final accounting standards

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ACCOUNTING STANDARDS Presented by : Ajit Kumar Singh Ashish Singh Rahul Shahi Sourdeep Mukherjee Tejas Vispute

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Page 1: Final accounting standards

ACCOUNTING STANDARDSPresented by :

Ajit Kumar Singh

Ashish Singh

Rahul Shahi

Sourdeep Mukherjee

Tejas Vispute

Page 2: Final accounting standards

CONTENTS

Accounting Standards

Objectives and Needs : Accounting Standards

Accounting Standards in different nations

Indian Accounting Standards

International Accounting Standards (IFRS)

IFRS vs. IAS

Benefits of IFRS

Conclusion

Page 3: Final accounting standards

ACCOUNTING STANDARDS

Accounting is considered as the language of business

Each language has certain set of rules

Similarly accounting has certain rules to be observed by the accountants so that it is understood by all in

the same sense these set of rules become accounting standards

Thus accounting standards are certain set of rules and guidance based on the principles and methods of

accounting to be followed to have uniformity in terminology approach and presentation of results

Written Documents issued by Government or Regulatory Body

In India, issued by ICAI on 21st April,1977

Page 4: Final accounting standards

OBJECTIVES AND NEED :

ACCOUNTING STANDARD

Objectives of Accounting Standard :

• Standardize the diverse Accounting Policies

• Add the reliability to the Financial Statement

• Eradicate baffling variation in treatment of accounting aspects

• Facilitate inter-firm and intra-firm comparison

The need for Accounting Standards arises from following reasons :

• Facilitate transparent and meaningful reporting of financial information

• Reduce accounting alternatives to reasonable and practical level

• Enhance comparability of financial statements in time and space

• Encourage consistency in accounting practices

Page 5: Final accounting standards

ACCOUNTING STANDARDS IN

DIFFERENT NATIONS

In India, 32 Accounting Standards as IAS under NACAS

As per International, there are 41 Accounting Standards called as IFRS

Adopted by 8 countries in the world

70 to 80 countries planning to adhere IFRS

Clause 50 added to the listing agreement mandatory

Page 6: Final accounting standards

EVOLUTION AND TYPES OF

ACCOUNTING STANDARD

Accounting Standards Initiation

AS 1 to AS 15 1979 - 1995

AS 16 to AS 29 2000 - 2007

AS 30 to AS 32 Later Part of 2007

Page 7: Final accounting standards

INDIAN

ACCOUNTING

STANDARDS

Page 8: Final accounting standards

Specific policies adapted to prepare FS

Should be disclosed at one place

Purpose :-

1. Better understanding of FS

2. Better comparison analysis

3. Mostly needed w.r.t Depreciation

Used for computation of Cost of inventories

and to show in BS till it is sold

Consists of :-

1. Raw Materials

2. Work in progress

3. Finished goods

4. Spares, etc.

INDIAN ACCOUNTING STANDARD

AS 1 – Disclosure of Accounting

PoliciesAS 2 – Accounting for Inventories

Page 9: Final accounting standards

Incoming and outgoing of cash

Act as barometer to judge surplus and

deficit

Explain Cash flow under 3 heads :-

1. Cash flow from operating activities

2. Cash flow from financing activities

3. Cash flow from investing activities

For maintaining Provision of Bad debts

Generally uses Conservative concepts of

Accounting like Bankruptcy, frauds & errors

INDIAN ACCOUNTING STANDARD

AS – 3 Cash Flow Statements

AS 4- Contingencies and events

occurring after BS date

Page 10: Final accounting standards

Ascertain certain criteria for certain items

Include income and expenditures of Financial

year

Consists of 2 component

1. Profit and loss of ordinary activities

2. Profit and loss of extra ordinary activities

A non-cash expenditure

Distribution of total cost to its useful life

Occurs due to obsolescence

Different methods of computation

1. Straight line method ( SLM )

2. Written-down value or diminishing value (WDV)

INDIAN ACCOUNTING STANDARD

AS 5- Net profit or loss for the period, prior period

items and change in Accounting policiesAS 6- Accounting for Depreciation

Page 11: Final accounting standards

Contract specifically negotiated for

construction of Asset or combination of

Assets closely inter-related

To deal with treatment of Cost of research

and development in the financial statements

Identify items of cost which comprise R&D

costs lays down condition R&D cost may be

deferred and requires specific disclosures to be

made regarding R&D costs.

