Page 7 - DCOM409_CONTEMPORARY_ACCOUNTING

Contemporary Accounting

Notes statements. World over, professional bodies of accountants have the authority and the obligation
to prescribe “Accounting Standards”. International Accounting Standards (IASs) are pronounced
by the International Accounting Standards Committee (IASC). The IASC was set up in 1973, with
headquarters in London (UK).
In India, the Institute of Chartered Accountants of India (ICAI) had established in 1977 the
Accounting Standards Board (ASB). The composition of ASB includes (i) elected (ii) ex-officio
and (iii) co-opted members of the Institute, nominees of RBI, FICCI, Assocham, ICSI, ICWAI and
special invitees from UGC, ICWAI, and SEBI, IDBI and IIM.
ASB is entrusted with the responsibility of formulating standards on significant accounting
matters, keeping in view (a) international developments as also (b) legal requirements in India.
According to the preface to the Statement on Accounting Standards issued by the ICAI, Accounting
Standards will be issued by the ASB constituted for the purpose of harmonising the different and
diverse accounting policies and practices in use in India and propagating the Accounting Standards
and persuading the concerned enterprise to adopt them in the preparation and presentation of
financial statement.

Self Assessment

Fill in the blanks:
1. Accounting standard is an authoritative pronouncement of code of practice of the regulatory
accountancy body to be observed and applied in the preparation and presentation of
………………..
2. The IASC was set up in ………….., with headquarters in London (UK).
3. In India, the Institute of Chartered Accountants of India (ICAI) had established in ………….
the Accounting Standards Board (ASB).
4. ASB is entrusted with the responsibility of formulating standards on significant accounting
matters, keeping in view (a) international developments as also (b) …………….in India.

5. The term …………….. denote a discipline, which provides both guidelines and yardsticks
for evaluations.

1.2 Nature and Rationale of Accounting Standards

Accounting Standards are formulated with a view to harmonise different accounting policies
and practices in use in a country. The objective of Accounting Standards is, therefore, to reduce
the accounting alternatives in the preparation of financial statements within the bounds of
rationality, thereby ensuring comparability of financial statements of different enterprises with
a view to provide meaningful information to various users of financial statements to enable
them to make informed economic decisions.
The following points discuss the nature of accounting standards for the perspective of key acts
and organisations:

1.2.1 Accounting Standards and Companies Act

The specific provisions of the Companies Act include,
1. Section 211 (form and contents of Balance Sheet and Profit & Loss Account)

(3A): Every profit and loss account, balance sheet of the company shall comply with
the accounting standards.

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