What is ACCOUNTING STANDARDS
Today we will talk about accounting standards the process of setting up an accounting standard and the benefits of accounting standard, So what exactly is accounting standard.
Accounting standards are written policy documents issued by the government with the support of other regulatory bodies covering the aspects of recognition measurement presentation and disclosure of accounting transactions. In the financial statements, So what does Accounting Standards deal with
First recognition of events and transactions in the financial statements.
Second measurement of these transactions and events.
Third presentation of these transactions and events.
Fourth point the disclosure relating to these transactions and events.
Accounting standards standardized diverse accounting policies with a view to first eliminate the non compare ability of financial statements and there by improving, the reliability of financial statements to the maximum possible extent second to provide a set of standard accounting policies valuation norms and disclosure requirements.
Now we should discuss about how accounting standards are being introduced first step is to identify the broad areas by formulation of accounting standard constitution of study groups by ASB to consider specific projects and to prepare preliminary drafts of the proposed accounting standards consider the preliminary draft prepared by the study group of ASB and it required make revisions of the draft on the basis of deliberations.
The draft is circulated to the members and specified outside bodies such as Ministry of Corporate Affairs DCA Securities and Exchange Board of India Sebby Controller and Auditor General of India finalization of the exposure draft of that proposed accounting standard and its issuance inviting public comments based on the comments received ASB will finalize the draft and submit to the council based on the council’s recommendation the ASB shall modify the draft by CAI shall issue accounting standard.
what are the benefits of Accounting Standards first standardization of alternative accounting treatment second requirements for additional disclosures third comparability of financial statements.
The benefits of Accounting
in this session let us understand the benefits of Accounting Standards we know Accounting Standards prescribes accounting principles valuation techniques and how we should apply these accounting principles in preparation and presentation of financial statements.
Its money because of these principles and techniques and their application we can say financial statements are giving true and fair view in case, if these accounting standards are absent then different entities will resort to different accounting treatments and it would lead to total confusion.
However accounting standards are ensuring that different accounting treatments are eliminated or at least reduced to a reasonable extent apart from that there are certain areas where statute does not call for disclosures but if disclosures had been made it would have been beneficial to the readers of financial statements.
In those cases accounting standards are actually giving helping hand because accounting standards call for disclosures and they are in addition to statutory disclosures okay and that step is actually bringing more transparency next business entities follows accounting standards and because of that we can now compare financial statements of different entities within India and to a limited extent.
We can also compare it with the financial statements of companies situated outside India say in the different parts of the world but one thing we have to keep in mind is that accounting standards are principle based so because of that in some cases application of Accounting Standards will become judgmental especially in case of complex of business transactions and in cases where there is a conflict between accounting standard and legal requirement and keep it in mind whenever there is a conflict between accounting standard and legal requirement it is only the statute which will prevail over accounting standards.