Accounting standards are

authoritative standards for fina

ncial reporting and are the
primary source of generally
accepted accounting principles
(GAAP). Accounting
standards specify how
transactions and other events
are to be recognized, measured,
presented and disclosed in
financial statements.
 Introduction
 Written Documents issued by
Government or Regulatory Body
 common set of principles, standards
and procedures that define the basis
of financial accounting policies and
practices. Accounting standards
improve the transparency of financial
reporting in all countries.
 In India, issued by ICAI on 21st
April,1977
 Objectives
 To provide a standard for the diverse accounting policies and principles.
 To put an end to the non-comparability of financial statements.
 To increase the reliability of the financial statements.
 To provide standards which are transparent for users.
 To define the standards which are comparable over all periods presented.
 To provide a suitable starting point for accounting.
 It contains high quality information to generate the financial reports. This can
be done at a cost that does not exceed the benefits.
 For the eradication the huge amount of variation in the treatment of accounting
standards.
 To facilitate ease of both inter-firm and intra-firm comparison.
 Accounting Standards in Different Nations
 In India, 32 Accounting Standards as IAS
under NACAS
 As per International, there are 41 Accounting
Standards called as IFRS
 Adopted by 8 countries in the world
 70 to 80 countries planning to adhere IFRS
 Clause 50 added to the listing agreement
mandatory
AS 1-Disclosure of Accounting
Policies
Specific policies adapted to prepare Financial
statements Should be disclosed.
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
Consists of :-
1. Raw Materials
2. Work in progress
3. Finished goods
4. Spares, etc
 Measurements of Inventories
 Determination of Cost of
Inventories
Cost of purchase (Purchase
price, duties & taxes, freight
inwards)
Cost of conversion
 Determination of Net realisable
value
 Comparison of cost and net
realisable
 AS 3- Cash Flow Statements
Incoming and outgoing of cash
Act as barometer to judge surplus and deficit
Cash flow under 3 heads :-
1. Cash flow from operating activities
2. Cash flow from financing activities
3. Cash flow from investing activities
 AS 4- Contingencies and
events occurring after BS date
Events Occurring After The Date of Balance Sheet refer to the
ones that: take place between the date of balance sheet and
the date on which such financial statements are approved and.
such events suggest a requirement to adjust assets and
liabilities on the balance sheet date or may need a disclosure.
 For maintaining Provision of
Bad debts
 Generally uses Conservative
concepts of Accounting like
Bankruptcy, frauds & 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
Depreciation is the accounting process of converting the
original costs of fixed assets such as plant and machinery,
equipment, etc into the expense. It refers to the decline in
the value of fixed assets due to their usage, passage of time
or obsolescence.
• A non-cash expenditure
• Distribution of total cost to its useful life
• Occurs due to obsolescence
 Different methods of computation
•Straight Line Depreciation
Method
•Diminishing Balance Method
•Sum of Years’ Digits Method
•Double Declining Balance
Method
•Sinking Fund Method
•Annuity Method
•Insurance Policy Method
•Discounted Cash Flow Method
•Use Based Method
• Output Method
• Working Hours Method
• Mileage Method
•Other Methods
• Depletion Method
• Revaluation Method
• Group or Composite
Method
 AS 7- Construction Contract
 Contract specifically
negotiated for construction
of Asset or combination of
Assets closely inter-related.
 Construction Contract
describes and lays out the
accounting treatment in
respect of the revenue and
costs in relation to a
construction contract.
 AS 8- Accounting for R&D
 To deal with treatment of Cost of
research and development in the
financial statements, 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.
 Purpose: This statement deals with
the treatment of cost of research
and development in financial
statements.
 AS 9- Revenue Recognition
Means gross inflow of cash and
other consideration like arising
out of :-
1. Sale of goods
2. Rendering services
3. Use of enterprise resources by
other yielding interest, dividend and
royalities.
 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
 Shown at either Historical
or Revalued value
 AS 11- Effect of change in
FOREX Rates
The standard deals with the principal
issue with respect to accounting for
foreign operations and foreign currency
transactions in deciding which exchange
rate to be used and a guidance on
recognizing the financial effect of changes
in exchange rates in the financial
statements.
The standard also deals with transactions
in foreign currency which are in the nature
of forwarding exchange contracts
 AS 12- Accounting for Govt.
Grants
Accounting Standard 12 deals with
the accounting for government
grants. Such grants are offered by
the government, government
agencies and similar bodies
including local, national or
international. These government
grants are sometimes referred to as
subsidies, cash incentives, duty
drawbacks etc.
 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
financial statements.
 AS 14- Accounting for
Amalgamation
Section 391 to 394 of Companies Act, 1956 governs the
provision of amalgamation.
Disclosures:
1. Names and nature of amalgamating
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 dependants, to
other such as trust, insurance
companies in exchange of
services rendered.
 AS 16- Borrowing Costs

