PRESENTATION

ON

UNDERSTANDING OF
ACCOUNTING
STANDARDS
History of IAS

 In June 1973 the International Accounting Standards

Committee (IASC) came into existence
 Standing Interpretations Committee (SIC) was established
in 1997
 In 2000 (SEC) issued a release on the acceptability of
international accounting standards.
 In 2001, IASC was replaced by the International
Accounting Standards Board (IASB).
 The first IFRS was published in June 2003 .
Objectives

 The basic objective of Accounting standards is to remove

variation in the treatment of several accounting aspects and
to bring about standardization in presentation
 Standardize the diverse Accounting Policies, valuation
norms and disclosure requirements.
 Eliminate the non- comparability and Add the reliability to the
Financial Statement
 Eradicate secret variation in treatment of accounting aspects
 Facilitate inter-firm and intra-firm comparison
IAS 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
IAS 1-Disclosure of Accounting Policies
Cont….

 IAS 1 states that the fundamental accounting

concepts to be followed are:
---fair presentation
---going concern
----accruals
----consistency
IAS 1-Disclosure of Accounting Policies
Cont….

 Asset: An asset is a resource controlled by the

enterprise as a result of past events from which
future economic benefits are expected to flow to the
enterprise.

 Liability: A liability is a present obligation of the

enterprise arising from the past events, the
settlement of which is expected to result in an
outflow from the enterprise' resources, i.e., assets.
IAS 1-Disclosure of Accounting Policies
Cont….

 Equity: Equity is the residual interest in the assets of the

enterprise after deducting all the liabilities under the
Historical Cost Accounting model.
 Revenues: increases in economic benefit during an
accounting period in the form of inflows or enhancements of
assets, or decrease of liabilities that result in increases in
equity.
 Expenses: decreases in economic benefits during an
accounting period in the form of outflows, or depletions of
assets or incurrences of liabilities that result in decreases in
equity.
IAS 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 etc.,
IAS 3: Consolidated Financial Statements

 IAS 3: Consolidated Financial Statements

Originally issued 1976, effective 1 Jan
1977. Superseded in 1989 by IAS 27 and
IAS 28
IAS 4: Depreciation Accounting

 IAS 4: Depreciation Accounting Withdrawn

in 1999, replaced by IAS 16, 22, and 38, all
of which were issued or revised in 1998
IAS 5: Information to Be Disclosed in
Financial Statements

 IAS 5: Information to Be Disclosed in

Financial Statements Originally issued
October 1976, effective 1 January 1997.
Superseded by IAS 1 in 1997
IAS 6: Accounting Responses to Changing
Prices Superseded

 IAS 6: Accounting Responses to Changing

Prices Superseded by IAS 15, which was
withdrawn December 2003
IAS 7- Cash Flow Statements

 Incoming and outgoing of cash

 Explain Cash flow under 3 heads :-

1. Cash flow from operating activities
2. Cash flow from financing activities
3. Cash flow from investing activities
IAS 8- Accounting Policies, Changes in Accounting
Estimates and Errors

 it prescribes the criteria for:

 selection of accounting policies;
 changes in accounting policies;
 accounting treatment;
 disclosure of changes in accounting policies;
 changes in accounting estimates; And
 correction of errors;
IAS 9: Accounting for R&D

 Accounting for Research and Development

Activities – Superseded by IAS 38 effective
1.7.99
IAS 10- Contingencies and events
occurring after BS date

 For maintaining Provision of Bad debts

 Impairment of an asset
 Generally uses Conservative concepts of
Accounting like Bankruptcy, frauds & errors.
IAS 11- Construction Contract

 Contract specifically negotiated for

construction of Asset or combination of
Assets closely inter-related
IAS 12- 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
IAS 13- Presentation of Current Assets and
Current Liabilities

 IAS 13: Presentation of Current Assets and

Current Liabilities – Superseded by IAS 1.
IAS 14: Segment Reporting

 IAS 14: Segment Reporting (superseded by

IFRS 8 on 1 January 2008)
 Reporting about risk and return of business
segment and Geographical segment.
IAS 15: Information Reflecting the Effects of
Changing Prices

 IAS 15: Information Reflecting the Effects of

Changing Prices – Withdrawn December
2003
IAS-16 Property, Plant & Equipment

 The objective of IAS 16 is to prescribe the

accounting treatment for property, plant, and
equipment. The principal issues are:
- the timing of recognition of asset;
- the determination of their carrying amounts; and
- the depreciation charges to be recognized
IAS 17- 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
IAS 18- 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 19- 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.
IAS 20- 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
IAS 21- Effect of change in FOREX
Rates

 Classification for Accounting treatment:-

1. Category I: Foreign currency transactions:
a) buying and selling of goods or services
b) lending and borrowing in foreign currency
c) Acquisition and disposition of assets
2. Category II: Foreign operations:
a) Foreign branch
b) Joint venture
c) Foreign Subsidiary
3. Category III: Foreign Exchange contracts:
a) For managing Risk/hedging
b) For trading and Speculation
IAS 22- Business Combinations

 IAS 22: Business Combinations –

Superseded by IFRS 3 effective 31 March
2004
IAS 23- Borrowing Costs

 Interest and cost incurred by an enterprise in

connection to the borrowed funds.
 Availed for acquiring building, installed Fixed
Asset to make it useable and saleable.
 IAS 24: Related Party Disclosures
 IAS 25: Accounting for Investments –
Superseded by IAS 39 and IAS 40 effective
2001
 IAS 26: Accounting and Reporting by
Retirement Benefit Plans
 IAS 27: Consolidated Financial Statements
 IAS 28: Investments in Associates
 IAS 29: Financial Reporting in
Hyperinflationary Economies
 IAS 30: Disclosures in the Financial
Statements of Banks and Similar Financial
Institutions – Superseded by IFRS 7 effective
2007
 IAS 31: Interests in Joint Ventures
 IAS 32: Financial Instruments: Presentation
(Financial instruments disclosures are in IFRS
7 Financial Instruments: Disclosures, and no
longer in IAS 32)
 IAS 33: Earnings Per Share
 IAS 34: Interim Financial Reporting
 IAS 35: Discontinuing Operations –
Superseded by IFRS 5 effective 2005
IAS 36- Impairment of Assets

 Weakening of Assets value

 Occurs when carrying cost more than
recoverable amount
 Carrying cost = Cost of assets –Accumulated
Depreciation
 IAS 37: Provisions, Contingent Liabilities and
Contingent Assets
 IAS 38: Intangible Assets
 IAS 39: Financial Instruments: Recognition
and Measurement
 IAS 40: Investment Property
 IAS 41: Agriculture
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