Introduction:- Accounting as a language
of business tells financial result or position of enterprises to shareholders
or owner by means of financial statement. If accounting process or system is
not proper, than there are chances that financial statement could be misleading
and not showing fair view. So in order to make accounting or financial
statement transparent, consistent, comparable, adequate and reliable, there is
requirement to make accounting standardize to make accounting principle and
policies. Accounting standard provide framework and standard accounting
policies so that financial statement of different enterprises become
Meaning of accounting standard: The accounting standards
are set of guidelines i.e. Generally Accepted Accounting Principles, that are
followed for preparation and presentation of financial statements. They are
accounting rules and procedures relating to measurement, recognition, treatment,
presentation and disclosures of accounting transactions in the financial
statements issued by the council of the institute of chartered Accountant of
Main objective of accounting standards are harmonizing accounting policies and
practice followed by different enterprises so that comparison of different
enterprises can be done easily.
It reduce accounting alternative for preparing financial statement to maintain
promote better understanding of financial statements.
enhances reliability of financial statements.
understand significant accounting policies adopted and applied.
Benefits:- There are following benefits
-It reduces variation between
different enterprises for accounting treatment used to prepare financial
-Standards discloses all information
even which are not required by law.
-It helps in comparison of financial
statement of companies situated in different parts of countries or world.
-When there are alternative of many
accounting treatment, choice of best alternative generally become difficult.
-Standards are rigid not flexible for
applying accounting treatment.
-Standards can not override statute.
It has to follow requirement of statute.
Overview of Accounting Standard in India
-ICAI constitute Accounting Standard
Board ( ASB ) on 21st April 1977.
-Main Function of ASB to formulate
-ASB issued so far 32 Accounting
Standard but AS-8 (Accounting for Research and development ) and AS-6(depreciation)
have been withdrawn so there are 30 Accounting Standards.
REPORTING STANDARDS(IFRS):-- Globalisation integrates the national economies into the
international economies through trade, foreign direct investments, capital flow
etc. in this age of globalization and technology, enterprises are carrying on
businesses worldwide. We also understand that accounting is the language of
business. Thus business enterprises around the world should not speak different
languages while sharing financial informations. Therefore there is need for
single set of accounting standards that can unify the accounting practices
worldwide. It is difficult to understand and compare worldwide financial
informations without a common set of accounting and financial reporting
standards. The use of single set of high quality accounting standards would
facilitate investment and other economic decisions across borders, increase
market efficiency and reduce cost of capital. Thus international accounting
standards (IAS) were developed, which are being withdrawn and superseded by
International Financial Reporting Standards(IFRS).IFRS are a set of accounting
standards developed by the international Accounting standards board(IASB)
ASSUMPTIONS IN IFRS:-
1. Accrual Assumption
2. Going concern
3. Measuring unit
assumption: measuring unit for valuation of capital is the current purchasing power.
It means asset should be reflected at current(fair) price.
4. Constant purchasing
power assumption:- it means value of capital be adjusted to inflation in the
economy at the end of financial year.
APPLICATION OF IFRS IN
India had two options, i.e. either to accept IFRS as they are or converge the
Indian accounting standards in line with IFRS. It decided to converge its
existing accounting standards with IFRS. The converged accounting standards
titled Ind-AS have been issued and notified. It should be noted that the
existing Indian accounting standards shall not cease to be applicable
standards. They will continue to apply on entities that are not required to
migrate to IND-AS.