1. Presentation On ACCOUNTING STANDARDS

2. Accounting Process of preparing & presenting the accounts It covers
* Summarizing
* Analyzing & Interpreting
* Communicating

3. Need for Standards Statements prepared in conformity with GAAP
No. of alternative treatment for same item
To standardize this Accounting Standards are developed
The aim is to make financial statements more meaningful & comparable

4. Formulation Of AS International Accounting Standards issued by IASC.
ICAI & ICWAI are members of IASC.
Accounting standards in India are issued by ICAI

5. Formulation continued…
This has not been defined by any statute or law
The ICAI realized this flaw
It constituted Accounting Standards Board (ASB) on 21st of April, 1977

6. Members Of ASB Eminent CAs Members from Industry The Company Law Board
The Central Board Of Direct Taxes
The Comptroller & Auditor General (CAG) Banks
Public Enterprises

7. AS-1 Disclosure Of Accounting Policies
Policies refers to Specific accounting principles & methods
Policies defer mainly in valuation of fixed assets, inventory, investments, recognition of revenue, depreciation, etc.
Any deviation from concepts must be disclosed.
Free to change unless it violets any statutory provision or AS.

8. An organisation is guided following consideration in selecting accounting policies:
(a) Prudence
(b) Substance Over Form
(c) Materiality

9. AS-2 Valuation of Inventories
Not applicable to shares, debentures, and other instruments held as stocks
Valued at cost or Net Realisable Value whichever is less.
Cost= Cost of Purchase – T.D./Freight Inward, etc.
It excludes: Abnormal wastage, Labour cost, storage cost, S & D expenses.
NRV = Estimated selling price – Estimated cost to sale
At each Balance Sheet Date a review of NRV is to be made.

10. AS- 3 Cash Flow Statement
Presented under 3 segments: Operating, Financing, Investing.
Operating inflow can be calculated either by Direct or Indirect method.
Investment activities include purchase & sale of assets & investments etc.
Financing activities include raising of share capital, redemption of shares etc.
Cash flow in foreign currency should be recorded applying exchange rate.
Extraordinary items must be disclosed separately
Taxes as Operating expenses disclosed separately

11. AS-4 Contingencies & Events Occurring After Balance Sheet
* Exist on balance sheet date
* Financial Outcome is not known
* Determined by future uncertain event
* Outcome may be loss or gain
If loss, then must be provided in P & L A/c.
Contingent gain is not taken into account because of the Concept of Conservatism or Prudence.
Disclosure of Contingent Liabilities, uncertainties associated & estimated amount involved, if possible should be made.

12. Events occurring after Balance Sheet Date
Events occurring between Balance Sheet Date & date of approving the accounts by S/H
Events
* May require adjustment in P & L A/c
e.g. cancellation of production license
* May require only disclosure
e.g. Mergers, acquisition, reconstruction, issue of share, etc.

13. AS-5 Net Profit or Loss for the period, Prior Period Items & Changes in Accounting Policies
* All incomes & expenses included in P & L A/c.
* Whether from Ordinary or Extraordinary
Prior Period Items
* Items arising in current year as a result of errors or omissions of earlier years.
* Does not include correction of A/cing estimate made in earlier years. E.g. R.D.D. from 5 to 10 %
* Separate disclosure is made to know the impact on Current years profits.

14. Changes in accounting policies
* Changed only if required by Law or AS or it would result in more appropriate presentation
* Change that materially affects financial position or results should be disclosed

15. AS-6 Depreciation Accounting
NA to forest produce, wasting assets, live-stocks, goodwill, etc.
Amount based on historical cost, expected useful life & expected residual value (scrap).
Method of Depreciation
Change in Method of Depreciation

16. If asset purchased on credit involving foreign currency loans, any increase or decrease in liability due to exchange rate change should be adjusted in historical cost
Useful life constantly reviewed and un-amortized amount should be charged over remaining life
If hire purchase, depreciate with respect to its cash price.

17. AS-7 Accounting for Construction Contracts
Two types of contracts are
* Fixed Price Contract
* cost Plus Contract
Two types of Accounting treatments
* Completed Contract Method (CCM)
* Percentage Completion Method (PCM)

18. If two or more contracts bear similar features, method should be same, PCM or CCM
Disclosure Of: Method Adopted, Changes in Method, Progressive Payments received, WIP, money retained by clients, contingent losses etc.

