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S20: Accounting Standards and Disclosure Requirements


S20: Accounting Standards and Disclosure Requirements Session Objective To give a brief about the different accounting standards to the participants including the ... – PowerPoint PPT presentation

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Title: S20: Accounting Standards and Disclosure Requirements

S20 Accounting Standards and Disclosure
Session Objective
  • To give a brief about the different accounting
    standards to the participants including the
    Government Accounting Standards being developed
    by GASAB
  • To discuss the major Accounting Standards of
  • To explain the disclosure requirements in
    Financial Management

  • Why?
  • To establish rules relating to recognition,
    measurement and disclosures for true, fair,
    transparent and comparable financial statements
  • What?
  • Set of pronouncement by various regulatory

Different Accounting Standards
  • Formulated by Accounting Standard Boards
  • International Accounting Standards by US
    Securities Exchange Commission
  • Australian Accounting Standards by AASB
  • Accounting Standards by ASB, Financial Reporting
    Council, UK
  • Indian Accounting Standards formulated by ICAI
  • Indian Government Accounting Standards by GASAB

Accounting Standards followed in India
  • ICAI Accounting standards are followed by all the
    Companies in India including PSUs.
  • These standards are mostly mandatory for the
  • Disclosures may vary from Company to Company,
    depending on their declared accounting policies
    and subject to the mandatory Accounting Standards.

AS-1Disclosures of Accounting Policies
  • Disclosures of specific accounting principles and
    methods of their application in preparation and
    presentation of financial statements.
  • Should form part of the financial statements and
    be disclosed at one place

AS-2Valuation of inventories
  • Applicable to accounting of inventories other
    than WIP, stock-in-trade, inventories of
    livestock, agriculture, forest products and
  • Inventories are valued at cost or net reliable
    value whichever is lower Overheads are absorbed
  • Financial statements should disclose
  • the accounting policies adopted in measuring
    inventories (including cost formula used)
  • Totally carrying amount of inventories with
    appropriate classification

AS-3Cash Flow Statements
  • Enables users to evaluate changes in net assets
    of an enterprise and its financial structure as
    well as to effect the amounts and timings of cash
  • Should report
  • Cash flows during the period
  • Classified by operating, investing and financing

AS-4Contingencies and Events occurring after B/S
  • Events that occur between the balance sheet date
    and the date of approval by the Board of
    Director/corresponding authority.
  • 2 types of events
  • Adjusting those providing further evidence of
    conditions on B/S date
  • Adjustments need to be made in the assets and
  • Non-adjusting indicative of events arising
    subsequent to B/S date

AS-5Net Profit or Loss for the Period, Prior
Period Items and Changes in Accounting Policies
  • To prescribe the classification and disclosure of
    certain items in the statement of profit and loss
  • Disclosure include
  • Distinct depiction of prior items under relevant

AS-6Depreciation Accounting
  • Various disclosures required are
  • Historical/analogous cost for each class for
    depreciable asset
  • Total Depreciation for the period for each class
    of asset
  • Related accumulated deprecation
  • Depreciation methods
  • Depreciation and written down values/lives

AS-7Construction Contracts
  • Arises because formulation of a construction
    contract and its execution usually fall in
    different accounting periods
  • Exception of AS-2 as profit on inventories is
    recognized in case of construction contracts
  • Disclosure requirements include
  • Amount of contract revenue recognizable for the
  • Methods used to determine the same,
  • Methods used to determine the stage of completion
    of the contract
  • Aggregate amount of net profits till date,
    advances received, retentions,
  • Balance amounts due to be shown as

AS-9Revenue Recognition
  • Recognition of revenue from
  • Sale of goods
  • Rendering of services
  • Interest, royalty, dividend from resources
  • Not applicable in case of construction,
    lease-purchase, insurance contracts, government
    grants and such subsidies
  • Disclosure must include
  • Postponement of revenue recognition apart from
    significant accounting policies

