ACCOUNTING STANDARDS

1. ACCOUNTING STANDARDS

2. BACK GROUND
Every profession develops a
body of knowledge
consisting of principles,
which are considered as
standard to be attained.
Accounting is no exception.
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3. PREVIEW
INTRODUCTION
AIM
NEED FOR ACCOUNTING STANDARDS
BASIS
SCENARIO
• INTERNATIONAL
• NATIONAL
AS & IND AS
CONCLUSION

4. AIM
TO GIVE AN OVERVIEW ON
ACCOUNTING STANDARDS
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5. OBJECTIVE OF ACCTG STDS
Standardize the diverse
accounting policies
Add the reliability to the financial
statement
Eradicate baffling variation in
treatment of accounting aspects
Facilitate inter-firm and intra-firm
comparison RTI, Jaipur 5

6. Accounting Event
A transaction or change
recognized on the financial
statements of an accounting
entity
An External transaction
would occur with an outside
party, such as the purchase
or sales of a good.
An Internal transaction is
for adjustment in the
accounts of the financial
statements
ACCTG EVENT

7. •national
/international org
•that have been
delegated
responsibility
•for setting GAAP
•by statute in a
country /jurisdiction
ACCOUNTING
STANDARD
SETTING
BODY
STANDARD-SETTING BODIES

8. • International Accounting Standards BoardIASB
• Financial Accounting Standards BoardFASB
• Generally Accepted Accounting PrinciplesGAAP
• International Financial Reporting StandardsIFRS
STANDARD-SETTING BODIES
STD SETTING
BODIES
FASB
GAAP (US)
IASB
IFRS (OTHERS)
OTHER STDs
EG INDIA (AS)

9. INDEPENDENT BODY ESTABLISHED IN 1973
ESTABLISHES FINANCIAL ACCOUNTING AND REPORTING STANDARDS
FOR PUBLIC AND PRIVATE COMPANIES THAT FOLLOW GAAP
RECOGNIZED BY THE SECURITIES AND EXCHANGE COMMISSION (SEC),
AICPA
THE FINANCIAL ACCOUNTING FOUNDATION (FAF) SUPPORTS AND
OVERSEES THE FASB.
ESTABLISHED IN 1972, RESPONSIBLE FOR THE OVERSIGHT, ADMIN,
FINANCING & APPOINTMENT OF THE FASB & THE GOVERNMENTAL
ACCOUNTING STANDARDS BOARD (GASB).
FASB

10. GAAP
• Great Depression1929
• Formulation of SEC1930
• AIA roped in1934
• GAAP Conceptualised1936
• CAP created, GAAP std createdLate 1930s
• SEC replaced CAP with FASB1973

11. FASB - STRUCTURE

12. GAAP
GAAP
PRINCIPLES
ASSUMPTIONSCONSTRAINTS

13. Assumptions
BUSINESS
ENTITY
MONETARY
UNIT
PERIODICITY
GOING
CONCERN
activities of a business
must be kept separate
from the activities of
the business owner.
only activities that can
be expressed in dollar
amounts can be
included in accounting
records.
business activities can
be reported in distinct
time intervals
the intent of a
business to continue
operations into the
foreseeable future
GAAP - ASSUMPTIONS

14. PRINCIPLES
HISTORICAL
COST
MATCHING
PRINCIPLE
FULL
DISCLOSURE
REVENUE
RECOGNITION
money that was paid for
an item when purchased
and is not changed to
account for inflation
Use accrual form of
accounting & match
business income to
business expenses in a
given time period
that all information
that is relative to the
business be reported
revenue be reported
on the income
statement in the
period in which it is
earned
GAAP - PRINCIPLES

15. CONSTRAINTS
OBJECTIVITY
CONSISTENCY
CONSERVATISM
MATERIALITY
financial statements
of an organization be
based on solid
evidence.
Once an accounting
principle is adopted,
continue to follow it
consistently in
future accounting perio
ds
potential expenses &
liabilities recognized
immediately, but
potential revenue not
recognized until actually
received
measure of
importance of a
misstatement in
accounting records
GAAP - CONSTRAINTS

16. Country GAAP
China Chinese Accounting Standards (Zhōngguó qǐyè kuàijì zhǔnzé 中
国企业会计准则)
Canada Generally Accepted Accounting Principles
France Generally Accepted Accounting Practice (Plan Comptable
Général)
Germany Generally Accepted Accounting Practice (Grundsätze
ordnungsmäßiger Buchführung)
India Generally Accepted Accounting Practice
Russia Generally Accepted Accounting Practice (RAP)
United Kingdom Generally Accepted Accounting Practice
United States Generally Accepted Accounting Principles
GAAP - FOLLOWERS

