ACCOUNTING STANDARDS
Accounting Standards are the policy documents or written
statements issued, from time to time, by an apex expert accounting body in
relation to various aspects of measurement, treatment and disclosure of
accounting transactions for ensuring uniformity in accounting practices and
reporting. These standards are prepared by Accounting Standard Board (ASB). Accounting
Standards are formulated with a view to harmonise different accounting policies
and practices in use in a country.
Objectives or
Purposes of Accounting Standards:
The whole idea
of accounting standards
is centered around
harmonization of accounting
policies and practices followed
by different business
entities so that
the diverse accounting
practices adopted for
various aspects of
accounting can be standardized. Accounting standards
standardizes diverse accounting policies with a view to:
a)
To provide information to the users as to the basis on which the
accounts have been prepared and the financial statements have been presented.
b)
To serve the statutory purpose of eliminating the impact of
diverse accounting policies and practices and to ensure uniformity in
accounting policies & practices, i.e., to harmonize the diverse accounting
policies & practices which are in use the preparation & presentation of
financial statements.
c)
To make the financial statements more meaningful and comparable
and to make people place more reliance on financial statements prepared in
conformity with the accounting standards.
d)
To guide the judgment of professional accountants in dealing with
those items, which are to be followed consistently from year to year?
e)
provide a set
of standard accounting
policies, valuation norms and
disclosure requirements.
Procedure adopted in formulation of Accounting Standards:
The Institute of Chartered Accountants of India
(ICAI), recognising the need to harmonise the diverse accounting policies and
practices, constituted an Accounting Standards Board (ASB) on April 21, 1977.
The main function of ASB is to formulate accounting standards so that such
standards may be mandated by the Council of ICAI. While formulating the
standards in India, ASB will take into consideration the applicable laws,
customs, usages and business environment. Following procedure will be adopted for
formulating Accounting Standards:
a)
Identification of the broad areas by the ASB for formulating the
Accounting Standards.
b)
Constitution of the study groups by the ASB for preparing the
preliminary drafts of the proposed Accounting Standards.
c)
Consideration of the preliminary draft prepared by the study group
by the ASB and revision, if any, of the draft on the basis of deliberations at
the ASB.
d)
Circulation of the draft, so revised, among the Council members of
the ICAI and 12 specified outside bodies such as Standing Conference of Public
Enterprises (SCOPE), Indian Banks’ Association, Confederation of Indian
Industry (CII), Securities and Exchange Board of India (SEBI), Comptroller and
Auditor General of India (C& AG), and Department of Company Affairs, for
comments.
e)
Meeting with the representatives of specified outside bodies to
ascertain their views on the draft of the proposed Accounting Standard.
f)
Finalisation of the Exposure Draft of the proposed Accounting
Standard on the basis of comments received and discussion with the representatives
of specified outside bodies.
g)
Issuance of the Exposure Draft inviting public comments.
h)
Consideration of the comments received on the Exposure Draft and
finalisation of the draft Accounting Standard by the ASB for submission to the
Council of the ICAI for its consideration and approval for issuance.
i)
Consideration of the draft Accounting Standard by the Council of
the Institute, and if found necessary, modification of the draft in
consultation with the ASB.
j) The Accounting Standard, so finalised, is issued
under the authority of the Council.