Accounting Standards

By:
Saloni Kansal (8)
Sonam Mahajan (21)
Ankit Sethia (31)
Deepak Maliwal (39)
Karan Jain ()

1
 What Is It???
Accounting Standards are written policy
documents issued by expert accounting
body or by govt. or by any other regulatory
body covering the aspects of recognition,
measurement, presentation & disclosure
of accounting transactions in financial
statement.

2
Objective of Accounting Standards

Objective of Accounting Standards is to

standardize the diverse accounting
policies and practices with a view to
eliminate to the extent possible, the non-
comparability of financial statements and
the reliability to the financial statements.

3
 Implementation

The Institute of Chartered Accountants of

India (ICAI) recognizing the need to
harmonize the diverse accounting policies
and practices at present in use in India
constituted Accounting Standards Board
(ASB) on April 21, 1977.

4
Accounting Standards Issued by the
ICAI are as below:
1. Disclosure of accounting policies:
2. Valuation Of Inventories:
3. Cash Flow Statements
4. Contingencies and events Occurring after the Balance sheet Date
5. Net Profit or loss For the period, Prior period items and Changes in accou
nting Policies.
6. Depreciation accounting.
7. Construction Contracts.
9. Recognition.
10. Accounting For Fixed Assets.
11. The Effect of Changes In Foreign Exchange Rates.
12. Accounting For Government Grants.
13. Accounting For Investments.
14. Accounting For Amalgamation.
15. Employee Benefits.
16. Borrowing Cost.

5
17. Segment Reporting.
18. Related Party Disclosures.
19. Accounting For Leases.
20. Earning Per Share.
21. Consolidated Financial Statement.
22. Accounting For Taxes on Income.
23. Accounting for Investment in associates in Consolidated Financial Statement.
24. Discontinuing Operation.
25. Interim Financial Reporting.
26. Intangible assets.
27. Financial Reporting on Interest in joint Ventures.
28. Impairment Of assets.
29. Provisions, Contingent, liabilities and Contingent assets.
30. Financial instrument.
31. Financial Instrument: presentation.
32. Financial Instruments, Disclosures and Limited revision to accounting standards.

6
 Significant criticism of IAS
These standards are too broad based and
general to ensure that similar accounting
method is applied in similar
circumstances.

7
 Introduction Of IFRS
The IASC Foundation’s mission is to
develop, in the public interest, a single set
of high quality, understandable
international financial reporting standards
(IFRSs), these are Standards,
Interpretations and the Framework for the
Preparation and Presentation of Financial
Statements adopted by the IASB.

8
Comparison Between the IFRS and IAS

9
IFRS 1 V/s AS 1: Disclosure of accounitng
policies
• Specific disclosure of • No such specific
changes in equity, disclosure is to be
departures, critical made under AS 1
judgments on
accounting policies is
to be made under
IFRS 1

10
IFRS 2 V/s AS 2 - Valuation of Inventories

 IAS 2 prescribes  AS 2 requires that the

same cost formula to formula used in
be used for all determining the cost
inventories having a of an item of inventory
similar nature and use needs to be selected
to the entity. with a view to
providing the fairest
possible
approximation to the
cost incurred
11
IFRS 3 V/s AS 3 -Cash Flow Statements
 Bank overdrafts are to be  AS 3 has no such
treated as a component stipulation
of cash / cash equivalents
 Interest and dividend paid  Interest and dividend paid
to be classified either under Financial Activities
under Operating Activities only
or Financing Activities.
 Prohibits separate  Mandates such
disclosure of disclosure
extraordinary items in
Cash Flow Statements

12
IFRS 10 V/s AS 4- Contingencies and
Events occurring after the Balance Sheet Date
 Provides that  It requires such
proposed dividend disclosure as it is
should not be shown mandated by
as liability Statutory requirement
 Date of authorization  No such stipulation
for issue of financial
statements to be
mentioned in the
financial statements.

13
IFRS 8 V/s AS 5 - Prior Period Items and
Changes in Accounting Policies
 In case of change in  AS 5 requires only
accounting policy IAS 8 prospective change in
requires retrospective accounting policy with
effect to be given by appropriate disclosures.
adjusting opening
retained earnings.
 IAS 8 requires disclosure  AS 5 does not require
of any impending change
such disclosure
in accounting policy viz.
change mandated by a
new accounting standard
which is yet to come into
effect
14
IFRS 16 V/s AS 6 -Depreciation Accounting

 In case of change in  AS 6 requires

method of retrospectively re-
depreciation, IAS 16 computation of
requires effect to be depreciation and any
given prospectively excess or deficit on
such re-computation
is required to be
adjusted in the period
in which such change
is effected
15
IFRS 11 V/s AS 7: Construction Contract
 Contract Revenue  AS 7 does not refer to
under IAS 11 is fair value and states
measured at the fair that Contract revenue
value of the is measured at the
consideration consideration
received or receivable received or receivable

16
IFRS 18 V/s AS 9: Revenue Recognition
 Under IAS 18, revenue  AS 9 does not contain
from sale of goods cannot any such stipulation.
be recognised when
entity retains continuing
effective control over the
goods sold.
 In case of revenue from
 AS 9 allows completed
rendering of services, IAS service contract method
18 allows only or proportionate
percentage of completion completion method
method.

