Accounting Standards

The Institute of Chartered Accountants of India (ICAI) had established an Accounting Standards Board (ASB) in 1977 with the aim of developing accounting standards and issuing guidelines for implementation thereof.

The Following brief gives the various standards issued by the ICAI as on March 2006.

AS1 – Disclosure of Accounting Policies (January 1979)

This standards deals with the disclosure of significant accounting policies followed in preparing and presenting financial statements. Such policies should form part of the financial statements and be disclosed in one place.

AS2 – Valuation of Inventories (June 1981)

This standard deals with the principles of valuing inventories for financial statements. For this purpose inventories include tangible property held for sale in the ordinary course of business, or in the process of production for such sale, or for consumption in the production of goods or services for sale, including maintenance supplies and consumable other than machinery spares.

AS3 – Cash Flow Statements (June 1981, revised in March 1992)

This standard deals with the financial statement that summarizes, for a given period, the sources and applications of funds of an enterprise. It supersedes Accounting Standards(AS) 3, ‘Changes in Financial Position’, issued in June, 1981. The Cash flows are to e classified into three categories viz., operating activities, investing activities and financing activities.

AS4 – Contingencies and Events Occurring after the Balance Sheet Date (November 1982, revised in April 1995)

This standard deals with the treatment of contingencies and events occurring after the balance sheet date. It, however, does not cover contingency situations relating to the liabilities of life insurance and general insurance enterprises arising from policies issued, obligations under the retirement benefit plan and commitments arising from long-term lease contracts.

AS5 – Net Profit or Loss for the Period, Prior Period items and Changes in Accounting Policies (November 1992, revised in February 1997)

This standard deals with the treatment in the financial statements of prior period and extraordinary items and changes in accounting policies. It does not deal with the tax implications of prior period items, extraordinary items and changes in accounting policies and estimates for which appropriate adjustments will have to be made depending on the circumstances. it also does not deal with adjustments arising out of revaluation of assets.

AS6 – Depreciation Accounting (November 1982)

This standard applies to all depreciable assets. It does not apply to assets in the category of forests, plantations and similar natural resources; wasting assets including expenditure on the exploration for natural non-regenerative resources; expenditure on research and development; goodwill and live stock. This also does not apply to land unless it has a limited useful life for the enterprise.

AS7 – Accounting for Construction Contracts (December 1983, revised in April 2003)

This standard deals with accounting for construction contracts in the financial statements of contractors. This contracts may fall into the category of fixed price contracts or cost plus contracts. The Accounting for such contracts may either on the percentage of completion method or completed contract method.

AS8 – Accounting for Research and Development (January 1985)

This standard deals with the treatment of costs of research and development in financial statements. It, however, does not deal with the accounting implications of the following specialised activites; (i) research and development activities conducted for others under an contract; (ii) exploration for oil, gas and mineral deposits; and (iii) research and development activities of enterprises at the construction stage.

AS9 – Revenue Recognition (November 1985)

This standard deals with the basis for recognition of revenue in the statement of profit and loss of an enterprise. It is concerned with the recognition of revenue arising in the course of the ordinary activities of the enterprise from the sale of goods, the rendering of rendering of services and the use by others of enterprise resources yielding interest, royalties and dividends.

AS10 – Accounting for Fixed Assets (November 1985)

This standard deals with fixed assets grouped into various categories such as land, buildings, plant and machinery, vehicles, furniture and fittings, goodwill, patents, trademarks and designs. It does not deal with the specialised aspects of accounting for fixed assets that arise under a comprehensive system reflecting the effects of changing prices but applies to financial statements prepared on historical cost basis. This also does not deal with accounting for following assets. (i) forests, plantations and similar regenerative natural resources; (ii) wasting assets including mineral rights, expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non-regenerative resources; (iii) expenditure on real estate development; and (iv) livestock.

AS11 – The Effects of Changes in Foreign Exchange Rates (August 1991, revised in 2003)

This standard deals with issues relating to accounting for effect of changes in foreign exchange rates. This applies to accounting in foreign cur-rencies and translating the financial statements of foreign branches for inclusion in the financial statements of the enterprise.

AS12 – Accounting for Government Grants (August 1991)

This standard deals with accounting for government grants. Government grants are sometimes called subsidies. cash incentives. duty drawbacks and so on. This standard does not deal with: (i) the special problems arising in accounting for gov-ernment grants in financial statements reflecting. the effects of changing prices or  in supplementary information of a similar nature; (ii) government assistance other than in the form of government grants; and (iii) government participation in the ownership of the enterprise.

