• ACCOUNTING:

Human is considered to be a social animal. Out of the various basic needs, one
which is important is economic needs which is full filled by economic activity.
In order to survive, every human has to earn the livelihood which is done with
the help of economic activities. Economic activities are done by the business
houses with the motive of earning some profits or professional fees. Every
business is interested to know about the profits as well as financial results
earned by the business due to economic activities carried on by the business
during the financial year. These economic activities took place in the form
transactions are recorded in the books of accounts at the first place and then
with the help of systematic process financial results are drawn known as
Accounting.

As per the definition given by American Institute of Certified Public

Accountants (AICPA), “Accounting is the art of identifying, recording,
classifying and summarizing, in a significant manner and in terms of money,
transactions and events which are, in part at least, of a financial character and
interpreting the results thereof ”.

Lucas Pacioli is a Mathematician, who wrote a book on Mathematics which

is based on the Principle of Double entry Book Keeping and accounting
system in middle of the 15th Century. Hence it’s perceived that accounting
was developed in 15th Century. In the middle of 18th Century number of
transactions which takes place during the financial year increases manifold
due to production by business houses on a Large scale. The main reason of
such Large scale production was Industrial Revolution. This revolution
creates the complexities in business environment as some transactions takes
place in cash where as other few on credit. To overcome these complexities
there is a need for detailed Rules, Laws and Standards so that transactions can
be recorded and analyzed in correct manner as well uniformity can be
maintained.
In Indian history, the beginning of the accounting system took place in
Maurya period. Chanakya wrote a book known as Arthshastra in which
Accounting was explained in an exclusive chapter. The main objective of any

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 business is to earn profit and loss during financial year, ascertain the financial
position on a particular date and to depict the true and fair view of the
business.

• ACCOUNTING STANDARD:

Every business is working with the aim of earning profit followed by the
wealth maximization. Better financial results depicts the efficiency and
performance of the business which are prepared with help of following Rules
and standard of Accounting. Different Business houses has different way to
prepare their accounts which lacks uniformity because of different accounting
practices followed such as depreciation methods that one company may
follow production hour method and other may follow straight line method.
Similarly another example is valuation of stock taking, one may follow FIFO
method for the valuation of stock and other business may follow LIFO
method. Variation in accounting practices create confusion amongst the
stakeholders and may impact their decision making power.

For comparing the financial results of various companies full information

regarding the accounting practices followed should be available. Companies
should not have the freedom to prepare their books of accounts the way they
feel like because the lack of uniformity among accounting practices followed
by different businesses, will make it difficult to compare the financial results
of different companies. In order to make it comparable companies should
adhere to various accounting standard formulated so that uniformity can b
maintained. Therefore, accounting standards are needed to:
➢ provide a basic framework which is followed by all companies to
prepare financial statements so that uniformity can be maintained.
➢ Make the financial results comparable of one company with another
and one accounting year results with another accounting year of the
same company.
➢ Make the financial results reliable and comparable, and
➢ Create confidence amongst the stakeholders or users of financial
statements.
Accounting standards are the written accounting Rules and uniform
accounting practices to be followed by the business while preparing the

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financial statements and for giving various disclosures. However accounting
standard cannot override the applicable laws and business environment of the
country. ICAI persuades and train accounting professionals to follow and
apply accounting standards so that uniformity can be maintained while
preparing financial statements. In the initial stages accounting standards were
recommendatory in nature but once the awareness is created and accounting
professionals were trained about the implementation of accounting standards,
steps were taken to make the financial statements compliant of accounting
standard by making them compulsory for all the companies. In case
companies do not comply with the accounting standards then they are required
to mention the reason for not following the same and impact of not following
such accounting standard on financial results due to such deviations.
Following are the main objectives that are accomplished by accounting
standards:
➢ To standardize the accounting methods and procedures.
➢ To formularies principles for true and fair presentation & preparation.
➢ To lay down standard and benchmark for analyzing the financial
statements prepared by the companies.
➢ To make sure that stakeholders gets reliable financial results.
➢ To formulate standards so that true and fair picture can be depicted by
the companies on the basis of which stakeholders can take their various
decisions.
Accounting standards are formulated to bring uniformity in preparation and
presentation of financial statements, so that stakeholders can form their
decisions. As financial statements are prepared on the basis of common
accounting Rules and practices hence they are compatible for third party also
As now financial results are comparable and more reliable, so it helps the
industries which are not performing well to improvise. Accounting standards
reduces the ambiguity regarding rules to be followed which in turns narrow
down the opinions of different experts and reduces the bias involved. In
addition to this, users of financial results knows which item presented in books
of accounts differ from generally accepted accounting principles.

