Accounting standards are written documents that guide how to recognize, measure, treat, present, and disclose accounting transactions in financial statements. The government or other regulatory authorities may also publish them.
Now that you know the meaning of accounting standards, learn why they are useful.
Accounting Standards: Why Are They Useful?
Accounting standards increase financial reporting’s openness across the board. They provide the timing and format for identifying, measuring, and displaying economic events.
Accounting standards ensure that relevant information is given about the firm to external entities, including banks, investors, and regulatory bodies. These technical declarations establish the parameters for financial reporting measures and guarantee reporting transparency.
Accounting Standards Objectives
The objectives of Accounting Standards (India) are as follows:
- To follow global standards, assuring adherence to best practices around the world.
- Following a technique for better governance increases global comprehension of Indian accounting methods.
- To ensure a clear understanding of ‘what is accounting standards’ for increased transparency for corporate/company accounts, financial statements, and reports.
Now, let’s move on to the Indian accounting standards list that every business, CA, or finance person should know.
Indian Accounting Standards List: A Complete Compilation
Here is a compiled Indian accounting standards list that you, as a growing business, need to be aware of. Make a note!
- Accounting Standard 1: Disclosure of Accounting Policies
- Accounting Standard 2: Inventories
- Accounting Standard 3: Cash Flow Statements
- Accounting Standard 4: Events and Contingencies Arising after the Balance Sheet Date
- Accounting Standard 5: Net P/L for the Period, Prior Period Items and Modifications in Accounting Policies
- Accounting Standard 6: Depreciation Accounting
- Accounting Standard 7: Statement of Cash Flows
- Accounting Standard 8: Accounting for Government Grants and Disclosure of Government Assistance
- Accounting Standard 9: Revenue Recognition
- Accounting Standard 10: Accounting for Fixed Assets
- Accounting Standard 11: Construction Contracts
- Accounting Standard 12: Income Taxes
- Accounting Standard 13: Accounting for Investments
- Accounting Standard 14: Segment Reporting
- Accounting Standard 15: Employee Benefits
- Accounting Standard 16: Borrowing Costs
- Accounting Standard 17: Leases
- Accounting Standard 18: Related Party Disclosures
- Accounting Standard 19: Leases
- Accounting Standard 20: Provisions, Contingent Liabilities, and Contingent Assets
However, you must note that the Indian accounting standards list recently underwent some updates. Check the next section for more insight.
Indian Accounting Standards List: Latest Updates
- AS 20 – The Indian Accounting Standard AS 20 has been issued in its amended form. It involves identifying, quantifying, and disclosing government funds and other incentives.
- AS 25 – A revision to Indian Accounting Standard AS 25 has improved the disclosure of contingent liabilities.
- AS 20 – The Indian Accounting Standard AS 20 has been issued in its amended form. It involves identifying, quantifying, and disclosing government funds and other incentives.
- AS 19 – The updated edition of Indian Accounting Standard AS 19 has been made public. Greater clarification is provided on how to account for such transactions related to lease arrangements.
- AS 31: The 2013 Companies Act’s provisions have been considered and assessed to revise the Indian Accounting Standard AS 31.
- AS 18 – The updated edition of Indian Accounting Standard AS 18 has been made public. It focuses on the identification and evaluation of related party transactions.
- AS 15 – The Indian Accounting Standard AS 15 has been amended and released in compliance with the Companies Act of 2013. It is about employee perks, which cover both immediate and long-term advantages.
Indian Accounting Standards: Stagewise Adaptation
According to the law, the Companies Rules 2015, the Indian Government has mandated that businesses adhere to the Indian Accounting Standards list in the following manner, stage by stage:
Stage 1:
Mandatory implementation of Ind AS for all businesses beginning on April 1, 2016, if:
- The company is listed or unlisted
- The company’s net worth is INR 500 crore or more
Stage 2:
Mandatory implementation of Ind AS for all businesses commencing from April 1, 2017, if:
- The company is listed on on-process (as of 31/03/2016)
- The company’s net worth is between INR 250 crores and INR 500 crores.