AS13 – Accounting for for Investments (September 1993)

This standard deals with accounting for investments in the financial statements of the enterprise and related disclosure requirements. The issues relating to recogni-tion of interest, dividends and rentals earned on investments, operating or finance lease and investment of retirement benefits plans and life insurance enterprise are not within the purview of this standard.

AS14 – Accounting for Amalgamations (October 1994)

This standard deals with the accounting treatment of any resultant goodwill or reserves in amalgamation of companies. This does not apply to the cases of acquisitions where one company purchases the shares in whole or in part of other company in consideration of cash or by issue of shares of other securities (In such a case the entity of acquired company continues).

AS15 – Accounting for Retirement Benefits in the Financial Statements of Employers (January 1995)

This standard deals with accounting for retirement benefits in the financial state-ments of employers. For this purpose, the retirement benefits considered may be in the form of provident fund, superannuation/ pension, gratuity, leave encashment benefits on retirement, post retirement health and welfare scheme and any other retirement benefits.

AS16 – Borrowing Costs (May 2000)

This standard deals with the issues involved relating to capitalisation of interest on borrowing for purchase of fixed assets. It deals with issues related to identifying the assets which qualify for capitalisaciong of interest, the period for which the interest is to be capitalised and the amount of interest that can be capitalised.

AS17 – Segment Reporting (October 2000)

This standard applies to companies which have an annual turnover of Rs.50 crore or more. it requires that the accounting information should be reported on segment basis. The segments may be based on products, services, geographical areas and so on.

AS18 – Related Party Disclosure (October 2000)

This standard requires certain disclosures which must be made for transactions between the enterprise and related party as an enterprise which has a common control with reporting enterprise, associate or joint venture of reporting enterprise, individual having direct/ indirect interest in the voting power of reporting enterprise and any other key personnel. Basically it includes any enterprise or person over which any person having direct/ indirect interest in voting power or key management personnel of the reporting enterprise, is able to exercise significance influence.

AS19 – Leases (January 20001)

This standard deals with the accounting treatment of transactions related to lease agreements. For this purpose, the standard divides the agreements into operating and financing leases.

AS20 – Earnings Per Share (January 2001)

This standard deals with the presentation and computation of Earning Per Share (EPS). The E{S needs to be calculated on consolidated basis as well as for the parent (holding) company while presenting the financial statements of the parent company. Basic as well as diluted EPS must be computed and presented.

AS21 – Consolidated Financial Statements (1-4-2001)

This standard deals with the preparation of consolidated financial statement to provide information about the activities of a group (parent company and companies under its control. referred to as subsidiary companies).

AS22 – Accounting for Taxes on Income (1-4-2001)

This standard deals with the determination of the amount of tax expenses for related revenues. The tax expense will comprise current tax and deferred tax for the purpose of determing the net profit (loss) for the period.

AS23 – Accounting for Investments in associated in Consolidated Financial Statements (July 2001)

This standard deals with the principles and procedures to be followed for recognis-ing, in consolidated financial statements, the effect of the investments in associ-ates, on the financial position and operating results of a group

AS24 – Discontinuing Operations (February 2002)

This standard lays down the principles for reporting information about discontinued operations with an objective to enhance the ability of users of financial statements to make a projection of an enterprise’s cash flows. earning generating capacity and financial position by segregating information about discontinued operations from information about continuing operations.

AS25 – Interim Financial Reporting (February 2002)

This standard deals with the minimum content of interim financial reports and pre-scribes the principles for recognition and measurement in complete or condensed financial statements for an interim period. It does not say anything about the frequency of such reporting.

AS26 – Intangible Assets (February 2002)

This standard prescribes the accounting treatment for intangible assets which are not covered by any other specific accounting standard.

AS27 – Financial Reporting of interests in Joint Ventures (February 2002)

This standard sets principles and procedures for accounting for interests in joint ventures and reporting of joint ventures’ assets, income and expenses in the financial statements of ventures and investors.

AS28 – Impairment of Assets (2004)

This standard sets principles and procedures that an enterprise needs to apply to ensure that its assets are not carried in the balance sheet at an amount higher that their recoverable value.

AS29 – Provisions. Contingent Liabilities and Contingent Assets

The Objective of this standard is to ensure that appropriate recognition criteria and measurement bases are applied to provision and contingent liabilities. and that sufficient information is disclosed in the notes to the financial statements to enable users to understand their nature, timing and amount. The objective is also to lay down appropriate accounting for contingent assets.

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