Bharat's

ACCOUNTING
STANDARDS
Made Easy
For CA-Inter
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 Bharat's

ACCOUNTING
STANDARDS
Made Easy
for CA-Inter
Includes
 Revised Accounting Standards
 All Inter/PCC/IPCC previous year examination questions
 Detailed explanation with concept capsules
 Around 400 questions and answers
 Diagrammatic presentation
 Simple language

CA. RAVI KANTH MIRIYALA

FCA, B.Com.

BHARAT LAW HOUSE PVT. LTD.

New Delhi
2018
 First Edition August 2013
Second Edition January 2014
Third Edition January 2015
Fourth Edition January 2016
Fifth Edition June 2016
Sixth Edition February 2017
Seventh Edition June 2017
Eighth Edition 2018

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 ACCOUNTING STANDARDS IN SYLLABUS OF CA Inter
Group I
Paper 1: Accounting
AS 1 Disclosure of Accounting Policies
AS 2 Valuation of Inventories
AS 3 Cash Flow Statements
AS 4 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 10 Property, Plant & Equipment
AS 11 The Effects of Changes in Foreign Exchange Rates
AS 12 Accounting for Government Grants
AS 13 Accounting for Investments
AS 16 Borrowing Costs
AS 17 Segment reporting
AS 22 Accounting for Taxes on Income
Group II
Paper 5: Advanced Accounting
AS 7 Construction Contracts
AS 9 Revenue Recognition
AS 14 Accounting for Amalgamations
AS 18 Related party disclosures
AS 19 Leases
AS 20 Earnings Per Share
AS 24 Discontinuing Operations
AS 26 Intangible Assets
AS 29 Provisions, Contingent Liabilities and Contingent Assets
 PREFACE TO THE EIGHTH EDITION
I would like to take this opportunity to thank everyone who have provided me suggestions and
corrections for improving the Eighth edition of this book. I worked on the valuable suggestions
given by the colleagues, teachers from other academies and students to make this book more useful.
Students’ & Well wishers’ feedback gave me enthusiasm and energy to write a book on
“Accounting Standards made Easy for CA Final” and it is published and available in the market.
In this format, “Accounting Standards Made Easy” will meet the students requirement.
The great features of this edition are:
 Updated with the recent revisions made by Ministry of Corporate Affairs;
 Student friendly;
 Conceptual understanding of the standards with more than 400 detailed examples;
 Very simple language to understand;
 It covers all previous year questions and answers of Inter, IPCC & PCC till Nov 2017;
 Diagrammatic presentation at the required places gives the grip on the AS.
I am very confident that this book also helps the students preparing for CMA Inter, B.Com and
M.Com examinations.
From the bottom of my heart, I am grateful to my dearest friend CA. Rama Krishna Reddy
Borra & my loving wife CA. Sunitanjani Miriyala for their continuous help in motivating me and
correcting me at every stage of composing this book.
We have taken considerable care to ensure that contents are accurate; few errors are inherent in a
work of this kind. Therefore, I seek suggestions and comments from the readers.

24th November, 2017 CA. RAVI KANTH MIRIYALA

New Delhi
Email: ravikanthca@gmail.com

https://www.facebook.com/ravikanthca
 ACKNOWLEDGMENT
No book is the work of a single person. At first I would like to express my sincere thanks to my
dearest friend CA. Ramakrishna Reddy Borra & my loving wife CA. Sunitanjani Miriyala who have
been a source of inspiration and support personally and professionally. This book would never have
been written without their support, encouragement and motivation.
I would like to thank CA. Lalith M Sharma, CA. M. Radha, Prof. Vaidheeswaran, CA. Nikhil
Jobanputra, CA. Ashim Jana, Prof. Narayana Rao, CA. Mayur, CA Uma Maheswara Rao, Prof.
Avinash and other seniors & juniors for their professional and personal support.
Special word of thanks is also due to my favourite students Saurab Jain, Sujendra, Himajashree,
Satya Sowmya & Meenakshi, who provided incisive comments and very useful feedback.
All valuable comments and suggestions for further improvement of this book will be gratefully
acknowledged and appreciated.
CA. RAVI KANTH MIRIYALA

