Accounting Standards

1
Accounting Standards

• The laws/framework behind
• Financial Accounting
• Mandatory for Companies
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Definition

• Written policy documents- issued by
• Institute of chartered Accountants of India
• Cover aspects of
• Treatment Presentation
• Recognition Measurement Disclosure

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Objectives (True Fair View)
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Benefits

• Reduction in Confusion Easy comparison
• Disclosure of all informations
• ( including not required by statute)

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Limitations

• Alternative solutions ( difficult choice between
  standards)
• Trend towards rigidity
• Accounting standards cannot
  override the statute

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Overview

• Accounting Standards
• Issued by ICAI Issued standards-32
• formulated by ASB set up on
  21st April,1977
• In force standards-31
• Notified Standards 29 ( by
  MCA)

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Overview

• A draft is prepared of accounting standards after
  comments from experts of various fields.
• Advisory committee NACAS

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List of Accounting Standards

• AS-1 Disclosure of Accounting Policies
• AS-2 Valuation of Inventories
• AS-3 Cash Flow Statements
• AS-4 Contingencies and Events Occurring after
  the Balance Sheet
• AS-5 Net Profit or Loss for the Period, Prior
  Period Items and Changes in Accounting Policies
• AS-6 Depreciation Accounting
• AS-7 Accounting for Construction Contracts
• AS-9 Revenue Recognition
• AS-10 Accounting for Fixed Assets
• AS-11 The Effects of Changes in Foreign
  Exchange Rates
• AS-12 Accounting for Government Grants
• AS-13 Accounting for Investments
• AS-14 Accounting for Amalgamations
• AS-15 Employee Benefits
• AS-16 Borrowing Costs

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List of Accounting Standards

• 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
  Contingent Assets
• AS-30 Financial Instruments Recognition
  Measurement
• AS-31 Financial Instruments Presentation
• AS-32 Financial Instruments Disclosures

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Notes

• AS-8 Accounting for research development
  withdrawn merged with
• AS-26 Intangible assets
• AS-30,31 32 Not notified by Ministry of
  corporate Affairs

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Notes

• Applicability of Accounting Standards depends on
  Level of Companies
• Note Level 1 2 Small Medium Sized
  Companies

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Notes

• Level 1
• Turnover(excl other income) of 50 Crores or above
• Borrowings (incl deposits) 10 cr or more
• Listed companies or are in process of listing.
• Level 2
• Turnover(excl other income) of 40 lakhs-50Cr
• Borrowings (incl deposits) 1Cr 10 Cr.
• Level 3
• Companies other than in Level 1 2
• Notes All Accounting standards are compulsory
  for Level 1 Companies.
• AS-3,17,18,24 (only for Level 1 cos.)

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Accounting Standard-1

• Disclosure of Accounting Policies
• accounting policies to be fully disclosed in the
• notes to accounts
• Selection of policies through -
• Prudence, Substance over Form Materiality
• No disclosure of Fundamental Accounting
  assumptions
• (if followed)

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Accounting Standard-2

• Valuation of Inventories
• Valuation Cost/NRV whichever is lower
• (based on Conservatism Concept)

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Accounting Standard-2

• Valuation to be applied on item by item basis.
• Cost of inventory
• Purchase cost
• Cost of conversion
• Cost of bringing the goods to the present
  location of the factory
• Net Realizable Value Realizable Value Selling
  Expenses

16
Accounting Standard-3

• Cash Flow Statements
• Statement showing movement of Cash in out of
  the business
• through three activities
• Operating Activity Financing Activity
• Investing Activity

17
Accounting Standard-9

• Revenue Recognition- when work completed
• Recognition of revenue arising in the course of
  ordinary activities.
• Sale (recognized as revenue)
• Complete Sale Risks Rewards transferred
  Consideration fixed
• (Delivery done) to buyer
  (guarantee of receipt)

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Amendments

• To bring uniformity in Accounts round the world,
• International Financial Reporting Standards
  are being applied worldwide.
• India not applied IFRS till now, so have issued
• Converged AS- IND AS
• Applicable from 1st April,2016
• Listed Cos. and unlisted companies having
• net worth in excess of Rupees 500 crore

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MCQs

• Q.1. AS-2 is on

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MCQs

• Q.2. Accounting Standards

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MCQs

• Q.3. As per AS-3, which of the following, should
  be classified as an investing activity?

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MCQs

• Q.4. Select the correct equation

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MCQs

• Q.5. Revenue is generally considered as realized.

24
MCQs

• Q.6. The accounting standards are mandatory for
  

25
MCQs

• Q.7. Provision for bad debts is the application
  of which of the following concept convention

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MCQs

• Q.8. As per AS-1, the fact need not be disclosed
  in the financial statements if the following
  concept is followed.

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MCQs

• Q.9. Economic life of an enterprise is split into
  the periodic interval as per

28
MCQs

• Q.10. Selection of Accounting policies
  appropriation is not based on