(ACCOUNTING STANDARDS WITH I.F.R.S.)
Accounting standard refers to such standards, which for all transactions, is a method of identifying the same type of method and a process of measuring results and providing information in which its users can make an appropriate decision.
-American Accounting Association.
It is considered very important that the financial statements of a company can be compared with the financial statements of other similar companies. Accordingly, the manager can exercise control over the economic condition and profits of the company, whether it is expressed less or less. It is also necessary that whatever accounting information is given in the financial statements, it should be considered reliable by the different entities, making the financial statements equally increases their comparability and reliability. It has the following two components
(1) The financial statements of an enterprise for different accounting years are based on the same methods and policies so that a meaningful comparative review of the progress of the enterprise can be made. This is commonly called Time Series Analysis.
( 2) Financial statements of different undertakings are prepared at the same time in relation to the same method and policies so that the result of the related operations can be extracted at the same time. This is called cross sectional analysis.
The task of accounting standards is to provide a prudential framework for the preparation of reliable financial statements of a high standard.
“Accounting standard is a policy document issued by a recognized accounting body in which various aspects of accounting practice events are related to measurement, management and disclosure.”
It is clear from the above definition that the accounting standard has a special contribution in the preparation of the format of the financial statement. In the absence of accounting standard, various options will arise in which the accountant will prepare the account according to his interest. The financial statements made by this creative accounting method will be considered unreliable and there will be no special restraint on the results, therefore it is very important to have meaningful accounting standards.
(i) Formulation of accounting standards.
(ii) Harmonization of accounting standards in public interest.
(iii) To publish.
(iv) To be recognized globally
(v) To create credibility with respect to the results of the financial statements.
(vi) Elimination of inconsistent and confusing accounting operations.
Therefore, on June 29, 1973, the International Accounting Standards Committee (IASC) was formed at the international level.
Accounting Standards In India
In India, on April 21, 1977, the Institute of Chartered Accountants of India constituted the Accounting Standards Board to lay down the accounting standards or standards, on the basis of which India’s International Accounting Standards Committee was established. Told by Formulate accounting standards from time to time in relation to their implementation in India.
Accounting Standards Board Framework
It is designed to provide an opportunity to all interested parties to be fairly represented. In which Presently Member of Council, Representative of Industries, Banks. Company Law Board, Central Board of Direct Taxes, Auditor General, Auditor General of India and SEVI (Security Exchange Board of India).
Formulation of Accounting Standards
(1) Accounting standards should be made in such a way that they are compatible with the rules, custom and environment of India.
(2) Accounting standards are rules by nature but in reality they are not rules. Though every possible care is taken in framing them, still a conflict may arise between the law and the accounting standards as the accounting standards are amended from time to time. In any case, the statement of accounting standards cannot override the accounting standards. However, in case of disagreement, the financial statements should be prepared keeping in view the relevant rules keeping in view the various arrangements. In such a situation, the accounting standards would not be applicable to the extent appropriate. Nevertheless, the institutions shall decide the extent to which disclosure should be made in the financial statement and auditor’s report. Full and proper of the item in relation to which this disclosure is made.
(3) Accounting standards should be made related to the items and they should be used from the date mentioned by the institute.
And they should be used in all undertakings unless there is a special thing.
(4) Accounting standards should be related to important matters as far as possible.
In the context of the above, the Accounting Standards Board used the following method to formulate accounting standards:
(1) The Board prepared a range of accounting standards where it would be necessary to use them.
(2) Will take help in making rules from various undertakings. Then this undertaking will prepare the preliminary draft. Thereafter Accounting Standards Board will study it and then send it to various external bodies like FICCI, ASSOCHAM, SCOPE, CLB, S8AG, ICWAI, ICSI, CDBT etc. Then this board will invite the representatives of all the above for discussion.
(3) After doing the above work, the members of the Institute will be given a copy of the board to know their views. Will send and publish in the Journal of the Institute which will contain the following things:
(A) a statement containing the concepts and accounting principles relating to the standard,
(B) the definitions of the items given in the standard,
(C) Method in which standards related to accounting principles have been made,
(D) the class of undertakings in which the standards shall be used,
(E) Date of standard use.
(4) After all the criticisms on the draft, prepare the final draft and send it to the Institute.
(5) Finally, the Council of the Institute will study the draft and, if necessary, take the opinion of the Accounting Standards Board, but may make changes. Thereafter the authorized council of the Institute will issue it.
Thus, the following accounting standards have been suggested from time to time for their implementation in India:
Note 1 . Entities to which Accounting Standards do not apply:
(i) Sole Trader Entities/Individuals
(ii) Partnership firms
(iii) Registered co-operative societies
(iv) Nuclear Hindu Undivided Family
(v) Institution of Persons (vi) Pranyas Note
Note 2. AS 3 and AS 17 are essentially applicable to the following entities:
(i) Undertakings whose shares and debt securities are listed on a recognized stock exchange in India.