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Status of the Accounting Standards issued by the ICAI:
Number Title

AS 1 Disclosure of accounting policies

AS 2 Valuation of inventories

AS 3 Cash flow statement

AS 4 Contingencies and events occurring after the balance sheet

date

AS 5 Net profit or loss of the period, prior period items and

changes in accounting policies.

AS 6 Depreciation accounting

AS 7 Accounting for construction contracts

AS 8 Withdrawn and included with AS-26

AS 9 Revenue recognition

AS 10 Accounting for fixed assets

AS 11 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 Accounting for retirement benefits in financial statements of

employers

AS 16 Borrowing costs

AS 17 Segment reporting

AS 18 Related party disclosures

AS 19 Leases

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 AS 20 Earnings per share

AS 21 Consolidated financial statement

AS 22 Accounting for taxes on income

AS 23 Accounting for investment in associates in Consolidated

financial statements

AS 24 Discontinuing operations

AS 25 Interim financial reporting

AS 26 Intangible assets

AS 27 Financial reporting of interesting joint-venture

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

AS 32 Financial Instruments: Disclosures

• Indian Accounting Standards:

Accounting standard brings the archetype shift in economic environment of
the country from few last years as more importance and attention is given to
accounting standards in order to ensure transparency and uniformity in
financial results of companies. In era of globalization, business happens
across the globe which increases the preference for General accepted
accounting principles especially in advanced and developed countries. ICAI
country’s premier accounting body took the command in his hand and taken
over the role of leadership 25 years back and form the accounting standard
board to meet with national and international expectations. Accounting
standard comes long way.

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In 1973, International accounting standard committee (IASC) was formed to
address the need of harmonization of Indian accounting standard with
international accounting standard. Role of IASC is to promote International
accounting standard, so that harmonization between Rules and regulations and
accounting practices can be maintained. In recent few years the need for
harmonisation of international accounting standards with domestic standards
and practice has been increased due to rapid increase in cross border
transactions and operation of MNCs across the countries. Accounting
standards are formulated to bring the uniformity in accounting practices to be
followed by different countries domestically. The objective is to bring
uniformity in accounting practices and narrowing down the alternative
practices followed by the different companies so that the financial results can
be companies can be compared with each other and stakeholders can take the
required decisions without any confusion or chaos. ICAI being the member of
IASC constituted the accounting standard board on 21 st April 1977, so that
diverse accounting practices can be harmonized in India. New economic
reforms of 1991 replaces LPQ with LPG. Liberalisation and Globalisation
creates the need of better corporate governance. ASB, while laying down the
accounting standards keep in consideration rules, regulation and business
environment of domestic country as well tries to integrate them with
International accounting standard issued by IASB, to the extent possible, in
the light of practices and the conditions prevailing in India.
While framing Accounting standards, various discussions were conducted
with different groups at different stages of it’s formulation, as well optimal
balance is maintained regarding financial information keeping in mind the
interest of various stakeholders.

