As 1

Accounting Standard 1

1. ACCOUNTING STANDARDS GROUP – 5 Amit Nopani Animesh Albert Barwa Challa Ravi Tej Nitesh Kumar Nupur Sharma Prabhakaran Selvaraj Swati Mishra Vaibhav Pateriya

2. Are the principles governing accounting practices which determines the appropriate treatment of financial transactions. No universally accepted set of standards: Standards conform to applicable laws, customs, usages & business environment. (GAAP, SAS, AAS, etc..) Issued for use in presentation of Financial Statements like Balance Sheet, Profit & Loss a/c and other statements & explanatory notes. The objective is to harmonise the diversified policies to make the system more useful & effective. What are accounting standards???

3. BACKGROUND.. In India, Accounting Standards are prepared & issued by the ‘ Accounting Standard Board’ (ASB) constituted by ICAI on 21 st April, 1977. The accounting standards have been granted legal recognition under the Companies Act, 1956. The parallel international body is the ‘ International Accounting Standards Committee’ (IASC) & ICAI is a member of the IASC. While formulating Standards, ASB takes into consideration the Standards issued by IASC, called ‘ International Accounting Standards .’

4. importance … Uniformity & Standardisation: to reduce alternatives and bring uniformity. For presenting True & fair picture of Financial statements For easy interpretation & analysis of the Financial Statements. For having same view point of presenter & reader of statements. For meaningful comparison between two enterprises.

5. List of Accounting standards… AS 1 : Disclosure of Accounting Principles. AS 2 : Valuation of Inventories. AS 3: Cash Flow Statements. AS 4 : Contingencies and Events Occurring After the Balance Sheet Date. AS 5 : Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies. AS 6 : Depreciation Accounting . AS 7 (revised) : Construction Contracts. AS 8 : Accounting for Research and Development. AS 9 : Revenue Recognition . AS 10 : Accounting for Fixed Assets. AS 11 (Rev. 2003) : The Effects Of Changes In Foreign Exchange Rates. AS 12 : Accounting for Government Grants. AS 13 : Accounting for Investments. AS 14 : Accounting for Amalgamations. AS 15 (Rev. 2005) : Employee Benefits. AS 16 : Borrowing Costs. AS 17 : Segment Reporting . AS 18 : Related Party Disclosures. AS 19 : Leases. AS 20 : Earnings Per Share.

6. AS 21 : Consolidated Financial Statements. AS 22 : Accounting for taxes on income. As 23 : Accounting for Investments in Associates in Consolidated Financial Statements. AS 24 : Discontinuing Operations. AS 25 : Interim Financial Reporting. AS 26 : Intangible Assets. AS 27 : Financial Reporting of Interests in Joint Ventures. AS 28 : Impairment of Assets. AS 29 : Provisions, Contingent Liabilities and Contingent Assets. AS 30 : Financial Instruments: Recognition and Measurement. AS 31 : Financial Instruments: Presentation . List of Accounting standards… List of Accounting standards cont…

7. ACCOUNTING STANDARD (AS) 1 DISCLOSURE OF ACCOUNTING PRINCIPLES

8. Accounting Standard (AS) 1 issued by the Accounting Standards Board on ‘ Disclosure of Accounting Policies ’. The Standard deals with the disclosure of significant accounting policies followed in preparing and presenting financial statements. Disclosure of accounting principles

9. All significant accounting policies adopted in the preparation and presentation of financial statements should be disclosed in one place. There is no single list of accounting policies which are applicable to all circumstances. Is required by law in some cases. The nature and degree of disclosure vary between Corporate and Non-Corporate sectors. In some cases it forms part of accounts, while in others it is given as supplementary information. It also facilitates a more meaningful comparison between financial statements of different enterprises . Disclosure of accounting principles: Introduction…

10. GOING CONCERN: The enterprise is normally viewed as a going concern, that is, as continuing in operation for the foreseeable future. CONSISTENCY: To achieve comparability of the financial statements of enterprise through time, the accounting policies are followed consistently from one period to another. If any changes are there they must disclose it. ACCRUAL: Revenues and costs are recorded in the financial statements of the periods to which they relate. Fundamental accounting assumptions Following are the Fundamental Accounting Assumptions. If any assumptions is not followed in the financial statements, the fact should be disclosed.

11. FIXED ASSETS & DEPRECIATION: Cost of fixed assets includes the incidental expenses related to the acquisition and installation of the assets & pre-operative expenses capitalized and allocated to Fixed Assets. Fixed assets are stated at cost of purchase less depreciation. Dep. Methods : Straight line, Written Down Value, Sum of the year’s digits, Production Units method. Plant and Machinery % per annum Office Equipments % per annum Computer & Software % per annum Vehicles % per annum Leasehold improvements % per annum Fixed assets costing less than Rs.5,000/- are fully depreciated in the year of purchase. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED

12. USE OF ESTIMATES: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of income and expenditure. ☼ Actual results could differ from those estimates ☼ Any revision to accounting estimates will be recognized prospectively in future periods AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…

13. BASIS OF PREPARATION OF FINANCIAL STATEMENTS: The financial statements should comply with the mandatory accounting standards and statements issued by the Institute of Chartered Accountants of India and relevant provisions of the Companies Act, 1956 to the extent applicable. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…

14. EXPENDITURE DURING CONSTRUCTION PERIOD : In some cases all the incidental expenditure on Construction of Assets during Project stage are accumulated and allocated to the cost of asset on completion of the project. In some cases the expenditure is divided in 2 parts: Direct & Indirect. Direct exp. is allocated to cost of assets & Indirect exp is charged to revenue. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…

15. VALUATION of INVENTORIES Inventories are valued at lower of cost and net realisable value. The basis of determining cost is set out below: Stores and spares “Weighted Average Basis” Raw materials & components “Weighted Average Basis” Packing materials “Weighted Average Basis” Work-in-progress “Cost of Raw materials, conversion cost and appropriate share of production Overheads. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…

16. REVENUE RECOGNITION Revenue from the sale of products is recognized at the point of dispatch of goods from the factory Revenue from job works/services is recognized on completion of respective job work/service. Export incentives and other incomes are recognized on accrual basis. AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…

17. FOREIGN CURRENCY TRANSACTIONS TREATMENT OF CONTINGENT LIABILITIES. TREATMENT OF RETIREMENT BENEFITS TREATMENT OF GOODWILL AREAS IN WHICH DIFFERING ACCOUNTING POLICIES ARE ENCOUNTERED CONT…

18. Financial statements prepared and presented should represent a true and fair view. The major considerations governing the selection and application of accounting policies are: PRUDENCE SUBSTANCE OVER FORM MATERIALITY CONSIDERATIONS IN THE SELECTION OF ACCOUNTING POLICIES

19. PRUDENCE : Profits are recognised only when realised but provision is made for all known liabilities and losses SUBSTANCE OVER FORM : Accounting transactions and events should be governed by their substance and not merely by the legal form. MATERIALITY: Financial statements should disclose all “material” items, which might influence the decisions of the users.

20. To ensure proper understanding of financial statements Such disclosure should form part of the financial statements. It would be helpful to the reader of financial statements if they are all disclosed at one place. Any change in an accounting policy which has a material effect should be disclosed The amount by which any item in the financial statements is affected by such change should also be disclosed disclosure of accounting policies Summarize…

21. Thank you…