Home
About Us
Why Joshi Apte?
Services
India Focus
Team
Alumni
QUICK LINKS
Professional Bodies
Govt. Organizations
FAQs on Taxes NRI Investment Options Accounting Standards Knowledge Portal
Accounting Standards
Accounting Standards in India

Introduction

Financial statements are prepared to summarize the end-result of all the business activities by an enterprise during an accounting period in monetary terms. These business activities vary from one enterprise to other. To compare the financial statements of various reporting enterprises poses some difficulties because of the divergence in the methods and principles adopted by these enterprises in preparing their financial statements. In order to make these methods and principles uniform and comparable to the extent possible ?standards are evolved.

What are Accounting Standards?

Accounting Standards are the statements of code of practice of the regulatory accounting bodies that are to be observed in the preparation and presentation of financial statements. In layman terms, accounting standards are the written documents issued by the expert institutes or other regulatory bodies covering various aspects of measurement, treatment, presentation and disclosure of accounting transactions.

Go to Top
What are the objectives of Accounting Standards?

The basic objective of Accounting Standards is to remove variations in the treatment of several accounting aspects and to bring about standardization in presentation. They intent to harmonize the diverse accounting policies followed in the preparation and presentation of financial statements by different reporting enterprises so as to facilitate intra-firm and inter-firm comparison.

Who issues Accounting Standards in India?

The Institute of Chartered Accountants of India (ICAI) recognizing the need to harmonize the diverse accounting policies and practices at present in use in India constituted Accounting Standards Board (ASB) on April 21, 1977. The main role of ASB is to formulate Accounting Standards from time to time.

What is the duty of Statutory Auditor for Compliance with Accounting Standards?

Section 211(3A) of Companies Act, 1956 provides that every profit and loss account and balance sheet of the company shall comply with the accounting standards.

The statutory auditors are required to make qualification in their report in case any item is treated differently from the prescribed Accounting Standard. However, while qualifying, they should consider the materiality of the relevant item. In addition to this Section 227(3)(d) of Companies Act, 1956 requires an auditor to report whether, in his opinion, the profit and loss account and balance sheet are complied with the accounting standards referred to in Section 211(3C) of Companies Act, 1956.

How many Accounting Standards have been prescribed? Are these applicable to all companies irrespective of its size?

In all 29 Accounting Standards have been prescribed. However their applicability is dependent on its size - Level I / II / III company. The following table lists out the Accounting Standards and its applicability.

Go to Top
Level I Company:

Enterprises, which fall in any one or more of the following categories, at any time during the accounting period, are classified as Level I enterprises:


i) Enterprises whose equity or debt securities are listed whether in India or outside India.

ii) Enterprises, which are in the process of listing their equity or debt securities as evidenced by the board of directors?resolution in this regard.

iii) Banks including co-operative banks.

iv) Financial Institutions

v) Enterprises carrying on insurance business.

vi) All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 500 million. Turnover does not include ‘other income?

vii) All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 100 million at any time during the accounting period.

viii) Holding and subsidiary enterprises of any one of the above at any time during the accounting period.

Level II Company:

Enterprises, which are, not Level I enterprises but fall in any one or more of the following categories are classified as Level II enterprises;

i) All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 4 million, but does not exceed Rs. 500 million. Turnover does not include ‘other income?

ii) All commercial, industrial and business reporting enterprises having borrowing, including public deposits, in excess of Rs. 10 million but not in excess of Rs. 100 million at any time during the accounting period. 

iii) Holding and subsidiary enterprises of any one of the above at any time during the accounting period.

Level III Company:

Enterprises, which are not covered under Level I and Level II are considered as Level III enterprises.

Applicability

Level II and Level III enterprises are considered as SMEs

Level I enterprises are required to comply fully with all the accounting standards.

Go to Top

No relaxation is given to Level II and Level III enterprises in respect of recognition and measurement principles. Relaxations are provided with regard to disclosure requirements. Accordingly, Level II and Level III enterprises are fully exempted from certain accounting standards, which mainly lay down disclosure requirements. In respect of certain other accounting standards, which lay down recognition, measurement and disclosure requirements, relaxations from certain disclosure requirements are given.

Sr. No. Particulars Applicability
1 Disclosure of Accounting Policies I, II, III
2 Valuation of Inventories I, II, III
3 Cash Flow Statements I
4 Contingencies and Events Occurring After the Balance Sheet Date I, II, III
5 Net Profit or Loss for the period, Prior period Items and Changes in Accounting Policies. I, II, III
6 Depreciation Accounting I, II, III
7 Construction Contracts I, II, III
8

Accounting for Research and Development (This standard has been withdrawn w.e.f. 01.04.2004 for all levels of enterprises and AS 26 is applicable)

As withdrawn
9 Revenue recognition I, II, III
10 Accounting for Fixed Assets I, II, III
11 The Effect of Changes in Foreign Exchange Rates I, II, III
12 Accounting for Government Grants I, II, III
13 Accounting for Investments I, II, III
14 Accounting for Amalgamations I, II, III
15 Accounting for Retirement Benefits in the Financial Statements of Employers I, II, III
16 Borrowing Costs I, II, III
17 Segment Reporting I
II-with modification
III- with modification
18 Related Party Disclosures I
II-with modification
III- with modification
19 Leases I
II-with modification
III- with modification
20 Earning Per Share I
II-with modification
III- with modification
21 Consolidated Financial Statements I
22 Accounting for Taxes on Income I,II,III
23 Accounting for Investments in Associates in Consolidated Financial Statements I
24 Discontinuing Operations I
25 Interim Financial Reporting I
26 Intangible Assets I,II,III
27 Financial Reporting of Interests in Joint Ventures I-with clarification
II-with clarification
III-with clarification
28 Impairment of Assets I
II-with modification
III-with modification
29 Provisions, Contingent Liabilities and Contingent Asset I
© All rights reserved.
Developed and maintained by Zestorm Technologies