17
IFRS 16 V/s AS 10 - Accounting for Fixed
Assets
 Under IAS 16, if  AS 10 provides that
subsequent costs are only that expenditure
incurred for which increases the
replacement of a part future benefits from
of an item of fixed the existing asset is
assets, such costs included in the gross
are required to be book value, e.g., an
capitalized increase in capacity.

18
IFRS 21 V/s AS 11: Effects of changes in
Foreign Exchange Rates
 The revised IAS 21  AS 11 provides
makes no distinction separate treatment for
between an integral integral operations
foreign operation and and non-integral
non-integral foreign operations.
operation.

19
IFRS 20 V/s AS 12- Government Grants
 In respect of grant related  AS 12 requires enterprise
to a specific fixed asset to compute depreciation
becoming refundable, IAS prospectively as a result
20 requires retrospective of which the revised book
re-computation of value is provided over the
depreciation and residual useful life.
prescribes charging off
the deficit in the period in
which such grant
becomes refundable.

20
IFRS 3 V/s AS 14: Accounting for
Amalgamations
 IFRS 3 requires  AS 14 requires
valuation of assets & valuation at carrying
liabilities at Fair value
Value.
 IFRS 3 allows only  AS 14 allows both
purchase method. Pooling of Interest
Method and Purchase
Method.

21
IFRS 19 V/s AS 15: Employee Benefits
 IAS 19 provides an  Exposure draft on
option to recognise revised AS 15 (AS 15
actuarial gains and ED)does not admit
losses either by "Corridor Approach".
following "Corridor
Approach" or
immediately in P&L
A/c.

22
IFRS 23 V/s AS 16- Borrowing Costs
 IAS 23 prescribes  AS 16 mandates
borrowing costs to be capitalization of
recognized as borrowing costs
expense as
benchmark treatment.

23
IFRS 14 V/s AS 17: Segment reporting
 IAS 14 provides that a  AS 17 does not
business segment contain any such
can be treated as stipulation.
reportable segment
only if, majority of its
revenue is earned
from sales to external
customers.

24
IFRS 17 V/s AS 19: Leases
 IAS 17 specifically  There is no such
excludes lease exclusion under AS 19
accounting for investment
property and biological
assets.

 IAS 17 does not require

any separate disclosure
 AS 19 mandates such
for assets acquired under separate disclosure
finance lease segregated
from assets owned.

25
IFRS 33 V/s AS 20 - Earnings per Share
 IAS 33 requires separate  AS 20 does not requires
disclosure of basis and any such separate
diluted EPS for continuing computation or disclosure
operations and
discontinued operations

 IAS 33 does not require  Disclosure of normal face

disclosure of normal face value is required under
value of share AS 20.

26
IFRS 12 V/s AS 22 - Accounting for Taxes on
Income:
 IAS 12 is based on  AS 22 is based on
Balance Sheet income statement
approach and approach and only
therefore temporary timing differences
difference (for e.g. leads to creation of
Difference on any deferred tax asset or
upward revaluation of liability
assets, leads to
creation of deferred
tax liability)
27
IFRS 28 V/s AS 23:Accounting for
Associate in Consolidated Financial Statement:
 While recognizing  Under AS 23, losses
losses of associates / are to be recognised
joint ventures under to the extent of
IAS 28, carrying investment plus
amount of investment incurred obligations
in equity and other plus payments made
long term interests to towards guaranteed
be considered obligations.

28
IFRS 34 V/s AS 25: Interim Financial
Reporting
 Under IAS 34,  No such disclosure is
minimum components required under AS 25.
of Interim Financial
Report includes -
Statement showing
changes in Equity

29
IFRS 38 V/s AS 26 - Intangible Assets
 There is no presumption
under IAS 38 as regards
useful life of an intangible
asset
 IAS 38 includes intangible
assets arising in
insurance enterprise from
contract with policy holder
 Under AS 26, there is a
rebuttable presumption
that the useful life of
intangible assets will not
exceed 10 years
 Intangible assets arising
in insurance enterprise
from contract with
policyholder are excluded
30
IFRS 31 V/s AS 27 - Financial Reporting of
Interests in Joint Ventures
 When the investments  There is no such
are made by venture provision under AS
capital organization, 27.
mutual funds and
similar entities when
those investments are
classified as held for
trading and accounted

31
IFRS 37 V/s AS 29 - Provisions, Contingent
Assets and Contingent Liabilities
 IAS 37 requires  AS 29 allows such
disclosure of Contingent disclosure only in
Assets in Financial approving authority report
Statements
 IAS 37 permits  AS 29 does not permit
discounting of provisions. any discounting
 Defines only obligation  Defines present
but does not define obligation and possible
present obligation and obligation as well
possible obligation.

32
Issues relating to Implementation of IFRS
in India

33
 Issues
 Lack of qualified resources: The major
problem that industries are likely to face is
a talent crunch since, even in the current
scenario, there is a scarcity of qualified
resources.
 Re-starting: IFRS compliance would
require changes right from the grassroots
level, beginning with academic inputs and
training.
34
 Issues
 Limited Time: Re-construction would not
be an easy task, given the limited time
frame before the new standards come into
force
 Modifications in various acts :
Modification will be required in the Income-
tax Act, as well as the Companies Act to
complement the changes arising from the
new standards.
35
 Issues
 Lastly, India is working towards a moving
target as IFRS is expected to undergo
change between now and 2011 putting us
at a comparative disadvantage as we still
don’t know what would be the IFRS
requirements to apply in 2011.

36