  • Not applicable in case of forests, livestock,
    plantations, minerals, real estate development
  • Disclosures include
  • Gross/net value of fixed assets at the beginning
    and end of accounting period with detailed
  • Revaluations, if any

AS-11Effects of Changes in Forex Rates
  • Recognition of exchange gains losses
  • Treatment of foreign operations
  • Forward exchange contracts for trading/speculation
  • Disclosure requirements
  • Amount of exchange differences included in net
    profit/loss for the period
  • Accumulation and reconciliation of net exchange

AS-12Accounting for Government Grants
  • Includes subsidies, cash incentives, duty
  • Two approaches
  • Capital approach as part of shareholders funds
    Income approach-Taken into income
  • Disclosure requirements include the nature and
    extent of grants recognized in the financial
    statements and the policy thereto.

AS-13Accounting for Investments
  • To harmonise the accounting of various kinds of
  • Disclosure requirements include
  • Carrying amount of investments and aggregate
    value of quoted and unquoted investments and
    accounting policy thereto
  • Classification of investments
  • Amounts included in PL A/c
  • Restriction on rights of ownership, reliability
    of investments, remittance, etc.

AS-14Accounting for Amalgamations
  • For amalgamations and resultant goodwill and
  • Disclosures include
  • All details of amalgamating companies and
    amalgamation procedure including sanctions,
    treatment of shares, value of assets, etc.

AS-15Employee Benefits
  • Required to prescribe the accounting and
    disclosure for employee benefit. An enterprise
    to recognize
  • A liability when an employee has provided service
    in exchange for which employee benefits to be
    paid in the future and
  • An expense when the enterprise consumes the
    economic benefit arising from service provided by
    an employee in exchange for employee benefits.
  • Disclosure of
  • All details and accounting policies pertaining to
    defined benefit plans
  • Actuarial gains/losses
  • Reconciliation of balances,
  • Returns on plan assets
  • Past service costs

AS-16Borrowing Costs
  • For accounting for borrowing costs including
    interest, commitment charges, amortisation of
    discounts etc., finance charges, exchange
    differences in r/o foreign currency borrowings
  • Financial Statements to disclose
  • Accounting policy for borrowing costs
  • Amount of borrowing costs capitalised

AS-17Segment Reporting
  • Information regarding different types of
    operational products and services of an entity
  • Disclosure is required
  • Only for reportable segments whose financial
    indicators are 10 or more than those of the
    entire entity
  • Detailed break up of all indicators
  • Any changes in segmental accounting policies
  • Information on types of products/services/geograph
    ical details
  • Some disclosures are recommendatory

AS-18Related Party Disclosures
  • Applicable for transactions between the reporting
    enterprise and its related parties
  • Disclosures include
  • Relations pertaining to control
  • Exact details about the relationships

  • For all assets are leased. Includes Operational
    Lease, Finance Lease and Sale and Leaseback
  • Disclosure requirements to be made by both
    lessor and lessee
  • The gross carrying amount
  • Depreciation details
  • Loss and profit details
  • Lease details

AS-20Earnings Per Share (EPS)
  • Used to assess the profitability of an enterprise
  • The A.S. deals with determination and
    presentation of the same
  • Disclosures include
  • EPS details of each class of share on face of PL
  • Also in case of extraordinary item/class of share

AS-21Consolidated Financial Statements
  • Applicable for a group of Companies under a
    common parent
  • Lays down principles and procedures for
    preparation and presentation of a consolidated
    financial statement for the group as a whole to
  • Resources, obligations and results of the group
    as an entity

Other Accounting Standards (not discussed)
  • AS22 Accounting for deferred Taxes on Income
  • AS23 Accounting for Investments in Associates
  • AS24 Discontinuing Operations
  • AS25 Interim Financial Reporting
  • AS26 Intangible Assets
  • AS27 Financial Reporting of Interests in Joint
  • AS28 Impairment of Assets
  • AS29 Provisions, Contingent Liabilities and
    Contingent Assets
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