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Accounting Standards

1) Accounting standards specify how transactions are recognized, measured, presented and disclosed in financial statements. 2) The two main standards are International Financial Reporting Standards (IFRS) issued by the IASB and Indian Accounting Standards (Ind-AS) issued by India's Accounting Standards Board. 3) IFRS adoption is mandatory for listed companies while Ind-AS adoption is mandatory for large public companies in India over time based on net worth.

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260 views6 pages

Accounting Standards

1) Accounting standards specify how transactions are recognized, measured, presented and disclosed in financial statements. 2) The two main standards are International Financial Reporting Standards (IFRS) issued by the IASB and Indian Accounting Standards (Ind-AS) issued by India's Accounting Standards Board. 3) IFRS adoption is mandatory for listed companies while Ind-AS adoption is mandatory for large public companies in India over time based on net worth.

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Johnson
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Accounting Standards 

- IFRS and INDAS:
INTRODUCTION:
Accounting standards are authoritative standards for financial reporting and are the primary source of
generally accepted accounting principles (GAAP). They specify how transactions and other events are to be
recognized, measured, presented and disclosed in financial statements

GAAP:
Generally accepted accounting principles or GAAP are a set of rules that encompass the details, complexities,
and legalities of business and corporate accounting. The Financial Accounting Standards Board uses GAAP as
the foundation for its comprehensive set of approved accounting methods and practices.

Indian and International GAAP:


There are many GAAP differences. But those of most prominent ones are briefly explained below.

1) Accounting
 the most significant differences in GAAP is the absence of both consolidation and equity accounting in
Indian GAAP
 Indian tax law, too, does not recognise the consolidated results
 AS 14, Amalgamations  governs the Accounting for acquisitions and mergers
 when international GAAP is applied a business combination can lead to different results

2) Deferred taxation.

 Deferred tax accounting is absent in India except in the accounts of a few multinationals
 the companies only account for the tax provision based on the current tax law

3) Leased assets.

 Leases that, in substance, qualify as capital leases are internationally required to be accounted from
operating leases. So, Indian GAAP does not require this differentiation.
 Thus, capital leases continue to remain on the lessor’s balance sheet. Therefore, stay outside the
lessee’s balance sheet.

Disclosures
 In Indian GAAP Disclosures are primarily driven by the requirements of the Indian Companies Act and
accounting standards.

Accounting Standards:
Accounting standards are authoritative standards for financial reporting and are the primary source of
generally accepted accounting principles:
1) International Financial Reporting Standards (IFRS)

It was issued by International Accounting Standards Board (IASB).  The International Standard setting
process began long ago as an effort to Standardize and make easier to adopt by the developing and smaller
nations which feel difficult to set and establish their own standards on Accounting and Reporting. The
importance of having ONE standard was felt by the regulators, investors, large entities and audit firms as the
business becomes more global.

Adoption of IFRS is mandatory for the following entities:

 Public and Private companies listed and in the process of listing.

 Private companies who have issued debt instruments in a public market and

 Private companies which hold assets in fiduciary capacity (ex: Banks and Insurance companies)

Indian Accounting Standard 


Indian Accounting Standard (Ind-AS) is the Accounting standard adopted by companies in India and
issued under the supervision of Accounting Standards Board (ASB) which was constituted as a body
in the year 1977.

The list of accounting standards are as below:

Ind As
Name of Indian Accounting Standard
No.

Ind AS 101 First time adoption of Ind AS

Ind AS 102 Share Based Payment

Ind AS 103 Business Combination

Ind AS 104 Insurance Contracts

Ind AS 105 Non-Current Assets Held for Sale and Discontinued Operations

Ind AS 106 Exploration for and Evaluation of Mineral Resources

Ind AS 107 Financial Instruments: Disclosures


Ind As
Name of Indian Accounting Standard
No.

Ind AS 108 Operating Segments

Ind AS 109 Financial Instruments

Ind AS 110 Consolidated Financial Statements

Ind AS 111 Joint Arrangements

Ind AS 112 Disclosure of Interests in Other Entities

Ind AS 113 Fair Value Measurement

Ind AS 114 Regulatory Deferral Accounts

Ind AS 115 Revenue from Contracts with Customers(Applicable from April 2018)

Ind AS 116 Leases (Applicable from April 2019)

Ind AS 1 Presentation of Financial Statements

Ind AS 2 Inventories

Ind AS 7 Statement of Cash Flows

Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors


Ind As
Name of Indian Accounting Standard
No.

Ind AS 10 Events occurring after Reporting Period

Construction Contracts (Omitted by the Companies (Indian Accounting Standards)


Ind AS 11
Amendment Rules, 2018)

Ind AS 12 Income Taxes

Ind AS 16 Property, Plant and Equipment

Ind AS 17 Leases (Omitted by the Companies (Indian Accounting Standards) Amendment Rules,2019)

Revenue (Omitted by the Companies (Indian Accounting Standards) Amendment Rules,


Ind AS 18
2018)

Ind AS 19 Employee Benefits

Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance

Ind AS 21 The Effects of Changes in Foreign Exchange Rates

Ind AS 23 Borrowing Costs

Ind AS 24 Related Party Disclosures

Ind AS 27 Separate Financial Statements


Ind As
Name of Indian Accounting Standard
No.

Ind AS 28 Investments in Associates and Joint Ventures

Ind AS 29 Financial Reporting in Hyper inflationary Economies

Ind AS 32 Financial Instruments: Presentation

Ind AS 33 Earnings per Share

Ind AS 34 Interim Financial Reporting

Ind AS 36 Impairment of Assets

Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets

Ind AS 38 Intangible Assets

Ind AS 40 Investment Property

Ind AS 41 Agriculture

Application of INDAS India:


Companies shall follow Ind AS either Voluntarily or Mandatorily. Once a company follows Indian AS, either
mandatorily or voluntarily, it can't revert to old method of Accounting.

1) Mandatory Applicability (1 April 16)

 Every Company with Net worth of not less than 500 crores (5 billion).
2) Mandatory Applicability from Accounting Period beginning on or after 1
April 2017

 Every Listed Company.


 Unlisted Companies with Net worth greater than or equal to Rs. 250 crore
(2.5 billion) but less than Rs. 500 crore (5 billion)(for any of the below
mentioned periods).

Conclusion:
The financial reporting standards that must be considered when preparing a company's
accounts. More standards are expected as the complexities of business transactions grow
and accounting practice adapts to keep up with these changes

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