16132_AS & Depreciation

7/29/2019 16132_AS & Depreciation

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ACCOUNTING STANDARD 1

By: Manju Asht

LFBAALPU Phagwara


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Introduction

Standards were known as principles till 1969

Standard is an agreed upon criteria of what is

proper practice in a given situation

They are a basis for comparison & judgment

They are a point of departure when variation is

justifiable by the circumstances and reported assuch

They are intentional and not accidental in origin


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Accounting Standards

Accounting standards are the accounting

policies or broad guidelines regarding the

principles and methods to be chosen out of

alternatives available

They direct a high but attainable level of

performance, without precluding justifiable

departures and variations in the proceduresemployed.

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Accounting standards mainly deal with

Financial measurements

Disclosures

AS are basically used for better financial

accounting and reporting.

AS helps in achieving Uniformity in accounting

practices.


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Nature of Accounting Standards

AS act as guidelines and handy tools for

Accountants and their work

With passage of time AS are being modified,

added or deleted as per needs

AS consists of 3 parts

A description of the problem

Discussion of ways of solving them

In the light of discussion of the prescribed solution


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Advantages of AS

Reduction in variation: in preparing financialstatements

Facilitates comparison of FS of companies

Improve reliability of financial statements

Help accounting professionals and auditorswhile performing their duties.

Accounting reforms

Determining accounting and corporateaccountability

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Standard setting in India

ASB -constituted on 21st April 1977 by ICAI to

harmonize accounting policies and practices.

It formulates AS considering applicable law,customs, usage and business environment

ASB gives due consideration to IAS issued by

IASC and try to integrate them in India.

Consists of 16 members including Company

Law Board, CBDT, Industry and SEBI etc

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Functions of ASB

Main function

formation of AS While formulation of AS, it has to consider the

law, customs, social and business environment

Give due consideration to IAS and IFRS

To persuade the accounting professionals to

adopt them

Issue guidance notes on AS

Review AS from time to time


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Enforcement of Accounting Standards

It is the duties of the appointed members of

ICAI, ICWAI & ICSI to ensure that company has

followed AS in FSs

In case of variations, disclose such issues in

their reports

Earlier the AS were recommendatory but later

made as mandatory with amended Cos Act.


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Enforcement is important for improvingquality of presentation of FSs.

AS are also applicable to non corporate

entities, but still there is a controversy aboutapplicability of AS to non corporate in India

Central govt may constitute National Advisory

Committee (NAC) to advice CG on AS &policies

ICAI will not be the final authority for AS


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Slow progress in standard setting in

India as compared to UK and USA

Indifferent attitude of ICAI since they remain

focused on conducting exam for CAs and basic

activities of Audit.

Standards setting programmes lacks

confidence of general public for accounting

issues

Rigidity of accounting professionals and

auditors


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Accounting professions lacks leaders who

could lead the discipline in an effective way

Accounting research plays an important role inthe development of standards, which is

extensively done in USA and UK

In India not much accounting research has

been done.


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Procedure for issuing AS

Determine the broad areas in which AS needs tobe formulated and its priority

Get assistance from the Govt, PSU, industry,study groups, institutes and other org

To prepare and issue the draft of the proposedstandard which include:

Objective of standard

Scope of standard

Definitions of terms used in standard

Recognition and measurement principles, ifapplicable

Presentation and disclosure requirements13


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The concerned groups comment on draft ofproposed accounting standard.

ASB considers preliminary draft prepared bythe study group and if revision is required, thesame is done.

ASB circulates the draft for comments to

council members of ICAI and other bodies like

Deptt of Co Affairs (DCA)

Comptroller and Auditor General of India (C&AG)

Central Board of Direct Taxes (CBDT) ICWAI, ICSI, ASSOCAHM, CII, FICCI, RBI, SEBI,

SCOPE, IBA and any other body consideredrelevant for the purpose


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Meeting is held by ASB to ascertain the views

of draft AS.

ASB finalizes the draft after taking into

consideration the comments received

ASB submits final draft of the proposedstandard to the council of the ICAI.

The council will consider the final draft, and if

found necessary modify the same in

consultation with ASB.

The AS on the relevant subject is issued

under the authority of the council15


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Accounting Policies

These are specific accounting principles and

methods of applying the same by the entity in

the preparation and presentation of FS.

For Ex:

Method of depreciation, depletion

Treatment of goodwill, stock

Treatment of contingent liabilities

Valuation of investments etc

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Interpretation of AS and comparison of

AS with IAS

Refer to book pg 3.4

3.6


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AS 1 & AS 17

Refer to Text Book pg. 3.11-3.13

Refer to Text Book Chapter Segment

Reporting


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Depreciation Accounting

Meaning

Causes

Methods AS 6 (Refer to Book Pg 3.31 3.34)

Factors influencing selection of depreciation

method

16132_AS & Depreciation

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