AGENDA OF DISCUSSION
Introduction of Accounting Standards
 Objectives of Accounting Standards
 Types of Accounting Standards

Introduction
Written Documents issued by
Government or Regulatory Body
 In India, issued by ICAI on 21st
April,1977
 Initiated by Kumar Mangalam Birla,
chairman committee of Corporate
Governance for Financial Disclosures
 Also initiated by Chair person of NACAS

Objectives
Standardise the diverse Accounting
Policies
 Add the reliability to the Financial
Statement
 Eradicate baffling variation in treatment
of accounting aspects
 Facilitate inter-firm and intra-firm
comparison

Accounting Standards in
Different Nations





In India, 32 Accounting Standards as IAS
under NACAS
As per International, there are 41
Accounting Standards called as IFRS
Adopted by 8 countries in the world
70 to 80 countries planning to adhere
IFRS
Clause 50 added to the listing agreement
mandatory
Evolution and Types of AS
Accounting Standards
Initiation
1. AS 1 to AS 15
1979 to 1995
2. AS 16 to AS 29
2000 to 2007
3. AS 30 to AS 32
Later part of 2007
AS 1-Disclosure of Accounting
Policies
Specific policies adapted to prepare FS
 Should be disclosed at one place
Purpose :1. Better understanding of FS
2. Better comparison analysis
3. Mostly needed w.r.t Depreciation

AS 2- Accounting for
Inventories
Used for computation of Cost of
inventories and to show in BS till it is
sold
Consists of :1. Raw Materials
2. Work in progress
3. Finished goods
4. Spares, etc

Measurements of Inventories
Determination of Cost of Inventories
Cost of purchase (Purchase price,
duties
& taxes, freight inwards)
Cost of conversion
 Determination of Net realisable value
 Comparison of cost and net realisable

AS 3- Cash Flow Statements
Incoming and outgoing of cash
 Act as barometer to judge surplus and
deficit
 Explain Cash flow under 3 heads :1. Cash flow from operating activities
2. Cash flow from financing activities
3. Cash flow from investing activities

AS 4- Contingencies and events
occurring after BS date
For maintaining Provision of Bad debts
 Generally uses Conservative concepts of
Accounting like Bankruptcy, frauds &
errors.

AS 5- Net profit or loss for the
period, prior period items and
change in Accounting policies
Ascertain certain criteria for certain
items
 Include income and expenditures of
Financial year
 Consists of 2 component
1. Profit and loss of ordinary activities
2. Profit and loss of extra ordinary activities

AS 6- Accounting for
Depreciation
A non-cash expenditure
 Distribution of total cost to its useful
life
 Occurs due to obsolescence
 Different methods of computation
1. Straight line method ( SLM )
2. Written-down value or diminishing
value (WDV)

AS 7- Construction Contract

Contract specifically negotiated for
construction of Asset or combination of
Assets closely inter-related
AS 8- Accounting for R&D

To deal with treatment of Cost of
research and development in the
financial statements, identify items of
cost which comprise R&D costs lays
down condition R&D cost may be
deferred and requires specific disclosures
to be made regarding R&D costs.
AS 9- Revenue Recognition
Means gross inflow of cash and other
consideration like arising out of :1. Sale of goods
2. Rendering services
3. Use of enterprise resources by other
yielding interest, dividend and
royalities.

AS 10- Accounting for Fixed
Assets
Called as Cash generating Assets
 Expected to used for more than a
Accounting period like land, building,
P/M, etc
 Shown at either Historical or Revalued
value

AS 11- Effect of change in
FOREX Rates

1.
2.
3.
Classification for Accounting treatment:Category I: Foreign currency transactions:
a) buying and selling of goods or services
b) lending and borrowing in foreign
currency
c) Acquisition and disposition of assets
Category II: Foreign operations:
a) Foreign branch
b) Joint venture
c) Foreign Subsidiary
Category III: Foreign Exchange contracts:
a) For managing Risk/hedging
b) For trading and Speculation
AS 12- Accounting for Govt.
Grants
Assistance provided by Govt. in cash or
in kind like
1. Grants of Assets like P/M, Land,etc
2. Grants related to depreciable FA
3. Tax exemptions in notified area

AS 13- Accounting for
Investments


1.
2.
3.
4.
5.
6.
Assets held for earning incomes like
dividend, interest, rental for capital
appreciation, etc
It involves:Classification of Investment
Cost of Investment
Valuation of Investment
Reclassification of Investment
Disposal of Investment
Disclosure of Investment in FS
AS 14- Accounting for
Amalgamation


1.
2.
3.
4.
Section 391 to 394 of Companies Act,
1956 governs the provision of
amalgamation.
Disclosures:
Names and nature of amalgamating
companies
Effective date of amalgamation
Method of Accounting used
Particulars of scheme sanctioned under a
statute
AS 15- Employees Benefits

All forms of consideration given by
enterprise directly to the employees or
their spouses, children or other
dependants, to other such as trust,
insurance companies in exchange of
services rendered.
AS 16- Borrowing Costs
Interest and cost incurred by an
enterprise in connection to the borrowed
funds.
 Availed for acquiring building, installed
FA to make it useable and saleable.

AS 17- Segment Reporting
It consists of 2 segment:1. Business segment
2. Geographical segment
 Information and different risk and
return reporting.