INDIAN ACCOUNTING STANDARD

AS 7- Construction Contract AS 8- Accounting for R&D

Page 12: Final accounting standards

Means gross inflow of cash and other

consideration like arising out of :-

1. Sale of goods

2. Rendering services

3. Use of enterprise resources by other

yielding interest, dividend and royalties

Called as Cash generating Assets

Expected to used for more than a Accounting

period like land, building, P/M, etc.

Shown at either Historical or Revalued value

INDIAN ACCOUNTING STANDARD

AS 9- Revenue Recognition AS 10- Accounting for Fixed Assets

Page 13: Final accounting standards

Classification for Accounting treatment:-

• Category I: Foreign currency transactions:

• buying and selling of goods or services

• lending and borrowing in foreign currency

• Acquisition and disposition of assets

• Category II: Foreign operations:

• Foreign branch

• Joint venture

• Foreign Subsidiary

• Category III: Foreign Exchange contracts:

• For managing Risk/hedging

• For trading and Speculation

Assistance provided by Govt. in cash or

in kind like

1. Grants of Assets like P/M, Land, etc.

2. Grants related to depreciable FA

3. Tax exemptions in notified area

INDIAN ACCOUNTING STANDARD

AS 11- Effect of change in FOREX Rates AS 12- Accounting for Govt. Grants

Page 14: Final accounting standards

Assets held for earning incomes like dividend,

interest, rental for capital appreciation, etc.

It involves:-

1. Classification of Investment

2. Cost of Investment

3. Valuation of Investment

4. Reclassification of Investment

5. Disposal of Investment

6. Disclosure of Investment in FS

Section 391 to 394 of Companies Act, 1956

governs the provision of amalgamation.

Disclosures:

1. Names and nature of amalgamating companies

2. Effective date of amalgamation

3. Method of Accounting used

4. Particulars of scheme sanctioned under a

statute

INDIAN ACCOUNTING STANDARD

AS 13- Accounting for Investments AS 14- Accounting for Amalgamation

Page 15: Final accounting standards

All forms of consideration given by

enterprise directly to the employees or their

spouses, children or other dependents, to

other such as trust, insurance companies in

exchange of services rendered

Interest and cost incurred by an enterprise in

connection to the borrowed funds.

Availed for acquiring building, installed FA

to make it useable and saleable

INDIAN ACCOUNTING STANDARD

AS 15- Employees Benefits AS 16- Borrowing Costs

Page 16: Final accounting standards

It consists of 2 segment:-

1. Business segment

2. Geographical segment

Information and different risk and return

reporting

Related party are those party that controls or

significantly influence the management or operating

policies of the company during reporting period

Disclosure:

1. Related party relationship

2. Transactions between a reporting enterprises

and its related parties.

3. Volume of transactions

4. Amount written off in the period in respect of

debts

INDIAN ACCOUNTING STANDARD

AS 17- Segment Reporting AS 18- Related party disclosure

Page 17: Final accounting standards

Agreement between Lessor And Lessee

Two types of leases:

1. Operating lease

2. Finance lease

Different from Sale

Classification to be made at the inception

Earning capacity of the firm

Assessing market price for share

AS gives computational methodology for

determination and presentation of EPS

2 types of EPS

INDIAN ACCOUNTING STANDARD

AS 19- Accounting for Leases AS 20- Earning per share

Page 18: Final accounting standards

Accounting for Parent and Subsidiary

company in single entity

Disclosure:-

1. List of all subsidiaries

2. Proportion of ownership interest

3. Nature of relation whether direct or

indirect

Tax accounted for period in which are accounted

It should be accrued and not liability to pay

Deals in 2 measurements:-

1. Current tax

2. Deferred tax

INDIAN ACCOUNTING STANDARD

AS 21- Consolidated Balance Sheet AS 22- Accounting for taxes and income

Page 19: Final accounting standards

Objectives to set out principles and

procedures for recognizing the investment

associates in CFS of the investors, so that

effect of investments in associates on

financial position of group is indicated

Establishes principles for reporting

information about discontinuing operations

Covers discontinuing operations rather

than discontinued operation

INDIAN ACCOUNTING STANDARD

AS 23- Accounting for investments in

Associates in CFS AS 24- Discontinuing operations

Page 20: Final accounting standards

Reporting for less than a year i.e. 3

months

Clause 41 says publish financial results on

quarterly basis

Objective is to provide frequently and

timely assessment

No physical existence

Can not be seen or even touched

3 featured as per AS

1. Identifiable

2. Non-monetary assets

3. Without physical substance

INDIAN ACCOUNTING STANDARD

AS 25-Interim Financial Reporting (IFR) AS 26- Intangible Assets

Page 21: Final accounting standards

What is joint venture?

• A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity, which is subject to joint control.

Joint ventures take many different forms and

structures

1. jointly controlled operations,

2. Jointly controlled assets

3. jointly controlled entities

Weakening of Assets value

Occurs when carrying cost more than

recoverable amount

Carrying cost = Cost of assets –

Accumulated Depreciation

INDIAN ACCOUNTING STANDARD

AS 27- Financial Reporting of interest in

Joint VentureAS 28- Impairment of Assets

Page 22: Final accounting standards

Provisions:-

• It is a Liability

• Settlement should result in outflow

• Liability is result of obligating event

Contingent liabilities:-

• Obligation arises of past event

• Existence confirmed when actually occurred of uncertain future

Contingent Asset:-

• Same as Contingent liability

AS 30 – Recognition and Measurement

AS 31 – Presentation

AS 32 – Disclosures

Has not been made mandatory

INDIAN ACCOUNTING STANDARD

AS 29- Provision, contingent liabilities

and assetsFinancial Instruments

Page 23: Final accounting standards

INTERNATIONAL

ACCOUTING

STANDARDS

Page 24: Final accounting standards

INTERNATIONAL FINANCING

REPORTING SYSTEM (IFRS)

IFRS – International Accounting Standards

IFRS are designed as a common global language for business affairs so that company accounts are understandable

and comparable across international boundaries

IFRS began as an attempt to harmonize accounting across the European Union but the value of harmonization

quickly made the concept attractive around the world

IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC).

On 1 April 2001, the new International Accounting Standards Board (IASB) took over from the IASC the responsibility

for setting International Accounting Standards

Page 25: Final accounting standards

IAS are rule based wherein the rules

guide how to record a transaction.

IAS lay more emphasis to laws over

standard

Companies following IAS follow their

defined format while presenting financial

statements

IFRS are principle based

IFRS lay more emphasis to the standard

over laws

IFRS have no prescribed format

IFRS VS. INDIAN ACCOUNTING

STANDARDS

Indian Accounting Standards

International Financing Reporting

System (IFRS)

Page 26: Final accounting standards

Indian Company’s Act while following

the Indian Standards has issued certain

depreciation rates on tangible assets to be

followed by companies

International Accounting Standards

(IFRS) levies charge based on the life of

assets

IFRS VS. INDIAN ACCOUNTING

STANDARDS

Indian Accounting Standards

International Financing Reporting

System (IFRS)

Page 27: Final accounting standards

BENEFITS OF IFRS

Global exposures to the Indian Market ; India is already is global market player. Above that the IFRS system will lead

to a more detailed exposures to the global markets

Tedious process can be avoided

Lowers Accountant’s fees and funds

Single Platform : Accounting techniques adopted internationally will not only lower the burden but also bring all the

global market entrepreneurs under a single platform

Targets globally : The Indian market thereafter has the permission to issue targets to be achieved according to the

global market

Eliminate multiple reports

Page 28: Final accounting standards

CONCLUSION

Harmonization of Accounting Standards :

• Harmonization is an essential to facilitate comparability of financial statements.

• With globalization financial statements of national entity/organization are no longer the

requirement of domestic users.

• This is more pronounced in case of business houses from one country expanding to other

countries for all their activities of operations, investing and financing.

• The problem that occurs in that scenario is that the financial statements prepared using

Accounting Standards of one country may not be understood in the same sense in another

country, which would require drawing up of financial statements in a different frame work.

• Need of single set of accounting standards applicable for government and commercial entities

Page 29: Final accounting standards

THANK YOU

ANY QUESTIONS

???