 Interest and cost incurred by

an enterprise in connection to
the borrowed funds.
 Availed for acquiring building,
installed Fixed Assets to
make it useable and saleable.
 AS 17- Segment Reporting
Accounting standard 17 deals with
segment reporting that was
established to help better
understand performance risk and
returns of an enterprise.
It deals with the provisions
pertaining to the reporting of
segment information in order to
meet the needs of the users of the
financial statements.
 AS 18- Related party disclosure
Related party are those party that controls or significantly influence the
management or operating policies of the company during reporting
period
Disclosure:
1. Related party relationship
2. Transactions between a reporting
enterprises and its related parties.
3. Volume of transactions
4. Amount written off in the period in
respect of debts
 AS 19- Accounting for Leases

AS-19 deals with the accounting policies

applicable for all types of leases.
Two types of leases:
1.Operating lease
2.Finance lease
 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
Basic EPS
Diluted EPS
 AS 21- Consolidated Balance
Sheet
 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
Accounting Standard 22 has been
prescribed by ICAI to be applied in
accounting for taxes on income. This AS is
applied to match the differences between
accounting income and taxable income.
1. Accounting income is the net profit
before tax for a period, as reported in the
profit and loss statement.
2. Taxable income is the income on which
income tax is payable, computed by
applying provisions of the Income Tax Act,
1961 & Rules.
 AS 23- Accounting for
investments in Associates in
CFS
 The objective of this Standard is to
set out principles and procedures
for recognizing, in the
consolidated financial statements,
the effects of the investments in
associates on the financial
position and operating results of a
group.
 AS 24- Discontinuing operations

 Establishes principles 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
1. No physical existence
2. Can not be seen or even
touched featured as per
AS
3. Identifiable
4. Non-monetary assets
5. Without physical substance
 AS 27- Financial Reporting of
interest in Joint Venture
 The objective of this Standard is to set
out principles and procedures for
accounting for interests in joint
ventures and reporting of joint
venture assets, liabilities, income and
expenses in the financial statements of
ventures and investors.
 AS 28- Impairment of Assets

 This AS deals with the impairment of assets

i.e the carrying amount of the assets should
not be more than the recoverable amount of
the assets.
 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 obligating event
 Contingent liabilities:-
Obligation arises of past event
Existence confirmed when actually occurred of uncertain future
 Contingent Asset
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)
 Accounting Standards mandatory as on September 1, 2014
• AS 1 Disclosure of Accounting Policies
• AS 2 Valuation of Inventories
• AS 3 Cash Flow Statements
• AS 4 Contingencies and Events Occuring
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 Construction Contracts (revised 2002)
• AS 9 Revenue Recognition
• AS 10 Accounting for Fixed Assets
• AS 11 The Effects of Changes in Foreign
Exchange Rates (revised 2003),
• AS 12 Accounting for Government Grants
• AS 13 Accounting for Investments
• AS 14 Accounting for Amalgamations
• AS 15 Employee Benefits (revised 2005)
• AS 16 Borrowing Costs
• AS 17 Segment Reporting
• AS 18 Related Party Disclosures
• AS 19 Leases
• 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
• 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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