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by an enterprise during an accounting period in monetary terms. These business activities vary from one enterprise to other. To compare the financial statements of various reporting enterprises poses some difficulties because of the divergence in the methods and principles adopted by these enterprises in preparing their financial statements. In order to make these methods and principles uniform and comparable to the extent possible standards are evolved.
What is the duty of Statutory Auditor for Compliance with Accounting Standards ?
Section 211(3A) of Companies Act, 1956 provides that every profit and loss account and balance sheet of the company shall comply with the accounting standards. The statutory auditors are required to make qualification in their report in case any item is treated differently from the prescribed Accounting Standard. However, while qualifying, they should consider the materiality of the relevant item. In addition to this Section 227(3)(d) of Companies Act, 1956 requires an auditor to report whether, in his opinion, the profit and loss account and balance sheet are complied with the accounting standards referred to in Section 211(3C) of Companies Act, 1956.
How many Accounting Standards have been prescribed? Are these applicable to all companies irrespective of its size ?
In all 29 Accounting Standards have been prescribed. However their applicability is dependent on its size Level I / II / III company. The following table lists out the Accounting Standards and its applicability.
Level I Company : Enterprises, which fall in any one or more of the following categories, at any time during the accounting period, are classified as Level I enterprises : -
i) Enterprises whose equity or debt securities are listed whether in India or outside India. ii) Enterprises, which are in the process of listing their equity or debt securities as evidenced by the board of directors resolution in this regard. iii) Banks including co-operative banks. iv) Financial Institutions v) Enterprises carrying on insurance business. vi) All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 500 million. Turnover does not include other income. vii) All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 100 million at any time during the accounting period.
Level II Company:
Enterprises, which are, not Level I enterprises but fall in any one or more of the following categories are classified as Level II enterprises : i) All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 4 million, but does not exceed Rs. 500 million. Turnover does not include other income. ii) All commercial, industrial and business reporting enterprises having borrowing, including public deposits, in excess of Rs. 10 million but not in excess of Rs. 100 million at any time during the accounting period. iii) Holding and subsidiary enterprises of any one of the above at any time during the accounting period.
Applicability : Level II and Level III enterprises are considered as SMEs and Level I enterprises are required to comply fully with all the accounting standards. No relaxation is given to Level II and Level III enterprises in respect of recognition and measurement principles. Relaxations are provided with regard to disclosure requirements. Accordingly, Level II and Level III enterprises are fully exempted from certain accounting standards, which mainly lay down disclosure requirements. In respect of certain other accounting standards, which lay down recognition, measurement and disclosure requirements, relaxations from certain disclosure requirements are given.
Sr. No. 1 2 3
Particulars Disclosure of Accounting Policies Valuation of Inventories Cash Flow Statements Contingencies and Events Occurring After the Balance Sheet Date Net Profit or Loss for the period, Prior period Items and Changes in Accounting Policies. Depreciation Accounting Construction Contracts Accounting for Research and Development (This standard has been withdrawn w.e.f. 01.04.2004 for all levels of enterprises and AS 26 is applicable) Revenue recognition Accounting for Fixed Assets The Effect of Changes in Foreign Exchange Rates Accounting for Government Grants
I, II, III
I, II, III
6 7
As withdrawn
9 10 11 12
13
14
I, II, III
I, II, III
15
I, II, III
16
Borrowing Costs
I, II, III I II-with modification III- with modification I II-with modification III- with modification I II-with modification III- with modification I II-with modification III- with modification I I,II,III
17
Segment Reporting
18
19
Leases
20
21 22
Consolidated Financial Statements Accounting for Taxes on Income Accounting for Investments in Associates in Consolidated Financial Statements Discontinuing Operations Interim Financial Reporting Intangible Assets Financial Reporting of Interests in Joint Ventures
23
24 25 26
I I I,II,III I-with clarification II-with clarification III-with clarification I II-with modification III-with modification I
27
28
Impairment of Assets
29