Status of the Indian Accounting Standards (IND–AS) issued by the ICAI:

Number Title

Ind AS 101 First-time adoption of Ind AS

Ind AS 102 Share Based payments

Ind AS 103 Business Combination

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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 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

Ind AS 116 Leases

Ind AS 117 Insurance contracts

Ind AS 1 Presentation of Financial Statements

Ind AS 2 Inventories Accounting

Ind AS 7 Statement of Cash Flows

Ind AS 8 Accounting Policies, Changes in Accounting Estimates and

Error

Ind AS 10 Events after Reporting Period

Ind AS 11 Construction Contracts

Ind AS 12 Income Taxes

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 Ind AS 16 Property, Plant and Equipment

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 28 Investments in Associates and Joint Ventures

Ind AS 29 Financial Reporting in Hyperinflationary 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

• Conceptual Framework: IFRS

In past, Institute of Chartered Accountants of India (ICAI) issued a

pronouncement with title “Framework for preparation and presentation of
financial statements under Indian Accounting standards”. Framework issued
by ICAI was based on the Framework which was issued by International

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Accounting Standard board’s(IASB’s) successor of IASC. In March 2018 new
revised comprehensive Framework was issued named ‘Conceptual
Framework for Financial Reporting”. In March 2018, the IASB issued a
comprehensive revised framework titled ‘Conceptual Framework for
Financial Reporting (Conceptual Framework). In order to maintain coherence
between framework issued by ISAB and Global accounting Standards ICAI
issued under Indian Accounting Standard, the Conceptual Framework for
Financial Reporting Corresponds to IASB’S Conceptual Framework 2018.
Framework is not the part of standards prepared by standard setters rather it’s
formed to help the preparators of standards to cover the areas of accounting
policies which are not covered by standards and to help the stakeholders and
participants to interpret them. ICAI has also recommended various changes
in IND As in order to comply with IFRS. In recent years lot of changes were
seen in Financial Reporting due to introduction of IFRS worldwide. India also
started all the required preparation in order to be complaint with newly
introduced IFRS. On one hand Industry is confused about the transition which
is going to happen due to introduction of IFRS, on the other hand few
regulators, standard setters and other contributors started making out the
roadmap for implementation of IFRS in India.
“IFRS is a single set of high quality, understandable and enforceable global
accounting standards that require high quality, transparent and comparable
information in financial statements and other reporting to help participants in
decision making”
IFRS are the set of international financial reporting standards which define
how to record particular types of transactions and events in financial
statements. IN the year 2001, IFRS are issued by IASB (International
Accounting Standard Board) which are recognized Global Financial Reporting

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Standards. Few countries make the full adoption of IFRS while others chosen
the route of partial adoption. The government of India has also adopted the
convergence route to IFRS from 1st of April 2011. India opted for partial
adoption and with few carves in and carves out in IFRS, IND –AS has been
introduced which will apply on companies as per companies act 2013,
mandatorily from 1st April 2016. Ministry of Corporate affairs (MCA) has
been assigned with the work of convergence of Indian GAAP to IFRS
resulting to IND AS.

IFRS in India

IN India, ASB is entrusted with the work of formulating and issuing

accounting standards which are formulated keeping in mind the compliance
with IFRS except with few deviations which are necessary in order to comply
with country’s Legal and economic environment. ICAI Council is of the
opinion that accounting standards are supported by. IFRS task force was
formed to lay down the roadmap for convergence of Indian accounting
standards with IFRS from the accounting year 1st April 2011. with
International Financial Reporting Standards henceforth called IND AS. India
opted for partial adoption and with few carves in and carves out in IFRS, IND
–AS has been introduced which will apply on companies as per companies act
2013, mandatorily from 1st April 2016. Ministry of Corporate affairs (MCA)
has been assigned with the work of convergence of Indian GAAP to IFRS
resulting to IND AS.

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 THE CHALLENGES

IFRS are formed by International Accounting Standard board(IASB) but the

responsibility of it’s Convergence with local GAAP lies with local
government. In India such task is done by ICAI. To comply with
implementation of IFRS ICAI needs proper infrastructure. India is facing
various challenges while adoption and implementation of IFRS due to legal,
regulatory and economic environment. So in order to make the Indian GAAP
complaint with IFRS, there is need to bring changes in Rules and regulations
followed in India for Financial reporting and accounting Under IFRS all assets
including intangible assets are shown at Fair Value, amortization of which
may reduce profits of companies. India lack experienced professionals who
helps in convergence to IFRS and it’s implementation. Therefore India needs
to depend on Foreign experts and auditors which makes it a costly affair.
Another major challenge is Indian GAAP are need to be based on the
principles of IFRS. So in order to remove the differences between Indian
GAAP and IFRS and make it closely converged with IFRS various changes
are need to be done in Indian GAAP.

