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Accounting for Companies – II Anand Thakur, Lovely Professional University

notes unit 3: accounting standards (as) – 14

contents

Objectives
Introduction
3.1 Accounting Standards
3.2 Summary

3.3 Keywords
3.4 Review Questions
3.5 Further Readings

objectives

After studying this unit, you will be able to:
l z Define the term accounting standards
l z Understand the various terms or definitions used in accounting standards

l z Explain the types and methods of amalgamation
l z Recognise the accounting standard
introduction

Any activity that you perform is facilitated if you have a set of rules to guide your efforts. Further,
you find that these rules are of more value to you if they are standardised. When you are driving
your vehicle, you keep to the left. You are in fact following a standard traffic rule. Without the
drivers of vehicles adhering to this rule, there would be much chaos on the road. A similar
principle applies to accounting which has evolved over a period of several hundred years, and
during this time certain rules and standards have come to be accepted as useful.
This Accounting Standard includes paragraphs 1 to 46 which should be read in the context of
the Preface to the Statements of Accounting Standards. The following is the text of Accounting
Standard (AS)-14, Accounting for Amalgamations, issued by the Institute of Chartered Accountants
of India. This standard has come into effect in respect of accounting periods commencing on or
after 1.4.1995 and will be mandatory in nature. The Guidance Note on Accounting Treatments
of Reserves in Amalgamations issued by the Institute in 1983 will stand withdrawn from the
aforesaid date.
1. This statement deals with accounting for amalgamations and the treatment of any resultant
goodwill or reserves. This statement is directed principally to companies, although some of
its requirements also apply to financial statements of other enterprises.
2. This statement does not deal with cases of acquisitions which arise when there is a
purchase by one company (referred to as the acquiring company) of the whole or part of
the shares, or the whole or part of the assets of another company (referred to as the acquired
company) in consideration for payment in cash or by issue of shares or other securities in
the acquiring company or partly in one form and partly in the other. The distinguishing
feature of acquisition is that the acquired company is not dissolved and its separate entity
continues to exist.

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