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CHAPTER 3 ACCOUNTING STANDARDS

At the end of this chapter you will be conversant with:


3.1 Meaning of Accounting Standards
3.2 International Accounting Standards
3.3 List of accounting standards issued by IASC
3.4 Auditors duties in relation to accounting standards
3.5 Accounting Standards Issued By ASB of the Institute of Chartered Accountants of
India

3.1 MEANING OF ACCOUNTING STANDARDS


An accounting standard is a selected set of accounting policies or broad guidelines regarding
the principles & methods to be chosen out of several alternatives. Accounting Bodies all over
the world have tried to achieve some uniformity in the accounting policies by prescribing
certain accounting standards in order to narrow the range of alternatives available to an
organization in respect of collection and presentation of accounting information.
The main objective of accounting standards is to harmonize the diverse accounting policies and
practices & ensure comparability of accounts because of uniformity in their presentation.
3.2 INTERNATIONAL ACCOUNTING STANDARDS
Accounting Bodies throughout the world are striving to achieve a reasonable degree of
uniformity in the accounting policies by prescribing certain accounting standards with respect
to collection and presentation of accounting information. To formulate the accounting
standards, they have established a committee called the International Accounting Standards
Committee (IASC) in 1973. Accounting bodies of most of the countries, including the Institute
of Chartered Accountants of India, are members of this body and these members have resolved
to conform to the standards developed by IASC, subject to variations needed due to local
conditions or laws.
The objectives of the committee according to its constitution are:
a. formulating, publishing and promoting the use of the accounting standards worldwide,
and
b. to work for the improvement and harmonization of regulations, accounting standards
and procedures relating to financial statements
The International Accounting Standards have assumed great importance in recent times for the
following reasons:

a. Globalization of the economy has led to Indian companies expanding their operations
across the borders and this calls for uniformity in accounts of units located in different
countries.
b. Foreign investors would give more weightage to the accounts of those companies which
are based on International Accounting Standards.
If there is a conflict between the International Accounting Standards and the local standards or
the local laws and regulations, the local standards, laws and regulations will prevail.
3.3 The list of accounting standards issued by the IASC is given below:
IAS 1

Presentation of Financial Statements

IAS 2

Inventories

IAS 7

Cash Flow Statements

IAS 8

Net Profit or Loss for the Period, Fundamental Errors and Changes in
Accounting Policies
Events after the Balance Sheet Date
Construction Contracts
Income Taxes
Segment Reporting
Information Reflecting the Effects of Changing Prices
Property, Plant and Equipment
Leases
Revenue
Employee Benefits

IAS 10
IAS 11
IAS 12
IAS 14
IAS 15
IAS 16
IAS 17
IAS 18
IAS 19
IAS 20

Accounting for Government Grants and Disclosure of Government


Assistance

IAS 21

The Effects of Changes in Foreign Exchange Rates

IAS 22

Business Combinations

IAS 23

Borrowing Costs

IAS 24

Related Party Disclosures

IAS 26

Accounting and Reporting by Retirement Benefit Plans

IAS 27

Consolidated Financial Statements

IAS 28

Investments in Associates

IAS 29

Financial Reporting in Hyperinflationary Economies

IAS 30

Disclosures in the Financial Statements of Banks and Similar


Financial Institutions

IAS 31

Financial Reporting of Interests in Joint Ventures

IAS 32

Financial Instruments: Disclosure and Presentation

IAS 33

Earnings per Share

IAS 34

Interim Financial Reporting

IAS 35

Discontinuing Operations

IAS 36

Impairment of Assets

IAS 37

Provisions, Contingent Liabilities and Contingent Assets

IAS 38

Intangible Assets

IAS 39

Financial Instruments: Recognition and Measurement

IAS 40

Investment Property

IAS 41

Agriculture

3.4 AUDITORS DUTIES IN RELATION TO ACCOUNTING STANDARDS


In case the company does not conform to any of the mandatory accounting standards, the
auditor will have to qualify his report justifying his deviation. In case he fails to do so the ICAI
can take disciplinary action against him on the ground of professional misconduct.
3.5 ACCOUNTING STANDARDS ISSUED BY ASB OF THE INSTITUTE OF CHARTERED
ACCOUNTANTS OF INDIA

(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 and Extraordinary Items and
Changes in Accounting Policies

(AS 6) Depreciation Accounting

(AS 7) Construction Contracts (Revised Accounting Standard)

(AS 8) Accounting for Research and Development

(AS 9) Revenue Recognition

(AS 10) Accounting for Fixed Assets

(AS 11) (Revised 2003), The Effects of Changes in Foreign Exchange Rate

(AS 12) Accounting for Government Grants

(AS 13) Accounting for Investments

(AS 14) Accounting for Amalgamations

(AS 15) Accounting for Retirement Benefits in the Financial Statement of Employers

(AS 16) Borrowing Costs

(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 and Contingent Assets