Email: ravikanthca@gmail.com

https://www.facebook.com/ravikanthca
 CONTENTS
(Detailed synopsis provided in each chapter)
Bharat's 5
Accounting Standards in Syllabus of CA Inter 8
Preface to the Eighth Edition 9
Acknowledgement 10
Weightage of Accounting Standards in previous IPCC exams 12
Introduction 1
Preface to Accounting Standards (Very Important) 7
Framework for Preparation and Presentation of Financial Statements 9
CHAPTER 1 AS 1 - Disclosure of accounting policies 18
CHAPTER 2 AS 2 - Valuation of Inventories 27
CHAPTER 3 AS 3 - Cash flow statement 46
CHAPTER 4 AS 4 - Contingencies and events occurring after the balance sheet date 62
CHAPTER 5 AS 5 - Net profit or loss for the period, prior period items and changes in
accounting policies 71
CHAPTER 6 AS 7 - Construction Contracts 83
CHAPTER 7 AS 9 - Revenue Recognition 97
CHAPTER 8 AS 10 - Property, Plant & Equipment (PPE) 110
CHAPTER 9 AS 11 - The effects of changes in Foreign Exchange Rates 142
CHAPTER 10 AS 12 - Accounting for Government Grants 165
CHAPTER 11 AS 13 - Accounting for investments 179
CHAPTER 12 AS 14 - Accounting for amalgamation 197
CHAPTER 13 AS 16 - Borrowing costs 209
CHAPTER 14 AS 17 - Segment Reporting 223
CHAPTER 15 AS 18 - Related Party Disclosures 241
CHAPTER 16 AS 19 - Leases 256
CHAPTER 17 AS 20 - Earnings per shares 279
CHAPTER 18 AS 22 - Accounting for Taxes on Income 294
CHAPTER 19 AS 24 - Discontinuing Operations 315
CHAPTER 20 AS 26 - Intangible assets 324
CHAPTER 21 AS 29 - Provisions, contingent liabilities and contingent assets 342
CHAPTER 22 Guidance Notes 357
 Weightage of Accounting Standards in previous IPCC exams
IPCC
Group AS May- Nov- May- Nov- May- Nov- May- Nov- May- Nov- May- Nov- May- Nov- May- Nov -
2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017
Group I AS 1 4 5 4
AS 2 4 4 8 4 5 5 5 5 5 5
AS 3 4 5
AS 7 4 4 5 5 5 5 5 5
AS 9 2 4 4 5 5 4 5 5 5 5
AS 10 6 4 13 9 8 10 14 9 5 10 5 5 5
AS 13 10 5 5 13 8 5 4 8 13 8 10 5 9 8
AS 14 4 5 5 4 4 4
Total 22 13 9 25 40 16 17 24 32 32 27 34 28 24 28 23
(A)
Group II AS 4 2 5 4 4 4 5 5 5 5 5
AS 5 2 4 4 4 5 5 4 5
AS 11 4 4 5 9 5 5 4
AS 12 6 4 4 5 4 4 5 5
AS 16 2 4 5 4 5 5 5 5 5
AS 19 4 8 5 4 8 4 5 5 4 5 5
AS 20 4 5 5 5 5 4 5 4 5 5
AS 26 4 5 5 5 4 5 5 5 5
AS 29 4 4 5 5 5 9 4 5
General 4 8 4 9
Total (B) 16 17 21 26 31 21 36 27 24 32 28 19 24 28 24 29
Grand Total 38 30 30 51 71 37 53 51 56 64 55 53 52 52 52 52
(A + B)
It does not include 16 marks questions on AS 3 & AS 14
 Introduction

