Accounting Standard 1
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PRESENTATION ON ACCOUNTING STANDARDS. BY: UTSAV, SIDDHARTH, APRAJITA, RAHUL & SAKSHI
CONTENTS What are Accounting Standards ? Objective of Accounting Standards ? Meaning of Accounting Standard 1 ? Objective of Accounting Standard 1 ? Fundamental Accounting Assumptions ? Considerations while selecting Acc. Policies ? • Example of a Company Following AS 1 ? • International Accounting Standards ? • Meaning of IAS-1 ? • • • • • •
ACCOUNTING STANDARDS • These are written policy documents issued by expert accounting body or by government or other regulatory body covering the aspects of recognition, treatment, measurement, presentation and disclosure of accounting transactions and events in the financial statements.
OBJECTIVE OF ACCOUNTING STANDARDS • The whole idea of accounting standards is centered around harmonization of accounting policies and practice followed by different business entities so that the diverse accounting practices adopted for various aspects of accounting can be standardized.
ACCOUNTING STANDARD (AS) – 1 Issued in 1979 By accounting standards board, the Institute of Chartered Accountants of
DISCLOSURE OF ACCOUNTING POLICIES
STATUS & APPLICABILITY • AS-1 is mandatory w.e.f. 01.04.1991 for Companies registered under the Companies Act, 1956 and with effect from 01.04.1993 for Partnerships, Sole proprietorships, Hindu undivided families, Trusts and Societies.
DISCLOSURE OF ACCOUNTING POLICIES • This is the first accounting standard, that deals with the disclosure of significant Accounting Policies followed in preparing and presenting Financial Statements.
ACCOUNTING POLICIES:These are specific accounting principles and methods of applying these principles adopted by the enterprise in the preparation and presentation of financial statements. FINANCIAL STATEMENTS :The financial statements are basic mean through which the management of an firm makes public communication with the financial information along with selected Quantitative Details.
OBJECTIVE • The objective of AS-1 is to lay down the basic principles for the disclosure of major accounting policies being followed in preparing the financial statements. These accounting policies affect the state of affair and profit or loss position of the enterprise as shown in the financial statements.
FUNDAMENTAL ACCOUNTING ASSUMPTIONS There are certain assumptions which affect the preparation and presentation of financial
• Going Concern : The enterprise is normally viewed as a going concern and continuing in operation, for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of closing the operations.
• Consistency: It is assumed that accounting policies are consistent from one period to another.
• Accrual: Revenues & costs are accrued & recognized as they are accrued or incurred and recorded in the financial statements of the periods to which they relate.
Examples of Accounting Policies • Method of Depreciation: 1. Straight line method. 2. Written down value method. • Valuation of investments and fixed costs: 1. Cost 2. Market Value 3. Replacement Value.
Contd…. • Treatment of contingent liabilities. • Treatment of Goodwill. • Recognition on profit on long term contracts. • Treatment of expenditure incurred during construction. • Conversion of foreign currencies. • Valuation of Inventories , etc.
CONSIDERATIONS FOR SELECTING AN ACCOUNTING POLICY.
• Prudence- provision is made for all expected liabilities & losses but profits are recognized only when realized.
• Materiality- all material , substantial and important items should be disclosed in the financial statements.
DISCLOSURE • To ensure proper understanding of financial statements, it is necessary that all accounting policies adopted in the preparation and presentation of financial statements should be disclosed and at one place. • Any change to the accounting policies which has a material effect in current period or later periods should also be disclosed.
Contd…. • If the fundamental accounting assumptions, i.e. Going Concern, Consistency & Accrual are followed in financial statements, specific disclosure is not required. However, if a fundamental accounting assumption is not followed, the fact should be
EXAMPLE : GLAXO SMITHKLINE PHARMACEUTIC ALS
Statement of Accounting Policies :• The financial statements are prepared under the historical cost convention & comply with the Accounting Standards. • Fixed assets are stated at cost of acquisition, including any attributable cost for bringing the asset to the working condition less
Contd…. • Interest on borrowings attributable to new projects is capitalized and included in cost of fixed assets. • Long term investments are stated at cost except where there is a diminution in value other than temporary, in which case, the carrying value is reduced to recognize the decline.
International Accounting Standards • The objective of this Standard is to 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. To achieve this objective, this Standard sets out overall requirements for the presentation of financial statements, guidelines for
A complete set of financial statements comprises: (a) a balance sheet; (b) an income statement; (c) a statement of changes in equity showing either: • (i) all changes in equity, or • (ii) changes in equity other than those arising from transactions with equity holders acting in their capacity as equity holders; (d) a cash flow statement; and (e) notes, comprising a summary of significant accounting policies and other
Comparison AS-1 • No format is prescribed for any of the financial statement. • Going concern, accrual and consistency are basic accounting policies and should be followed
IAS-1 • Is basically a presentation standard and gives the format of balance sheet and income statement. • No fundamentals assumptions have been provided and it talks about the fair presentation.