19. AS-8 Accounting For Research & Development
Does not cover: R & D activity conducted for others under contract, R & D activity at the construction stage or oil, gases, mineral related research.
Two methods:
* Preferred Method-charge to revenue as exp.
* Deferred Method- deferring cost to future
Disclosure of: R & D Cost charged in P & L A/c., Method, Cost not written off

20. AS-9 Revenue Recognition
Timing & amount of revenue to be recognised
NA to Construction Contracts
Revenue from: sale of goods, Rendering Of services & use of resources by others
If consideration is not measurable, postpone recognition of revenue
If uncertainty in collection, postpone recognition to the extent of uncertainty
If uncertainty arises after recognition, then recognise but make provision

21. Sale of goods
Rendering of services
Disclosure of: Amount of turnover less excise duty

22. AS-10 Accounting for Fixed Assets
NA to Forest , plantations, wasting assets, expenses on real estate development, livestock, intangible assets, govt. grants or subsidies on assets, assets required under amalgamation.
Cost of FA include purchase price, delivery & handling, installation charges, trail run expenses, excise duty, sales tax.
Assets under barter at fair mkt. value or net book value given up
Assets under Hire Purchase, capitalised at cash price

23. Repair exp. On Purchase of Old asset to be capitalised
Losses or Gain on Disposal should be charged to P & L A/c.
Revalue entire class of assets
Accumulated depreciation as on that date should not be charged to P & L A/c
Revaluation Profit transferred to Revaluation Reserve not for dividend
Loss charged to P & L A/c or adjusted with earlier Revaluation Reserve.
Disclosure Of: Gross & Net Value at Beginning & End, Expenses incurred on acquisition & revalued amount.

24. AS-11 Accounting For the Effect Of Changes in Foreign Exchange
Deals with exchange rate to be used
The manner of presenting in the assets & liabilities held at foreign branches of an entity
Disclosure of: Amount of exchange difference accounted in P & L A/c, adjustment in fixed assets.

25. AS-12 Accounting for Government Grants
Grants in form of
* Monetary or Non-Monetary
* Capital or Revenue (Subsidies)
* Cash Incentives
* Duty Drawback
Grants for Depreciable & Non Depreciable assets
Revenue grants charged to P & L A/c
Capital Subsidy credited to Capital Reserve
Disclosure of: Accounting policy, nature & extent of govt. grant received

26. AS-13 Accounting for Investment
Classification, determination of cost, disposal & valuation
NA to Operating & financial lease, investment under retirement benefit plans, investment in mutual funds & banks, investment held as stock.
Cost of Investment includes purchase price, brokerage and fee.
Current investment at lower of cost or fair value
Long-term at cost
Profit on sale charged to P & L A/c.
Disclosure of: Accounting policy for valuation, disposal and reclassification

27. AS-14 Accounting for Amalgamation
Treatment of Amalgamation
Resultant Goodwill or Capital Reserve
Amalgamation
* In Nature of Merger- Pooling Of Interest
* In Nature Of Purchase Method
Disclosure of: Name, Nature of Amalgamation, Effective Date, Particulars of Scheme, etc.

28. AS-15 Accounting For Retirement Benefits
In form of pension, gratuity, provident fund, leave encashment etc.
Contribution Scheme charged to P & L A/c. on accrual basis.
Actuarial Valuation should be made at least once in 3 years
Shortfall in actuarial valuation is charged to P & L A/c. excess be treated as prepayment
Disclosure of: Method of calculation of retirement benefit, date of actuarial valuation, method of actuarial valuation

29. AS-16 Borrowing Cost
NA to actual or implied cost of owner’s equity including preference capital.
Interest paid may be Revenue Exp. Or part of cost of asset
Qualifying assets include fixed assets or investment property, which take substantial time to get ready for use or sale.
Capitalisation or charging to revenue is to be decided as to interest on borrowings used to acquire such assets.
When such capitalisation commences or suspends or ceases is discussed here.
Disclosure of: Accounting policy followed for treatment of borrowing cost & amount of borrowing cost capitalized during the period.

30. AS-17 Segment Reporting Reporting Product-wise & geographic area-wise
Applies to company
* whose equity or debt capital are listed on exchange in India or will be listed.
* commercial, industrial & business enterprises whose turnover exceeds Rs. 50 crore.
Disclosure of: Segments, arriving at the revenue, expenditure, assets, liabilities of each segment through Primary & Secondary Reporting

31. AS-18 Related Party Disclosure
Investors & users are entitled to believe that all transactions are at ‘arm’s length.
Related Party: If at any time during the period one party has the ability to control the other party or exercise significant influence over the other party in making financial & operating decisions
Relative, key management personnel, associates, joint ventures are some terms defined.
Disclosure of: Detailed information about the parties & nature of relationship & information on all material related party transactions.

