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Accounting Standards Before
introduction of standards every company was followed its own
accounting policies and there was no standard accounting
practices to follow and it’s become difficult to compare the
financial statements of various companies. Hence, ICAI
introduced accounting standards to standardize diverse
accounting practices with a view to eliminate, to the extent
possible, incomparability of information contained in the
financial statements of various enterprises. The accounting
standards have got legal recognition under the Companies Act,
1956, which require accounting standards to be followed by all
companies. Apart from the Companies Act, 1956, various
regulatory bodies, e.g., the Securities and Exchange Board of
India (SEBI), the Reserve Bank of India (RBI) and the Insurance
Regulatory and Development Authority (IRDA) also require
compliance with the accounting standards issued by the
Institute. Till now there are 29 accounting standards are issued
by ICAI. For the
purpose of applicability of Accounting Standards, enterprises
are classified into three categories, viz., Level I, Level II
and Level III. Level II and
Level III enterprises are considered as SMEs. Level I
enterprises are required to comply fully with all the accounting
standards. Level II and
Level III enterprises in respect of recognition and measurement
principles should be followed. Relaxations are provided with
regard to disclosure requirements.
Accounting Standards not applicable to Level II enterprises in
their entirety:
(vii) AS 23,
Accounting for Investments in Associates in Consolidated
Financial Statements (viii) AS
24, Discontinuing Operations.
(ix)
AS 25 is not mandatory
(ix)
AS 27, Financial Reporting of Interests in Joint Ventures
(x) AS 29,
Provisions, Contingent Liabilities and Contingent Assets
(partly) All the
above standards not applicable to Level III enterprises also and
apart from above AS 22, Accounting for Taxes on Income also not
applicable to Level III enterprises.
Accounting standards are easy to understand if we read the
standards along with the help of one or two company’s annual
reports and how they followed the standards and how they
disclosed in their financial statements.
Accounting standards would become easy to understand and read,
for the students if the following points are considered for
every Accounting standard. Consider these points for every
standard then it’s become easy.
The points are as follows:
1 Objective of the Standard
2. Scope of the Standard
3. Definitions of the terms used in the
Standard
4. Recognition and measurement
principles (wherever applicable)
5. Presentation and disclosure
requirements. |
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