Assignment 2 by Leo Financers

INTRODUCTION TO ACCOUNTING STANDARDS


MEANING OF ACCOUNTING STANDARDS :
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.
WHO ISSUED ACCOUNTING STANDARDS IN INDIA ?
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. The main role of ASB is to formulate Accounting Standards from time to time.

DICUSSION

ICAI has so far issued 29 accounting standards.
These are :

1. Disclosure of accounting policies (January 1979). This standard
deals with the disclosure of significant accounting policies in the
financial statements.

2. Valuation of Inventories (June 1981). This standard deals with the
principles of valuing inventories for the financial statements.

3. Cash flow statement (June 1981, Revised in March 1997).
This standard deals with the financial statement which summaries
for a given period the sources and applications of an enterprise.

4. Contingencies and events occurring after the Balance Sheet date
(November 1982, Revised in April, 1995) This standard deals with
the treatment of contingencies and events occurring after the
balance sheet date.

5. Net profit or loss for the period, prior period (period before the date
of balance sheet) items and changes in accounting policies (November
1982, Revised in February 1997). This standard deals with the
treatment in financial statement of prior period and extraordinary items
and changes in accounting policies.

6. Depreciation Accounting (November 1982). This standard applies
to all depreciable assets. But this standard does not apply to assets
in the category of forests, plantations and similar natural resources
and wasting assets.

7. Accounting for construction contracts (December 1983, revised in
April 2003). This standard deals with accounting for construction
contracts in the financial statements of contractors.

8. Accounting for Research and Development (January 1985). This
standard deals with the treatment of costs of research and
development in financial statements.

9. Revenue Recognition (November 1985). This standard deals with
the bases for recognition of revenue in the statement of profit and
loss of an enterprise.

10. Accounting for fixed assets (November 1991). This standard deals
with recognition of fixed assets grouped into various categories,
such as land, building, plant and machinery, vehicles, furniture and
gifts, goodwill, patents, trading and designs.

11. Accounting for the effects of change in foreign exchange Rates.
(August 1991 and Revised in 1993). This standard deals with the
issues relating to accounting for effect of change in foreign
exchange rates.

12. Accounting for Government grants (April 1994). This standard
deals with the accounting for government grants.

13 Accounting for investments (September 1994). This standard deals
with accounting aspect concerning investments in the financial
statements. These include classification, determination of cost for
initial recognition, disposal and re-classification of investment.

14. Accounting for amalgamation (October 1994). This standard deals
with accounting treatment of any resultant goodwill or reserves in
amalgamation of companies.

15. Accounting for retirement Benefits in the financial statements of
employers (January 1995). This standard deals with accounting for
retirement benefits in the financial statements of employers.

16. Borrowing Costs (April 2000). This standard deals with the uses
involved relating to capitalization of interest on borrowing for
purchase of fixed assets.

17. Segment reporting (October 2000). This standard applies to
companies which have an annual turnover of Rs 50 crores or more.
These companies have to present financial statements and
consolidated financial statements.

18. Related party disclosures (October 2000 revised 1st July 2003).
This standard requires certain disclosure which must be made for
transactions between the enterprise and related parties.

19. Leases (January 2001). This standard deals with the accounting
treatment of transactions related to lease agreements.

20. Earning per share (April 2001). This standard deals with the
presentation and computation of earning per share (EPS).

21. Consolidated financial statements (April 2001). This standard
deals with the preparation of consolidated financial statements
with an intention to provide information about the activities of a
group.
22. Accounting for taxes on Income (April 2001). This standard deals with
determination of the account of tax expenses for the related revenue.

23. Accounting for investments in Associates in consolidated financial
statements (July 2001). This standard deals with the principles and
procedures to be followed for recognising, in the consolidated
financial statement.

24. Discontinued operations (February 2002). This standard deals with
the principles of discontinuing operations of an enterprise with the
activities which are continuing.

25. Interim financial reporting (February 2002). This standard deals
with the minimum content of interim financial report.

26. Intangible Assets (February 2002). This standard prescribed the
accounting treatment for intangible assets which are not covered
by any other specific accounting standard.

27. Financial reporting of interest for joint venture (February 2002).
This standard sets principles and procedure for accounting for
interest in joint venture.

28. Impairment of Assets (2004). This standard prescribed procedure
to ensure that an asset is carried at no more than its carrying amount
and procedures as to when to recognise an asset as impaired.

29. Provision for contingent labilities and contingent assets (2004).
This standard deals with measurement and recognition criteria in
three areas, namely provisions, contingent liabilities and contingent
assets.

All the above standards issued by the Accounting Standards Board are
recommended for use by companies listed on a recognized stock exchange
and other large commercial, industrial and business enterprises in the public
and private sectors.



CONCLUSION:
The Accounting Standards is to remove variations in the treatment of several accounting aspects and to bring about standardization in presentation. They intent to harmonize the diverse accounting policies followed in the preparation and presentation of financial statements by different reporting enterprises so as to facilitate intra-firm and inter-firm comparison. So we concluded that accounting standards provides uniformtity to this business languages and makes it more reliable.
Submitted to-Mr. Gurdeepak Sir
Submitted by-Leo Financers
Alisha Chahbda(A)Introduction
Anshu Mala(B)Discussion
Govind Sharma(C)Conclusion