Contd.. AS-1 • There is no offsetting principle in AS-1
IAS-1 • The current assents and current liabilities are clearly defined and criteria for offsetting items of financial statement against each other are specified
K N A H T U O Y
CONTENTS What are Accounting Standards ? Objective of Accounting Standards ? Meaning of Accounting Standard 1 ? Objective of Accounting Standard 1 ? Fundamental Accounting Assumptions ? Considerations while selecting Acc. Policies ? • Example of a Company Following AS 1 ? • International Accounting Standards ? • Meaning of IAS-1 ? • • • • • •
ACCOUNTING STANDARDS • These are written policy documents issued by expert accounting body or by government or other regulatory body covering the aspects of recognition, treatment, measurement, presentation and disclosure of accounting transactions and events in the financial statements.
OBJECTIVE OF ACCOUNTING STANDARDS • The whole idea of accounting standards is centered around harmonization of accounting policies and practice followed by different business entities so that the diverse accounting practices adopted for various aspects of accounting can be standardized.
ACCOUNTING STANDARD (AS) – 1 Issued in 1979 By accounting standards board, the Institute of Chartered Accountants of
DISCLOSURE OF ACCOUNTING POLICIES
STATUS & APPLICABILITY • AS-1 is mandatory w.e.f. 01.04.1991 for Companies registered under the Companies Act, 1956 and with effect from 01.04.1993 for Partnerships, Sole proprietorships, Hindu undivided families, Trusts and Societies.
DISCLOSURE OF ACCOUNTING POLICIES • This is the first accounting standard, that deals with the disclosure of significant Accounting Policies followed in preparing and presenting Financial Statements.
ACCOUNTING POLICIES:These are specific accounting principles and methods of applying these principles adopted by the enterprise in the preparation and presentation of financial statements. FINANCIAL STATEMENTS :The financial statements are basic mean through which the management of an firm makes public communication with the financial information along with selected Quantitative Details.
OBJECTIVE • The objective of AS-1 is to lay down the basic principles for the disclosure of major accounting policies being followed in preparing the financial statements. These accounting policies affect the state of affair and profit or loss position of the enterprise as shown in the financial statements.
FUNDAMENTAL ACCOUNTING ASSUMPTIONS There are certain assumptions which affect the preparation and presentation of financial
• Going Concern : The enterprise is normally viewed as a going concern and continuing in operation, for the foreseeable future. It is assumed that the enterprise has neither the intention nor the necessity of closing the operations.
• Consistency: It is assumed that accounting policies are consistent from one period to another.
• Accrual: Revenues & costs are accrued & recognized as they are accrued or incurred and recorded in the financial statements of the periods to which they relate.
Examples of Accounting Policies • Method of Depreciation: 1. Straight line method. 2. Written down value method. • Valuation of investments and fixed costs: 1. Cost 2. Market Value 3. Replacement Value.
Contd…. • Treatment of contingent liabilities. • Treatment of Goodwill. • Recognition on profit on long term contracts. • Treatment of expenditure incurred during construction. • Conversion of foreign currencies. • Valuation of Inventories , etc.
CONSIDERATIONS FOR SELECTING AN ACCOUNTING POLICY.
• Prudence- provision is made for all expected liabilities & losses but profits are recognized only when realized.
• Materiality- all material , substantial and important items should be disclosed in the financial statements.
DISCLOSURE • To ensure proper understanding of financial statements, it is necessary that all accounting policies adopted in the preparation and presentation of financial statements should be disclosed and at one place. • Any change to the accounting policies which has a material effect in current period or later periods should also be disclosed.
Contd…. • If the fundamental accounting assumptions, i.e. Going Concern, Consistency & Accrual are followed in financial statements, specific disclosure is not required. However, if a fundamental accounting assumption is not followed, the fact should be
EXAMPLE : GLAXO SMITHKLINE PHARMACEUTIC ALS
Statement of Accounting Policies :• The financial statements are prepared under the historical cost convention & comply with the Accounting Standards. • Fixed assets are stated at cost of acquisition, including any attributable cost for bringing the asset to the working condition less
Contd…. • Interest on borrowings attributable to new projects is capitalized and included in cost of fixed assets. • Long term investments are stated at cost except where there is a diminution in value other than temporary, in which case, the carrying value is reduced to recognize the decline.
International Accounting Standards • The objective of this Standard is to 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. To achieve this objective, this Standard sets out overall requirements for the presentation of financial statements, guidelines for
A complete set of financial statements comprises: (a) a balance sheet; (b) an income statement; (c) a statement of changes in equity showing either: • (i) all changes in equity, or • (ii) changes in equity other than those arising from transactions with equity holders acting in their capacity as equity holders; (d) a cash flow statement; and (e) notes, comprising a summary of significant accounting policies and other
Comparison AS-1 • No format is prescribed for any of the financial statement. • Going concern, accrual and consistency are basic accounting policies and should be followed
IAS-1 • Is basically a presentation standard and gives the format of balance sheet and income statement. • No fundamentals assumptions have been provided and it talks about the fair presentation.
Contd.. AS-1 • There is no offsetting principle in AS-1
IAS-1 • The current assents and current liabilities are clearly defined and criteria for offsetting items of financial statement against each other are specified
K N A H T U O Y
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