Page 16 - debkxi

Theory Base of Accounting, Accounting Standards and Ind-AS 3.3

• Accounting Standards are a set of guidelines, i.e., Generally Accepted Accounting Principles,
issued by the accounting body of the country, i.e., The Institute of Chartered Accountants of
India (ICAI), that are followed for preparation and presentation of financial statements.
• The objective of setting Accounting Standards is to bring uniformity in accounting practices
and to ensure transparency, consistency and comparability.
• International Financial Reporting Standards (IFRS) are a set of accounting standards
issued by IASB, which came into existence in the year 2001.
• IASB adopted existing International Accounting Standards (IAS) and SIC as their standards.
Out of 41 IAS, 12 IAS stand withdrawn and in effect 29 IAS are still applicable.
• IASB issued 9 IFRS and a standard for Small and Medium Enterprises.
• IFRS compliant financial statements are:
1. Statement of Financial Position,
2. Comprehensive Income Statement,
3. Statement of Changes in Equity,
4. Statement of Cash Flow, and
5. Notes and Summary of Accounting Policies.
• Objectives of IASB are:
1. To develop, in the public interest, 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 financial reporting to help
participants in the various capital markets of the world and other users of the information
to make economic decisions;
2. To promote the use and rigorous application of those standards;
3. In fulfilling the objectives associated with (1) and (2), to take account of, as appropriate,
the special needs of small and medium-sized entities and emerging economies; and
4. To bring about convergence of national accounting standards and International Financial
Reporting Standards to high-quality solutions.
• Difference between IFRS and Indian Accounting Standards (Ind-As). The principal
difference between the two is that while IFRS are based on principle and fair value, Indian
Accounting Standards are based on rules and historical value.
• India decided to converge Indian Accounting Standards with IFRS and has issued converged
International Accounting Standards titled ‘Ind-AS’.
India has issued Indian Accounting Standards (Ind-AS) that converge into IFRS. They are the
Indian Equivalent of IFRS applicable to select types of companies, i.e.,
(i) Companies listed on the Stock Exchange in India;
(ii) Companies having net worth of ` 250 crores or more;
(iii) Their Holding, Subsidiary, Associate and Joint Venture Companies.
Ind-AS are notified Indian Accounting Standards under the Companies Act, 2013 and are
mandatory for companies to which they apply. Other companies are encouraged to adopt them.
So far 40 Ind-AS have been issued.