(ii) All commercial industrial and trading undertakings whose sales in the accounting period exceed 50 crores.
Note 3. AS 20 is generally mandatory for those undertakings whose equity shares or prospective shares are listed on a registered stock exchange in India. Entities that do not have shares or potential shares but are listed which indicate earnings per share should disclose earnings per share by computing the same based on AS 20.
Note 4 . AS 21 is mandatory for those entities that present consolidated financial statements.
Note 5 . AS 22 whose accounting period is on or after 1.4.2001. It is mandatory in nature for those who:
(A) whose accounting period begins on or after 1.4.2001, relating to: (i) an undertaking whose shares or debt securities are listed on a registered stock exchange in India and an undertaking intending to issue shares or debt securities; Undergoing the phase of liquidation, shall be listed on the registered Stock Exchange in India as per the resolution of the Board of Governors in this regard.
(ii) If the holding company prepares consolidated financial statements for all the undertakings of a group, then the accounting standards are mandatory in nature in respect of any of the undertakings of that group within the meaning of (i) above.
(B) in respect of all those not falling in (A) above, for the accounting period commencing on or after 1.4.2002.
(C) all accounting periods commencing on or after 1.4.2003 for all undertakings.
AS1 – Disclosure of Accounting Policies
First accounting standard, which is related to disclosure of accounting policies, was declared. It describes the policies that are followed in the preparation and presentation of financial statements.
Under this there are the following three basic accounting assumptions:
Consistency : It is a general belief that there should be consistency or consistency in accounting policies from year to year so that the accounting information and figures are mutually comparable, otherwise they will have difficulty in decision making.
(ii) Going concern: It should be assumed that the business will continue indefinitely. The business or undertaking has no intention, no intention, and no necessity for its end. Also, the business has no tendency to reduce its activities.
(iii) Accruals : All the expenses related to the accounting period of any business which have been paid or not paid at that time i.e. unpaid expenses and all the income related to the same accounting period which have been earned. Whether they have been received or are yet to be received i.e. accrued income, they should be adjusted in the books so that the correct position of the accounting period can be known.
Different accounting policies may be adopted by different undertakings or businesses in the following areas:
- Methods of Depreciation, Set-off and Write-off
- inventory valuation
- valuation of investments
- accounting of expenses at the time of manufacture
- goodwill accounting
- accounting of retirement benefits
- valuation of fixed assets
- foreign currency conversion
- accounting for contingent liabilities
- Accounting for benefits of long term contracts
Disclosure requirements of accounting policies
(i) All significant accounting policies should be disclosed.
(ii) Disclosure of financial statements and significant accounting policies should be disclosed at one place.
(iii) Basic or fundamental accounting assumptions are adopted in the preparation of financial statements such as going concern, stability and earnings, then special disclosure is not necessary. But when a fundamental or fundamental accounting assumption has not been adopted, this fact should be disclosed.
(iv) If any change in accounting policy is made which has a material effect in the current year period, the amount by which any item in the financial statement is affected, the change should be disclosed. Provided that where such amount cannot be ascertained wholly or in part, that fact shall be mentioned. Must go If a change in accounting policy has an effect in subsequent periods, the fact of such change shall be Tax must be paid in the period in which the change is made.
AS-2 Valuation of Inventories
It is used to bring uniformity in the evaluation of stocks of different units of the same industry. Comparative study can be done easily. In this the following words are used.
1. Inventories : It refers to the tangible or tangible assets that are kept for sale in the business. or for use in the production of goods.
2. Cost of Purchase: In this the purchase price, inland freight, import tax and other expenses related to the purchase of goods are included and trade discount, duty and other grants are deducted which are included in this years immediately or in deferred form for this purpose? ,
3. Historical Cost: It refers to the cost which is incurred to bring the stock to its present condition, in which the sum of conversion cost, purchase cost and other costs are included.
4. Direct Costs: This is the method in which the cost of inventory is determined only as an appropriate part of the fixed costs, all fixed costs are charged or charged against revenue in the period in which they are incurred. are done.
5. Cost of Conversion: These costs are incurred specifically in the production of units, such as direct labour, direct expenses etc.
6. Fixed Costs: These costs are always fixed which do not change with the volume of production.
7. Net Realizable Value: In this, net realizable value after deducting the costs of completing the goods and the special costs incurred in the sale of goods from the actual or estimated selling price in the normal course of business. value is considered.
8. Variable Costs : These costs are directly related to the volume of production. Like material cost, labor cost etc.