AS 18- Related party disclosure


1.
2.
3.
4.
Related party are those party that controls
or significantly influence the management
or operating policies of the company
during reporting period
Disclosure:
Related party relationship
Transactions between a reporting
enterprises and its related parties.
Volume of transactions
Amt written off in the period in respect of
debts
AS 19- Accounting for Leases
Agreement between Lessor And Lessee
 Two types of leases:
1. Operating lease
2. Finance lease
 Different from Sale
 Classification to be made at the
inception

AS 20- Earning per share
Earning capacity of the firm
 Assessing market price for share
 AS gives computational methodology for
determination and presentation of EPS
 2 types of EPS

AS 21- Consolidated Balance
Sheet
Accounting for Parent and Subsidiary
company in single entity
 Disclosure:1. List of all subsidiaries
2. Proportion of ownership interest
3. Nature of relation whether direct or
indirect

AS 22- Accounting for taxes
and income
Tax accounted for period in which are
accounted
 It should be accrued and not liability to
pay
 Deals in 2 measurements:1. Current tax
2. Deferred tax

AS 23- Accounting for
investments in Associates in
CFS

Objectives to set out principles and
procedures for recognizing the
investment associates in CFS of the
investors, so that effect of investments in
associates on financial position of group
is indicated.
AS 24- Discontinuing
operations
Establishes principles for reporting
information about discontinuing
operations
 Covers discontinuing operations rather
than discontinued operation

AS 25-Interim Financial
Reporting (IFR)
Reporting for less than a year i.e 3
months
 Clause 41 says publish financial results
on quarterly basis
 Objective is to provide frequently and
timely assessment

AS 26- Intangible Assets
No physical existence
 Can not be seen or even touched
 3 featured as per AS
1. Identifiable
2. Non-monetary assets
3. Without physical substance

AS 27- Financial Reporting
of interest in Joint Venture
What is joint venture?
 Three types of JV in case of Financial
reporting

AS 28- Impairment of Assets
Weakening of Assets value
 Occurs when carrying cost more than
recoverable amt
 Carrying cost = Cost of assets –
Accumulated

Depreciation
AS 29- Provision, contingent
liabilities and assets
 Provisions:-
It is a Liability
Settlement should result in outflow
Liability is result of obligating event
 Contingent liabilities:Obligation arises of past event
Existence confirmed when actually occurred of
uncertain future
 Contingent Asset
Same as Contingent liability
Financial Instruments
AS 30 – Recognition and Measurement
 AS 31 – Presentation
 AS 32 – Disclosures
 Has not been made mandatory (expected
in 2009)

Time of Transition
International Financial Reporting Standards
Why, When, What & How
IFRS in INDIA
2009‐11
WHY IFRS ?
India is one of the over 100 countries that have
or are moving towards IFRS (International
Financial Reporting Standards) convergence with
a view to bringing about a uniformity in reporting
systems globally, enabling businesses, finances
and funds to access more opportunities.
Foreign Direct Investors (FDI), overseas
financial institutional investors (FII) are more
comfortable with compatible accounting
standards and companies accessing overseas
funds feel the need for recast of accounts in
keeping with globally accepted standards.
ICAI has decided to implement IFRS in India.
The Ministry of Corporate Affairs has also
announced its commitment to convergence to
IFRS by 2011.
IFRS ‐ WHOM APPLICABLE ?
Compliance with IFRS in India is restricted to
‘Public Entities’ which includethose companies &
entities listed on any stock exchange or have
raised money from the public, or have a
substantial public interest, or public sector
companies. IFRS in India would cover the
following public interest entities in the first
phase.
 Listed companies
 Banks, insurance
companies, mutual funds, and
financial institutions
 Turnover in preceding year > INR 1 billion
 Borrowing in preceding year > INR 250 million
 Holding or subsidiary of the above
IFRS is not applicable to SME’s as of now.
IMPACT OF IFRS
IFRS implementation affects several areas of the
business entity, such as presentation of accounts,
the accounting policies and procedures, the way
legal documents are drafted, the way the entity
looks at its assets and their usage, as well as the
its communications with its stakeholders and also
the way it conducts its business.
This fundamental and pervasive nature of
impact of IFRS, makes it imperative that
sufficient planning and thought is given to this
aspect and choices made at the transition stage
itself, as they determine the effect on the
company and its operations.
A detailed analysis of all aspects of impact and
change as well as all legal documentation and
communication becomes necessary.
IFRS – THE PAIN AREAS
 IFRS
is itself a moving target, with changes being
introduced continually, refining the provisions
and adding more areas for disclosures.
 The
IFRS implementation requires a
multi‐disciplinary approach and is the
responsibility of the management.
 There
is a lack of awareness and understanding
of the requirements and implications of IFRS
transition and compliance.
 IFRS
requires aligning business practices and
policies to the reporting requirements (including
retrospective ones)
 Training
the organizational components will be a
huge task.
SKILLSETS FOR IFRS :
We bring together a useful combination of skill
sets required to address the issues arising out
of IFRS transition & compliance :
Accounting
• Understand of IFRS requirements
• Understanding of accounting systems, issues &
training
IFRS CONVERSION
The conversion methodology suggested
below puts a strong emphasis on
planning, study, preparation for transition,
evaluation, training and embedding the
change.
IFRS in INDIA
2011
The countdown has begun …….
THANK YOU