17. ORG INVOLVED IN STD SETTING

18. 6. Announce final revisions to the ASC
5. Weigh all public responses and revise accordingly
4. Propose new standards and invite business feedback
3. Publish Exposure Draft for investor commentary
2. Draft issue agenda & hold public meetings
1. Identify current investor issues
THE FASB STANDARDS-SETTING PROCESS
Accounting Standards Codification

19. IFRS

20. Need for convergence towards
Global Standards
• International Accounting Standards
(IAS)/International Financial Reporting Standards
(IFRS) (collectively referred to as IFRS), issued by
International Accounting Standards Board (IASB)
in 1973 are now widely recognised as Global
Accounting Standards.
• More than 130 countries and reporting
jurisdictions currently require or permit the use
of or have a policy of convergence/adoption of
IFRS.
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21. Accounting Standards in Different
Nations
• In India, 32 Accounting Standards as IAS under
NACAS
• As per International, there are 41 Accounting
Standards called as IFRS
• Adopted by 8 countries in the world
• 70 to 80 countries planning to adhere IFRS

22. Stands for Generally Accepted Accounting
Principles
They are the standard framework of guidelines for
financial accounting
Include the standards, conventions & rules that
accountants follow in recording, summarizing and
in the preparation of financial statements
Many businesses choose to opt out of GAAP
practices as they operate on a cash basis, as
opposed to an accrual basis
OBJECTIVES OF IFRS
The main difference between
accrual and cash basis accounting is the
timing of when revenue and expenses
are recognized.
The cash method accounts for revenue
only when the money is received and for
expenses only when the money is paid
out.

23. Difference between IFRS and
GAAP

24. GAAP IFRS
Stands for
Generally Accepted
Accounting Principles
International Financial Reporting
Standards
Introduction
Standard guidelines and
structure for typical
financial accounting
Universal financial accounting method
that lets international businesses to
understand each other and work
together
Used in United States
Around 120 countries, including the
European Union
Required
documents in
financial
statements
Balance sheet, income
statement, statement of
comprehensive income,
changes in equity, cash
flow statement, footnotes
Balance sheet, income statement,
changes in equity, cash flow statement,
footnotes
Definition of an
asset
The U.S. GAAP framework
defines an asset as a
future economic benefit
The IFRS framework defines an asset as
a resource from which future economic
benefit will flow to the company

25. INDIAN SCENARIO
• The institute of Chartered Accountants of
India, recognizing the need to harmonize the
diverse accounting policies and practices,
constituted at Accounting Standard Board
(ASB) on 21st April, 1977.
• Initiated by Kumar Mangalam Birla, chairman
committee of Corporate Governance for
Financial Disclosures

26. INDIAN STD STETTING BODIES
THEY ARE NATIONAL REGULATORS
HAVING AUTHORITY TO SET AND
IMPLEMENT REGULATORY RULES
IN FIN SECTOR

27. INDIAN STD STETTING BODIES
• FOR REGULATION & SUPERVISION OF BANKS AND FIN
INSTITUTIONS, MONEY, FOREIGN EXCHANGE AND
GOVT SECURITIES MARKET
RBI
• TO PROTECT INTEREST OF INVESTORS IN SECURITIES
AND TO PROMOTE , REGULATE SECURITIES MARKET
SEBI
• PROTECTING THE INTERESTS OF THE POLICY HOLDERS, TO
REGULATE, PROMOTE AND ENSURE ORDERLY GROWTHIRDA
• LEGAL FRAMEWORK FOR INCORPORATION FUNCTIONING OF
COMPANIES, SURVEILLANCE OVER CORPORATE SECTOR TO
ENSURE FINANCIAL HEALTH & COMPLIANCE WITH STATUTORY
PROVISIONS, PRESCRIBING COST AUDIT RULES AND
APPOINTMENT OF COST AUDITORS, INVESTIGATION OF
COMPLAINTS, COORDINATION WITH OTHER REGULATORY
BODIES
MINISTRY
OF
CORPORA
TE
AFFAIRS

28. INDIAN STD STETTING BODIES
STANDING COMMITTEE
• SET UP IN DEC 1999
• TASK TO MONITOR DEVELOPMENTS IN GLOBAL STDS
• CREATE FINANCIAL ARCHITECHTURE
• WRT APPLICABILITY TO INDIAN FINANCIAL SYSTEM
ADVISORY GROUPS
• ROLE TO ASSIST STANDING COMMITTEE
• EMINENTS & EXPERTS PANEL
• TACKLES SPECIFIC TOPIC

29. CONTROLLING BODIES
NACAS
• ADVISES THE CENTRAL GOVERNMENT ON THE FORMULATION AND LAYING
DOWN OF ACCOUNTING POLICY AND ACCOUNTING STANDARDS FOR
ADOPTION BY COMPANIES
MEMBERS
• CHAIRPERSON (PERSON OF EMINENCE)
• 1 X REP OF ICAI
• 1 X ICWA
• 1 X CSI
• 1 X GOVT, RBI CAG, TAX DEPT
• ACADEMICIA
• REPS OF CHAMBERS OF COMMERCE & INDUSTRY
• 1 x SEBI