SYNOPSIS
1. Who issues Accounting Standards in India? 1
2. What is the duty of Statutory Auditor for Compliance with Accounting Standards? 1
3. Procedure for Issuing an Accounting Standard from 2009 onwards 1
4. Applicability of Accounting Standards 2
“ACCOUNTING is the language of business”
“Accounting” has been in existence ever since the dawn of civilization where a person in the settlement
wanted to keep track of his belongings and ensure a legal claim on his holdings – be it land or livestock.
However, Fra Luca Bartolomeo de Pacioli (1445-1517) has been regarded as the father of modern
accountancy for his noteworthy works describing the system of book-keeping i.e. the double-entry accounting
system which is widely accepted across the business world even today!
As time progressed, a natural evolution in accounting became evident. Industrial revolution and voluminous
transactions in a complex financial and business environment led to need-based accounting, specific to the
nature of transactions involved. The pressing demand for uniform Accounting Standards was felt in early
1930s post the Wall Street crash and the following Great Depression post the economic boom of 1920s.
Accounting Standards are the statements of code of practice of the regulatory accounting bodies that are to be
observed in the preparation and presentation of financial statements. In layman terms, accounting standards
are the written documents issued by the expert institutes or other regulatory bodies covering various aspects
of measurement, treatment, presentation and disclosure of accounting transactions.
Financial statements are prepared to summarize the end-result of all the business activities by an enterprise
during an accounting period in monetary terms. These business activities vary from one enterprise to other.
To compare the financial statements of various reporting enterprises poses some difficulties because of the
divergence in the methods and principles adopted by these enterprises in preparing their financial statements.
In order to make these methods and principles uniform and comparable to the extent possible standards are
evolved.
1. Who issues Accounting Standards in India?
The Institute of Chartered Accountants of India (ICAI), being the premier standard-setting body in the
country, has been making relentless efforts in this direction by formulating/revising the Accounting Standards
since 1977 to be followed in the preparation and presentation of financial statements.
The main role of Accounting Standards Board (ASB) is to formulate/revise the Accounting Standards from
time to time.
2. What is the duty of Statutory Auditor for Compliance with Accounting Standards?
Section 129 of The Companies Act, 2013 provides that every Profit and Loss account and Balance Sheet of
the company shall comply with the accounting standards.
The statutory auditors are required to make qualification in their report in case any item is treated differently
from the prescribed Accounting Standard. However, while qualifying, they should consider the materiality of
the relevant item. In addition to this Section 143 of The Companies Act, 2013 requires an auditor to report
whether, in his opinion, the Profit and Loss account and Balance Sheet are complied with the accounting
standards referred to in Section 129 of The Companies Act, 2013.
3. Procedure for Issuing an Accounting Standard from 2009 onwards
1. Accounting Standards Board (ASB) determines the broad areas in which Accounting Standards need
to be formulated and the priority in regard to the selection thereof.
2 Accounting Standards Made Easy
2. In the preparation of AS, ASB will be assisted by Study Groups constituted to consider specific
subjects. In the formation of Study Groups, provision will be made for wide participation by the
members of the Institute and others.
3. The draft of the proposed standard will normally include the following:
(a) Objective of the Standard,
(b) Scope of the Standard,
(c) Definitions of the terms used in the Standard,
(d) Recognition and measurement principles, wherever applicable,
(e) Presentation and disclosure requirements.
4. ASB will consider the preliminary draft prepared by the Study Group and if any revision of the draft
is required on the basis of deliberations, ASB will make the same or refer the same to the Study
Group.
5. The Exposure Draft of the proposed Standard will be issued for comments by the members of the
Institute and the public. The Exposure Draft will be sent to specified bodies like stock exchanges, and
other interest groups, as appropriate.
6. After taking into consideration the comments received, the draft of the proposed Standard will be
finalised by the ASB and submitted to the Council of the ICAI.
7. The Council of the ICAI will consider the final draft of the proposed Standard, and if found
necessary, modify the same in consultation with the ASB. The Accounting Standard on the relevant
subject will then be issued by the ICAI.
4. Applicability of Accounting Standards
Every entity need NOT follow ALL Accounting standards. It is based on the classification of entities.

Entities

Corporate Non corporate entities like

partnership firms, etc.

Small and Medium sized Non SMC’s Level I Level II Level III
Companies (SMC)

Few AS exempted
Few AS exempted
(discussed below)
(discussed below) ALL AS needs to be
complied

Let us learn about CORPORATE entities classification and the applicability of the AS:
Small and Medium sized Companies (SMC)
“Small and Medium Sized Company” means, a company—
(a) whose equity or debt securities are not listed or are not in the process of listing on any stock
exchange, whether in India or outside India;
(b) which is not a bank, financial institution or an insurance company;
(c) whose turnover (excluding other income) does not exceed rupees fifty crore in the immediately
preceding accounting year;
 Accounting Standards Made Easy For
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