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UNDERSTANDING OF ACCOUNTING STANDARDS & IFRS By:- Group No. 12 Members : Jitesh Kumar, Prateek Agarwal, Ram Nandan Singh, Satish Biradar, Sakshi Zutshi, Sumeet Sharma, Umang Arora, Piyush Bahatkar, Priyanka Rana, Heena Shekhawat, Prajit Dhagat, Parveen Gulia, Rohit Heda Promesh Chouriwar and Rakesh Kumar Singh

Introduction of Accounting Standards Objectives of Accounting Standards Types of Accounting Standards

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

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 1. AS 1 to AS 15 Initiation 1979 to 1995

2. AS 16 to AS 29
3. AS 30 to AS 32

2000 to 2007
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.

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

1. 2. A non-cash expenditure Distribution of total cost to its useful life Occurs due to obsolescence Different methods of computation Straight line method ( SLM ) 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. 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 2. Category II: Foreign operations: a) Foreign branch b) Joint venture c) Foreign Subsidiary 3. 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

1. 2. It consists of 2 segment:Business segment Geographical segment Information and different risk and return reporting.

AS 18- Related party disclosure

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

1. 2.
3. 4.

AS 19- Accounting for Leases

1. 2. Agreement between Lessor And Lessee Two types of leases: Operating lease 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

1. 2. 3. No physical existence Can not be seen or even touched 3 featured as per AS Identifiable Non-monetary assets 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

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)

IFRS in INDIA 200911

Time of transition
International Financial Reporting Standards Why, When, What & How

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.


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 SMEs as of now.

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 is itself a moving target, with changes being introduced continually, refining the provisions and adding more areas for disclosures. The IFRS implementation requires a multidisciplinary 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.


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

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 .