Page 49 - DMGT104_FINANCIAL_ACCOUNTING

Unit 3: Accounting Standards

5. Class of enterprises to which the standard will apply. Notes
6. Date from which the standard will be effective.
After the publication of ED, the comments and views are collected from the different corners. Then
ASB finalizes the proposed standard and submit it to the council of the Institute of chartered
accountant of India for the approval. The council considers the ED and, if found necessary, modifies
with the consolation of the Accounting Standard Board. Then final shape of the standard is issued
under the authority of the council. In the beginning, this is recommendatory and after some period
it becomes mandatory. The board has issued the following standards for adoption worldwide. A
number of provisional standards relating to other aspects of accounting are an anvil.

3.1.3 Nature

The Institute of chartered Accountants of India had set up Accounting Standards Board on 22nd
April, 1977 to formulate accounting standards on a number of accounting issues, taking into
account the accounting standards developed by the International Accounting Standard
Committee, prevailing laws in India, business customs usages and conventions etc. The
Accounting Standards made were not mandatory in the beginning but after the amendment in
the Sec 211(3C) of Companies Act, 1956 Accounting Standards out of 28 have been made
mandatory. The Auditor is required to give in his report to the shareholders that accounts are
prepared (drawn) in accordance with the provisions relating to Accounting Standards in India.
The Purpose of this exercise is to make the financial statements more reliable, comparable,
consistent and transparent. These standards are made taking into account the laws of the country,
business custom, environments etc. If there is a change in any law of the country or change in
business custom or environment, the accounting standards are also changed/altered. This
flexibility of Accounting Standards is a special feature which makes them more popular and
friendly with the users.
If any enterprise wants to change/modify any business custom/practice the same must be
properly disclosed along with its effects. For example—change of depreciation method, must be
disclosed along with its effect on profit or loss.
The Institute of Chartered Accountants of India has issued the following accounting standards:
AS 1. Disclosure of Accounting policies.

AS 2. Valuation of Inventories.
AS 3. Cash Flow Statement.
AS 4. Contingencies and Events occurring after the Balance Sheet Date.
AS 5. Net Profit or loss for the period, prior items and changes in accounting policies.

AS 6. Depreciation Accounting.
AS 7. Accounting for Construction Contracts.
AS 8. Accounting for research and development.
AS 9. Revenue Recognition.

AS 10. Accounting for fixed Assets.
AS 11. Accounting for the effects of changes in foreign Exchange rates.
AS 12. Accounting for Government grants.
AS 13. Accounting for Investments.

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