NESS WADIA COLLEGE OF COMMERCE, PUNE

NAME : Haripriya Kiran Gaikwad

CLASS: T.Y ( B.Com )
DIVISION : C
ROLL NO. : 435
SUBJECT : Advanced Accounting - I
SEMESTER : V
TOPIC : Accounting Standards
INDEX
 INTRODUCTION TO ACCOUNTING STANDARDS

Accounting as a 'language of business' communicates the

financial results of an enterprise to various stakeholders by
means of financial statements. If the financial accounting
process is not properly regulated, there is possibility of
financial statements being misleading, tendentious and
providing a distorted picture of the business, rather than
the true. To ensure transparency, consistency,
comparability, adequacy and reliability of financial
reporting, it is essential to standardise the accounting
principles and policies. Accounting Standards (ASs) provide
framework and standard accounting policies for treatment
of transactions and events so that the financial statements
of different enterprises become comparable.
MEANING OF ACCOUNTING STANDARDS
Accounting standards are written policy documents issued by the expert
accounting body or by the government or other regulatory body covering the
aspects of recognition, measurement, presentation and disclosure of
accounting transactions and events in the financial statements. The
ostensible purpose of the standard setting bodies is to promote the
dissemination of timely and useful financial information to investors and
certain other parties having an interest in the company's economic
performance. The accounting standards deal with the issues of -

recognition of events and transactions in the financial statements;

measurement of these transactions and events;
presentation of these transactions and events in the financial
statements in a manner that is meaningful and
understandable to the reader; and
the disclosure requirements which should be there to enable the
public at large and the stakeholders and the potential investors in
particular, to get an insight into what these financial statements are
trying to reflect and thereby facilitating them to take prudent and
informed business decisions.
 CONCEPTS OF ACCOUNTING STANDARDS
A "standard" means a generally accepted model or an ideal.
Thus, accounting standard means generally accepted accounting principles.
Accounting Standards are written documents containing the 'Generally
Accepted Accounting Principles (GAAP) issued by ICAI in India.
There are 32 AS in India as on date
The main objective of Accounting Standards is to standardise the different
accounting policies and practices followed by different business concerns
Accounting Standards Board (ASB) set up in 1977 by ICAI prepares
accounting standards.
The Central Council of the ICAI notifies the final standard, after consultations
and discussions.
Considerations:

The Indian laws, customs and business environment

international Accounting Standards given by IASB
Purposes and limitations of published final accounts
The role of the auditors
OBJECTIVES OF ACCOUNTING STANDARDS

The whole idea of accounting standards is centred around

harmonisation of accounting policies and practices followed
by different business entities so that the diverse accounting
practices adopted for various aspects of accounting can be
standardised. Accounting Standards standardise diverse
accounting policies with a view to:

eliminate the non-comparability of financial

statements and thereby improving the reliability of
financial statements; and
provide a set of standard accounting policies,
valuation norms and disclosure requirements.
Accounting standards reduce the accounting alternatives in
the preparation of financial statements within the bounds of
rationality, thereby ensuring comparability of financial
statements of different enterprises.
 BENEFITS OF ACCOUNTING STANDARDS
ComparabilityAccounting standards ensure that all entities follow
the same set of principles and procedures. This allows stakeholders
to compare the financial performance of various companies before
making informed decisions. It also enables investors to explore
career opportunities in accounting across different countries.
Fraud PreventionStandardised accounting practices make it
harder for companies to manipulate financial data or commit
frauds. The management cannot misrepresent information as the
standards are mandatory to follow.
Auditor AssistanceWith the adherence to standard accounting
practices, it becomes easier for external auditors to read and
interpret the financial statements of any company. This makes the
auditing process less susceptible to internal interference
Managerial Accountability
Universal standards for accounting ensure managerial
accountability in corporations. The transparency and consistency
in record-keeping allow accurate comparisons between
organizations, enabling boards and stakeholders to hold
managers accountable for the company's performance
 LIMITATIONS OF ACCOUNTING STANDARDS
Rigid FrameworkAccounting standards are often perceived as rigid and inflexible, hindering the
ability of organisations to adapt their accounting practices to unique circumstances or changes in the
business environment. This limitation can restrict operational flexibility and innovation in financial
reporting.
ComplexityMany accounting standards can be complex and require careful interpretation. This
complexity may lead to inconsistent applications and potential misstatements in financial reporting,
especially among smaller companies that may lack the resources for thorough training and
understanding of the standards.
Historical Cost BasisAccounting primarily relies on historical costs for asset valuation, which does
not account for inflation or current market conditions. This limitation can result in financial statements
that do not accurately reflect the current value of assets or liabilities, diminishing the relevance of the
reported information.
Errors and Fraud RisksThe reliance on human input in preparing financial statements introduces
risks of errors and fraud. Even with established standards, manipulation of financial data can occur,
making it challenging to ensure the integrity of financial reports. This limitation highlights the
importance of strong internal controls and external audits to mitigate these risks.
Compliance CostsImplementing and maintaining compliance with accounting standards can be
costly, particularly for smaller firms. The need for specialised training, potential system upgrades, and
ongoing compliance monitoring can impose significant financial burdens on organisations, potentially
diverting resources from other important business activities.
 AUDITORS DUTIES
Framework for ConsistencyAccounting standards provide a uniform framework that auditors
can rely on when reviewing financial statements. This consistency allows auditors to easily
interpret and assess the financial information presented by various entities, ensuring that they
follow the same accounting principles and practices .
Reduction of MisrepresentationBy mandating specific accounting policies and procedures,
these standards minimize the risk of management manipulating financial data. This reduces the
likelihood of discrepancies or misrepresentations in financial statements, making it easier for
auditors to evaluate the accuracy and fairness of the reports they review .
Facilitating External AuditsStandardised accounting practices enable auditors to conduct
external audits more efficiently. When all companies adhere to the same standards, auditors do
not need to rely on internal accountants to explain unique accounting systems, which could
introduce bias or confusion into the audit process .
Enhanced Auditor IndependenceThe clear guidelines established by accounting standards help
maintain auditor independence by providing a structured approach to auditing. This reduces
potential conflicts of interest and ensures that auditors can perform their duties without undue
influence from management .
Improved Reporting QualityAccounting standards dictate how financial information should be
reported, which enhances the overall quality of financial statements. This allows auditors to form
more accurate opinions regarding whether the financial statements present a true and fair view of
the company's financial position .
NOTABLE LANDMARKS
NOTABLE LANDMARKS
LIST OF ACCOUNTING STANDARDS IN INDIA