Accounting Standards –Its Meaning, Significance & Need

Introduction of Accounting Standards

Preparation and presentation of corporate financial statement are governed by the companies act, 1956 and accounting standards. In India the institute of chartered accountants of India had established in 1977 an Accounting Standard Board (ASB).

Meaning of Accounting Standards

In this respect main purpose of standards is to provide information to the users as to the basis on which the accounts have been prepared.

The objective of setting standards is to bring about uniformity in financial reporting and to ensure consistency in the data published by enterprises. For accounting standards, to be useful tool to enhance the corporate governance and responsibility, two criteria must be satisfied, i.e.

(i)  A standard must provide a generally understood and accepted measure of the phenomena of concern.

(ii)  A standard should significantly reduce the amount of manipulation of the reported numbers and is likely to occur in the absence of the standards.

Significance of Accounting Standards

Accounting standards facilities uniform preparation and reporting of general purpose financial statements published annually for the benefit of shareholders, creditors, employee and public at large. They are very useful to the investors and other external groups in assessing the progress and prospects of alternative investments in different companies in different countries.

Need for Accounting Standards

Accounting standards can be seen as providing an important mechanism to help in the resolution of potential financial conflicts of interest between the various important groups in society. It is essential that accounting standards should command the greatest possible credibility among shareholders, creditors, employee and public at large.

Indian Accounting Standards

The accounting standards board of 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 Period Items and Changes in Accounting Policies
  • AS 6 – Depreciation Accounting
  • AS 7 – Construction Contracts (revised 2002)”’
  • AS 8 – Accounting for Research and Development (AS-8 is no longer in force since it was merged with AS-26)
  • AS 9 –  Revenue Recognition
  • AS 10 – Accounting for Fixed Assets
  • AS 11 – The Effects of Changes in Foreign Exchange Rates (revised 2003),
  • AS 12 – Accounting for Government Grants
  • AS 13 –  Accounting for Investments
  • AS 14 – Accounting for Amalgamations
  • AS 15 –  Employee Benefits (revised 2005)
  • AS 16 – Borrowing Costs
  • AS 17 – Segment Reporting
  • AS 18 – Related Party Disclosures
  • AS 19 – Leases
  • AS 20 –  Earnings Per Share
  • AS 21 – Consolidated Financial Statements
  • AS 22 – Accounting for Taxes on Income.
  • AS 23 – Accounting for Investments in Associates in Consolidated Financial Statements
  • AS 24 – Discontinuing Operations
  • AS 25 – Interim Financial Reporting
  • AS 26 – Intangible Assets
  • AS 27 – Financial Reporting of Interests in Joint Ventures
  • AS 28 – Impairment of Assets
  • AS 29 – Provisions, Contingent` Liabilities and Contingent Assets
  • AS 30 – Financial Instruments: Recognition and Measurement and Limited Revisions to AS 2, AS 11 revised 2003), AS 21, AS 23, AS 26, AS 27, AS 28 and AS 29
  • AS 31 – Financial Instruments: Presentation
  • AS 32 – Financial Instruments: Disclosures, and limited revision to Accounting Standard