Accounting Standards L2 (POA)

ACCOUNTING STANDARDS
L2(POA)
Accounting Standards
Accounting Standards are policy documents
in writing issued by the concerned authorities
like Accounting Standards Committee,
government or other regulatory bodies,
covering the aspects of recognition,
measurement, treatment, presentation and
disclosure of accounting transactions in the
financial statements.
The purpose of developing accounting Standards
is to :
1. Standardize the diverse accounting policies and
practices,
2. Ensure comparability of financial statements,
3. Establish reliability to financial statements,
4. Ensure confidence in the users of information,
and
5. Ensure universal acceptance of financial
statements.
Objectives of preparation and disclosure of financial statement is for the overall benefit of various
stakeholders who have keen interest over the operation of the enterprise. This largely depends on a
structured and systematic financial accounting process which accommodates undisputed accounting
principles and practices. If the financial accounting process is not properly regulated, there is every
possibility of financial statement being misleading, tendentious, and providing a distorted picture of
the business, rather than its true state of affairs. In order to ensure transparency, consistency,
comparability, adequacy and reliability of financial reporting it is essential to standardize the
accounting principles and policies. Accounting Standards provide structured framework and
Standard policies of accounting so that the financial statements of different enterprises become
comparable.
Accounting Standards focus on the issues relating to :
• Recognition of events and transactions in the financial
statements;
• Measurement of these events and transactions;
• Presentation of these events and transactions in the
financial statements meaningfully and purposefully;
• Disclosure requirements to enable the shareholders,
potential investors in particular and public at large to
get an insight into the facts and figures in the financial
statements to take prudent investment decision.
The whole idea of accounting Standards is centered on harmonization of accounting policies and
practices followed by various business entities so that diverse accounting practices can very well be
standardized. The reasons are to :
Eliminate the non-comparability of financial statements and thereby improving the reliability
of financial statements; and
Provide a set of Standard accounting policies, valuation norms and disclosure requirements.
Therefore, Accounting Standards reduce the accounting alternatives in the preparation of financial
statements within the purview of rationality, thereby ensuring comparability of financial statements
of different enterprises. These Standards broadly prescribe the basis for presentation of general
purpose financial statements to ensure comparability both with the entity’s financial statements of
previous periods and with the financial statements of other entities.
Accounting Standards in Indian
Context
In India, the Institute of Chartered Accountants of India (ICAI), being a premier
accounting body in the country, constituted the Accounting Standard Boards (ASB)
on 21st April 1977 to formulate Accounting Standards to be established in India by
the council of the ICAI. The council of the ICAI, so far, has issued 32 (Thirty-two)
Accounting Standards (AS) as per the list given below. However, AS – 8 on
“Accounting for Research & Development” has been withdrawn consequent to the
issuance of AS – 26 on “Intangible Assets” thus effectively, there are 31 Accounting
Standards at present. These Standards issued by the ASB establish Standards which
have to be complied by the business entities so that the financial statements are
prepared in accordance with Generally Accepted Accounting Principles (GAAP).
These Standards set out overall requirements for the presentation of financial
statements, guidelines for their structure and minimum requirements for their
content.

Accounting Standards L2 (POA)

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ACCOUNTING STANDARDS

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