Accounting Standards

Accounting Standards
Accounting is an information system and its main aim is to provide financial information to a number of parties such as investors, management, creditors, Government etc. Such information is provided through a set of financial statements namely, profit and loss account and balance sheet. The set of financial statements of enterprises should depict a true and fair view of its operating results and financial position. However that constitutes true and fair view has not been defined either in the companies act, 1956 or in any other statute. Over a period of time a number of Generally Accepted Accounting Principles GAAP in the form of concepts and conventions have been developed and accepted to bring comparability and uniformity in the financial statements of various business entities, But the difficulty is that GAAPalso allow a large number of alternative treatment for the same item. Different organization adopts different policies for same transaction or an enterprise may follow different accounting policies for the same item over different accounting period. As a result the financial statements become inconsistent and incomparable. Hence there is an urgent need to standardize these diverse accounting policies. The International Accounting Standards Committee came into existence on 29th june, 1973 to develop accounting standards. The ICAI and ICWAI of India is associate member of the IASC.

Concepts of Accounting Standards- Accounting standards may be defined as written statements issued from time to time by institutions of accounting professionals, specifying uniform rules or practices for drawing the financial statements

Kohler- defines accounting standards as a mode of conduct imposed on accountants by custom, law or professional body.

Nature of accounting standards-
1. Accounting standards lay down the norms of accounting policies and practices by way of codes to direct as to how the transaction and events should be dealt with in accounts and disclosed in the financial statements.
2. In this way they remove the effect of diverse accounting practices and policies so that financial statement of different business units becomes comparable.
3. They prescribe a preferred accounting treatment from the available set of methods for solving one or more accounting problems.
4. They provide information to the users of financial statements as to the basis on which such statement have been prepared.
Accounting standards specified by the Institute of chartered Accountants under section 211 of the Act 1956-

Section 211 of the companies Act 1956 as amended recently, requires that the profit and loss account and balance sheet of a company shall comply with the accounting standards. For this purpose, the expression accounting standards means the standards of accounting recommended by the Institute Chartered Accounts of India as may be prescribed by the central government.
As on 1st April 2008 there are 29 accounting standards specified by the Institute, compliance of all of which is Mandatory for companies. The following is the list o these standards.
1. AS1, disclosure of Accounting policies
2. AS 2, Valuation of Inventories
3. AS 3, Cash Flow Statement
4. AS 4, Contingencies and Event Occurring after the Balance Sheet
5. AS 5, Net profit or Loss for the period, prior period Items and Changes in Accounting Policies
6. AS 6, Depreciation Accounting
7. AS 7, Accounting for Construction Contracts
8. AS 8, Accounting for Research and Development
9. AS 9, Revenue Recognition
10. AS 10. Accounting for Fixed Assets
11. AS 11, Accounting for the effect of Changes in Foreign Exchange Rates
12. AS 12, Accounting for Government Grants
13. AS 13, Accounting for Investment
14. AS 14, Accounting for Amalgamation
15. AS 15, Treatment of Employee Benefit Schemes in the Financial Statement of Employee.
16. AS 16, Borrowing Costs
17. AS 17, Segment Reporting
18. AS 18, Related party Disclosure
19. AS 19, Lease
20. AS 20, Earning per Share
21. AS 21, Consolidated Financial Statement
22. AS 22, Accounting for Tax and Income
23. AS 23, Accounting for Investment in Association in consolidated Financial Statement.
24. AS 24, Discontinued Operation
25. AS 25, Interim Financial Reporting
26. AS 26, Intangible Assets
27. AS 27, Financial Reporting of Interest in Joint Ventures
28, AS 28, Impairment of Asset
29. AS 29, Provision, Contingent Liabilities and Contingent Asset.