Stage 3:
Mandatory implementation of Ind AS for all NBFCs, banks, and insurance companies commencing from April 1, 2018, if:
- The net worth is over INR 500 crore (w.e.f., April 1, 2018)
Stage 4:
With regulations that must be followed starting on April 1, 2019, all Non-Banking Financial Companies (NBFCs) must have a net worth of at least Rs 250 crore but not more than Rs 500 crore.
International Accounting Standards: Introduction To GAAP!
Generally Accepted Accounting Principles, also called GAAP, are a collection of accounting standards that are commonly used to create financial statements in the United States. Its goal is to make financial information more easily understood, consistently presented, and comparable.
In essence, it is a collection of accounting guidelines published by the Financial Accounting Standards Board (FASB) that are universally accepted. When their accountants put together a public company’s financial statements in the US, they must adhere to GAAP.
IFRS: Exploring More About International Accounting Standards!
Formed by the International Accounting Standards Board (IASB), the IFRS, or what we call International Financial Reporting Standards, is the accounting standard that non-U.S. GAAP corporations reporting financial statements must abide by. International businesses use IFRS.
They were created to promote uniformity in accounting standards and procedures across industries and nations. Since IFRS is frequently updated to reflect a constantly shifting financial environment, it is regarded to be more dynamic than GAAP.
Indian Accounting Standards Vs. International Accounting Standards: Key Differences
| Parameters | Indian Accounting Standards | International Accounting Standards |
| Meaning | The Indian Accounting Standards (IAS) state that assets should be recognized when there is a strong likelihood that they will generate financial advantages in the future. | According to the International Accounting Standards (IAS), assets should be recorded when they are expected to bring the organization financial benefits. |
| Asset Valuation | The IAS mandates that an asset’s worth be determined by comparing it to the lowest of its cost or fair value. | If the asset’s fair value is higher than its cost, the cost should be considered the asset’s lower price. |
| Fixed Asset Treatment | On disposal or when no longer projected to bring benefits, fixed assets must be removed from the accounting records. | Fixed assets must be depreciated throughout their estimated lifespans of use rather than only their useful lives. |
In-Depth Insight Into Indian & International Accounting Standards
- Treatment of Foreign Exchange Transactions: Under International Accounting Standards (IAS), enterprises must report foreign exchange transactions using the rate in effect when the transaction took place. Any gains or losses from foreign exchange must also be included in their income statement as expenses or revenue.
- Treatment of Investments: Investors who adopt International Accounting Standards (IAS) must recognize that their investments cost what they initially did. They can then demonstrate the fair value of their investments by doing so.
- Financial Statement Consolidation: According to IAS (International Accounting Standards), the financial accounts of two companies should be combined if one controls the other. IAS states that financial accounts must be combined even if a company has significant influence over another but no actual control over them.
Conclusion
Accounting standards must guarantee that all reporting or measures in financial statements adhere to a unified, easily readable accounting technique or norms.
When preparing and presenting financial accounts, auditors rely on chartered accountants, tax preparers (such as those who handle income tax, the Goods and Services Tax (GST), etc.), and the Indian Accounting Standards, which include accounting standards 1 through 32.
FAQs on Accounting Standard
1. How many accounting standard lists are available in the Indian Accounting Standards?
There are 32 accounting standards that must be followed while creating, reporting, or presenting financial accounts.
2. Do I need to follow everything in the Indian accounting standards list?
No, the non-mandatory lists of accounting standards have been removed by the Indian Chartered Accountants Institute (ICAI). The three standards are:
- AS 30 – Measurement and Recognition of Financial Instruments,
- AS 31 – Presentation of Financial Instruments and
- AS 32 – Disclosures necessary for reporting of Financial Instruments.
3. Are accounting standards compulsory for companies to comply with?
Yes, businesses in India are required to adhere to accounting norms. Companies who disregard the accounting requirements risk fines and legal repercussions.