Moving from Indian GAAP to IFRS not only require technical changes but
also change in managements and open the window for the company for
improvement and various opportunities. Various benefit company will ripe
due to it’s transition are:
• Reshaping the information and management system in order to improve
financial accounting and financial generation reports.
• Better disclosure of Company’s financial results and position and other
performance indicators to various stakeholders such as investors, Banks etc.

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Status of the IFRS issued by the International accounting standard
board:

Number Title

IFRS 1 First-time adoption of Ind AS

IFRS 2 Share Based payments

IFRS 3 Business Combination

IFRS 4 Insurance Contracts

IFRS 5 Non-Current Assets Held for Sale and Discontinued

Operations

IFRS 6 Exploration for and Evaluation of Mineral Resources

IFRS 7 Financial Instruments: Disclosures

IFRS 8 Operating Segments

IFRS 9 Financial Instruments

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IFRS 13 Fair Value Measurement

IFRS 14 Regulatory Deferral Accounts

IFRS 15 Revenue from contracts with customers

IFRS 16 Leases

IFRS 17 Insurance contracts

IAS 1 Presentation of Financial Statements

IAS 2 Inventories Accounting

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IAS 7 Statement of Cash Flows

IAS 8 Accounting Policies, Changes in Accounting Estimates and

Error

IAS 10 Events after Reporting Period

IAS 11 Construction Contracts

IAS 12 Income Taxes

IAS 16 Property, Plant and Equipment

IAS 19 Employee Benefits

IAS 20 Accounting for Government Grants and Disclosure of

Government Assistance

IAS 21 The Effects of Changes in Foreign Exchange Rates

IAS 23 Borrowing Costs

IAS 24 Related Party Disclosures

IAS 26 Accounting and Reporting by retirement benefit plans.

IAS 27 Separate Financial Statements

IAS 28 Investments in Associates and Joint Ventures

IAS 29 Financial Reporting in Hyperinflationary Economies

IAS 32 Financial Instruments: Presentation

IAS 33 Earnings per Share

IAS 34 Interim Financial Reporting

IAS 36 Impairment of Assets

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

IAS 38 Intangible Assets

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 IAS 40 Investment Property

IAS 41 Agriculture

Phased Manner Adoption of IFRS in INDIA

Particulars Voluntary Phase I Phase II
adoption
Financial Year of adoption 2015-16 or 2016 - 2017 2017 - 2018
thereafter

Corresponding Previous 2014-15 or 2015 - 2016 2016 - 2017

Year for Comparatives thereafter

Companies within IND

AS coverage:

i. Listed Companies Any company All Companies All companies

can Voluntarily with net worth > = listed or in process
adopt IND AS ₹ 5,00 crores of being listed.
ii. Unlisted companies All Companies Companies with
with net worth > = net worth > =
₹ 500 crores ₹ 250 crores
iii. Group Companies YES

Group Companies includes subsidiaries, holding companies, associated companies and

joint ventures of that company.

Particulars NBFCs
Phase I Phase II

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Financial Year of adoption 2018 - 2019 2019 - 2020

Corresponding Previous 2017 - 2018 2018 - 2019

Year for Comparatives

NBFCs within IND AS

coverage:
i. Listed companies All NBFCs All NBFCs listed or in process
Net Worth > = of being listing
ii. Unlisted Companies ₹ 500 crores NBFCs with net worth > =
₹ 250 crores
iii. Group Companies YES

Group Companies includes subsidiaries, holding companies, associated companies and

joint ventures of that company.

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