32. AS-19 Accounting for Lease
A lease is an agreement whereby the lessor conveys the lessee in return for a payment or series of payment, the right to use asset.
Lease can be
* Finance Lease: If arrangements transfers to lessee ‘substantially all the risks & rewards incidental to ownership’
* Operating Lease: If not above then.

33. The purpose is to correctly depict the right & position of assets in a lease.
Issues dealt are:
* Finance & Operating Lease identified first
* In finance lease, lessee has to account the assets & claim depreciation
* For taxation, lessor may still continue to be owner based on the terms of lease.

34. AS-20 Earning Per Share
Purpose is to bring consistency in computation of EPS
And to facilitate inter-firm & intra-firm comparison
EPS separately for different classes of equity shares.
Calculation of EPS during Amalgamation, in case of partly paid shares or bonus shares
Information on basic EPS & diluted EPS in cases of future conversion of bonds or warrants into shares.

35. AS-21 Consolidated Financial Statements
Comprises of: Balance Sheet, P & L A/c., Notes to account, cash flow statement.
The performance of group vary in relation to individual performance of company
Purpose is to know financial position of entire group.

36. AS-22 Accounting for Taxes on Income
Focus on fundamental principle of matching concept
The manner in which the related item of expense or saving (of income tax) is to be determined & disclosed.
Taxes include domestic & foreign taxes but not corporate dividend tax or wealth tax.
Taxes are differed /postponed due to provision of taxation laws.
Firms claim higher depreciation than shown in the books for tax purpose.
Due to ‘carry forward of losses’, can not be taxed up to certain years.
Disclosure of: Differed Tax assets & liabilities in Balance sheet.

37. AS-23 Accounting for Investment in Associates
AS-23 Accounting for Investment in Associates in Consolidated financial Statements
An associate is an enterprise, other than subsidiary, where investing company has significant influence.
Significant Influence-20% or more voting power.
Disclosure of: Investment in Associates, component of goodwill or capital reserve, extent of holding in associates.

38. AS-24 Discontinuing Operations
Disclosure of
A description of discontinued operation
Business or geographical segment
Date & nature of Initial disclosure event
Carrying amount of total assets to be disposed off & total liabilities to be settled
Amount of revenue & expenses in respect of discontinued operation during current financial year
Gain or loss from discontinuation

39. AS-25 Interim Financial Reporting
Applies to companies which report IFS
Does not specify which company should prepare it & how frequently
Disclosure of:
There is no change n accounting policies
Nature & amount of items affecting assets, liabilities, equity, cash flow etc.
Changes in amount reported in earlier IFS
Issue, buy-back, repayment, restructuring of debt & equity.
Dividend declared.
Amalgamation, acquisition
Calculation of taxes, retirement benefit, damages, seasonal effect, intra-company transactions

40. AS-26 Intangible Assets
Purpose- Accounting treatment for intangible assets that are not dealt in other AS.
Intangible asset is recognized only if, it is probable that the assets can be measured reliably.
Internally generated goodwill, brand, title & similar items of assets should not be recognized
Disclosure of:
Amortization methods of intangibles
Brand valuation, HR valuation

41. AS-27 Financial reporting of Interest In Joint Venture
Principle & procedures for accounting for Interest in JV
Reporting of JV assets, liabilities, income, expenses in financial statement of investor or venturer
In consolidated financial statement, a venture should report its interest using Proportionate Consolidation method.

42. AS-28 Impairment of Assets
Comes into effect in respect of accounting period on or after 1st April 2004
Purpose: Assets are carried at not more than their recoverable value.
An asset is said to be impaired if its carrying amount exceeds the amount to be recovered through use or sale
NA to Inventories, contractual contracts, financial assets and deferred tax assets

43. Issues dealt are
Factors which decide impairment can be internal or external sources of information
Net selling price based on binding sale, active market, best estimate are the valuation methods of assets.
If value in use is more than recoverable value, providing for impairment is necessary.
Annual Review, reversal of impairment

44. AS-29 Provisions, Contingent Liabilities & assets
When & how provisions are to be made for liabilities.
Principle for differentiating liability from contingent liability.
Procedure for identifying contingent asset

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