and presentation of EPS.
 2 types of EPS.
AS 21- Consolidation of Financial
Statements.
 Accounting for Parent and Subsidiary company in
single entity.
 Disclosure.:-

1. List of all subsidiaries.

2. Proportion of ownership interest.
3. Nature of relation whether direct or indirect.
AS 22-Accounting for taxes and
income.
 Tax accounted for period in which are accounted.
 It should be accrued and not liability to pay.
 Deals in 2 measurements:-

1. Current Tax.
2. Deferred Tax.
AS 23- Accounting for investments in
Associates in CFS.
 Objectives to set out principals and procedures for
recognizing the investment associates in CFS of
the investors, so that effects of investments in
associates on financial position of group is
indicated.
AS 24- Discontinuing operations.
 Establishingprinciples for reporting information
about discontinuing operations.
 Covers discontinuing operations rather than
discontinued operation.
As 25- Interim Financial Reporting
(IFR)
 Reporting for less than a year i.e. 3 months.
 Clause 41 says publish financial results on
quarterly basis.
 Objective is to provide frequently and timely
assessment.
AS 26 – Intangible Assets.
 No physical existence.
 Can not be seen or even touched.
 Three featured as per AS.

1. Identifiable.
2. Non-monetary assets.
3. Without physical substance.
AS 27 – Financial Reporting of
interest in Joint Venture.
 What is joint venture?
 Three types of JV in case of Financial reporting.
AS 28 – Impairment of Assets.
 Weakening of Assets value.
 Occurs when carrying cost more than recoverable
amount.
 Carrying cost = Cost of Assets-Accumulated
Depreciation.
AS 29 – Provision, contingent
liabilities and Assets.
 Provisions :-
It is a Liability.
Settlement should result in outflow.
Liability is result of obligation event.
 Contingent liability:-

Obligation arises of past events.

Existence confirmed when actually occurred of uncertain
future.
 Contingent Assets.

Same as Contingent Liability.

Financial Instruments.
 AS 30 – Recognition and Measurement.
 AS 31 – Presentation.
 AS 32 – Disclosures.
 Has not been made mandatory (expected in 2009)
Thank You.