30. Accounting Standards in India
The ICAI, established Accounting Standards
Board (ASB) in 1977, to issue Accounting
Standards (AS) in India
• Initially, AS were mandatory for members of the ICAI
acting as auditors
• In the year 1999, the Companies Act 1956, was
amended to make AS mandatory to companies
• In 2006, Central Government notified 28 Accounting
Standards, as recommended by ICAI under Companies
(Accounting Standards) Rules 2006 with
recommendation of NACAS.31

31. Compliance with Accounting
Standards issued by ICAI
Sub Section(3A) to section 211 of Companies Act, 1956
requires that every Profit/Loss Account and Balance Sheet
shall comply with the Accounting Standards.
'Accounting Standards' means the standard of accounting
recommended by the ICAI and prescribed by the Central
Government in consultation with the National Advisory
Committee on Accounting Standards(NACAS) constituted
under section 210(1) of companies Act, 1956.

32. 31 Acctg Stds
ACCTG STDS

33. Accounting
standards
Initiation
1. AS 1 to 15 1979 to 1995
2. AS 16 to 29 2000 to 2007
3 AS 30 to 31 Later part of 2007
EVOLUTION AND TYPES OF AS

34. 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 Date
AS 5.Net Profit or loss For the period, Prior period items
and Changes in accounting Policies.
ACCTG STDS

35. AS 6.Depreciation accounting.
AS 7.Construction Contracts.
AS 8.Revenue Recognition.
AS 9.Accounting For Fixed Assets
AS 10.The Effect of Changes In FOREX Rates.
AS 11.Accounting For Government Grants.
AS 12.Accounting For Investments.
ACCTG STDS

36. AS 13. Accounting For Amalgamation
AS 14.Employee Benefits.
AS 15.Borrowing Cost.
AS 16. Segment Reporting.
AS 17. Related Party Disclosures.
AS 18. Accounting For Leases.
AS 19. Earning Per Share.
ACCTG STDS

37. AS 20. Consolidated Financial Statement.
AS 21. Accounting For Taxes on Income.
AS 22. Accounting for Investment in associates in
Consolidated Financial Statement.
AS 23. Discontinuing Operation.
AS 24. Interim Financial Reporting.
AS 25. Intangible assets.
ACCTG STDS

38. AS 26.Financial Reporting on Interest in joint Ventures.
AS 27. Impairment Of assets.
AS 28.Provisions, Contingent, liabilities and Contingent
assets.
AS 29. Financial instrument.
AS 30. Financial Instrument: presentation.
AS 31. Financial Instruments, Disclosures and Limited
revision to accounting standards.
ACCTG STDS

39. PRESNET STATUS
GOVERNMENT HAS DECIDED TO CONVERGE AND NOT TO
ADOPT IFRS ISSUED BY IASB.
THE ICAI HAS FORMULATED IFRS-CONVERGED
STANDARDS, KNOWN AS INDIAN ACCOUNTING
STANDARDS (IND AS), WHICH HAVE BEEN NOTIFIED BY
THE MCA UNDER COMPANIES (INDIAN ACCOUNTING
STANDARDS) RULES, 2015 VIDE NOTIFICATION DATED
FEBRUARY 16, 2015,
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40. Roadmap for Implementation on Ind
ASs
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41. Roadmap for Implementation on Ind
ASs (Contd.)
Phase I
1st April 2015 or thereafter: Voluntary Basis for
all companies
1st April 2016: Mandatory Basis
• Companies listed on Stock Exchange having net
worth > Rs. 500 Crore
• Unlisted Companies having net worth > Rs. 500
Crore
• Parent, Subsidiary, Associate and J. V of Above
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42. Roadmap for Implementation on Ind
ASs (Contd.)
Phase II 1st April 2017 (Mandatory basis)
• All Listed Companies not covered in Phase I
• Unlisted Companies having net worth Rs. 500
Crore > Rs. 250 crore
• Parent, Subsidiary, Associate and J. V of Above
– Other companies will continue to follow existing AS
– Roadmap for banks, NBFCs and insurance companies
still to be decided
• Banks, Insurance Companies, MBFC’s, RRB’s not yet
covered in Phase I and Phase II. Roadmap is yet to
be notified.
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43. Understanding Ind AS from AS
• Ind AS are based more on substance over form
• Sale of Goods on Extended Credit Terms, i.e.,
goods sold on terms extending more than
normal credit period.
– Financing element inbuilt in price is segregated and
considered as ‘interest’ income.
– Say, goods normally sold at price at Rs. 100 for 3
months credit
• If sold for Rs. 110 for 15 months credit: Rs. 10 considered as
‘interest’ income
• This has VAT and TDS implications
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44. JAI HIND