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Accounting Standards:

May 18, 2023

Accounting Standard (1)


Accounting Standards:


Accounting standards play an important role in a company’s financial statements. A company needs to abide by accounting rules to prevent financial risks and fraud in its statements.


 What is the accounting standard?

Accounting standards are rules that guide the preparation and presentation of financial information in organizations and cover multiple areas of financial reporting, such as revenue recognition, inventory valuation, and depreciation. Below are some examples of common accounting standards around the world.


GAAP (Generally Accepted Accounting Principles):

In the United States, GAAP refers to the standards that manage the creation and preparation of financial statements.

International Financial Reporting Standards (IFRS):

IFRS is an accounting system created by the International Accounting Standards Board and is currently used in many countries around the world, such as the European Union, Australia, and Canada.

Indian Accounting Standards (Ind AS):

Ind AS (Indian Accounting System) is an accounting system developed by the Indian Institute of Chartered Accountants (ICAI).


List of Accounting Standards in India:

The Indian AS has been derived from the globally accepted International Financial Reporting Standards (IFRS) that are mandated by the esteemed International Accounting Standards Board (IASB). The ICAI in India has 32 accounting standards. AS-1 to AS-29 are mandatory. Here, we give a brief explanation of accounting standards.

Ind AS 1: Financial Statement Presentation:

Under this standard, companies must disclose the key accounting policies used in the preparation and presentation of financial statements. It also helps them know their financial position.

Ind AS 2 Inventories Accounting:

This standard deals with the valuation of inventories and prescribes the methods of determining the value of inventories, like the first-in, first-out (FIFO) method, the weighted financial value method, and therefore, the specific identification method.

Ind AS-3: Cash Flow Statements:

Income statements show how much money a company has in and out of the company during a certain period. The income statement is used to evaluate a company's cash position and ability to pay debts. It aids financial statement users in assessing liquidity.


Ind AS-4: Events Occurring After the Balance Sheet Date:

According to this rule, companies must reveal any significant events or potential issues that happened after the record date but before approving financial statements. With the support of such disclosures, users of financial statements can assess the company's potential liabilities and risks.


Ind AS-5: Net Income or Loss from the Period:

This standard is about fixing mistakes and making changes to how accounting was done in previous periods. It involves calculating the amount of net income or loss.


 Ind AS- 6: Depreciation Accounting:

 According to AS 6, depreciation is the systematic allocation of the depreciable amount of an asset over its useful life. The depreciable amount is the cost of an asset, or other amount substituted for cost, less its estimated residual value.


 Ind AS 7: Building Contracts:

It explains the rules of building contracts in the financial reports of building contractors. This standard offers guidelines to follow and takes responsibility for revenue and expenses associated with lengthy construction contracts.


AS 8: Accounting for Research and Development

This standard reveals the criteria for capitalizing and reducing development costs and provides guidelines on how to manage accounts for Research and Development(R&D) costs according to Indian accounting standards.


Ind AS 9: Revenue Recognition:

This standard covers the recognition of revenue in a company's financial statements. It imposes the concepts and techniques for recognizing revenue from the sale of goods, the performance of services, and the use of the company's assets by others.


Ind AS 10: Fixed Asset Accounting

This rule tells how to handle the accounting of fixed assets, such as land, buildings, and equipment. It deals with the popularity, measurement, depreciation, and disposal of fixed assets.

Ind AS 11: The Effects of Foreign Exchange Rate Changes

This standard sets rules for foreign exchange transactions, which affect the foreign exchange rates for all foreign operations.


Ind AS 12 Accounting for Government Grants:

This accounting standard is about government grants, which include subsidies, rate defects, and incentives, among others. It aims to provide clear guidelines for accounting.


Ind AS 13: Investment Accounting:

The standard also requires disclosure of the accounting principles applied to the investments, the amount of each investment category, and the fair value or value of the investments at the end of the reporting period.


Ind AS 14 Accounting for Amalgamations:

Ind AS-14 deals with accounting for mergers and acquisitions. A merger occurs when two or more companies are combined into a new entity with no transfer of ownership between the parties. An acquisition is when one company acquires the assets and liabilities of another company.


Ind AS 15: Employee Benefits:

This standard requires companies to record employee benefit costs in the financial statements as an expense in the financial period in which the employee earns the benefit.


Ind AS 16: Borrowing Fees:

This rule is about how to handle the costs of borrowing money, such as interest charges on loans. Under this standard, borrowing costs specifically attributable to the securing, development, or generation of a qualifying asset are capitalized as part of the fetched assets.


Ind AS 17: Reporting by Segment

The standard requires organizations to publish financial and non-financial information about the segments, such as revenue, expenses, assets, liabilities, and other indicators used internally to evaluate segment performance.


Ind AS 18: Disclosure of Related Parties

Companies must disclose transactions with linked parties, their nature, and the amounts involved under the requirement.


Ind AS 19: Leases:

Ind AS 19 leases are used to disclose their operating and financial arrangements for lessees and lessors. For lessees, assets depreciate over the lease term, while their liabilities decrease when lease payments are paid. For lessors, leases are different depending on whether they are operational or finance leases.


Ind AS 20: Earnings Per Share:

The Ind AS 20 Earnings Per Share discloses the earnings per share in a company and shows how much money the company makes for its shares and stocks.


Ind AS 21: Preparation of Consolidated financial statement:

 This standard deals with the consolidated financial statement of a group of firms under the control of parent firms. It discloses financial statements of all the subsidiaries of parent firms such as name, ownership interest, equity shares, and minority interests.


Ind AS 22: Income Taxes:

These standard deals with the accounting treatment of income taxes. The tax income displayed on financial statements varies due to various reasons, making it difficult to link taxes with revenue over time.


Ind AS 23: Consolidated Financial Statement Accounting for Investments in Associates

This standard addresses the accounting treatment of associate investments in consolidated financial statements. An associate is a company where the investor has significant power but not full authority over its financial and operational policies. Organizations need to have subsidiaries, joint ventures, or associates because it explains how to account for these investments and generates consolidated financial statements that reflect the organization's financial performance and position.


Ind AS 24: Stopping Operations:

According to AS 24, a firm that has decided to end operations must recognize and measure the assets and liabilities of the discontinued operation separately and present the results of the discontinued operation separately in the financial statements.


Ind AS 25: Interim Financial Reporting:

Interim financial reports typically include a balance sheet, an income statement, a cash flow statement, and financial statements of a company for a short period of time.


 Ind  AS 26: Intangible Assets

This standard specifies how to handle and disclose requirements for intangible assets, which are valued assets that lack a physical form but have economic value.


Ind AS 27: Financial Reporting:

The ICAI's AS-27 focuses on creating rules for accounting and reporting related to joint ventures. This includes recording assets, liabilities, income, and expenses in the financial statements of those investing and venturing.  


Ind AS 28: Asset Impairment:

This standard deals with reduction value of assets and ensures that the amount carrying the asset does not exceed the recoverable amount. If the carrying amount exceeds the recoverable value, the asset is considered impaired, and the firm must record an impairment loss.


Ind AS 29: Contingent Assets, Contingent Liabilities, and Provisions:

The disclosure of provisions, contingent liabilities, and contingent assets is required by this standard. Contingent assets and liabilities are possible assets and liabilities that are contingent on the happening of uncertain future events. Provisions are liabilities that are certain or very likely to occur, but the amount or timing of payment is unpredictable.


Ind AS 30: Financial Instruments Recognition and Measurement:

The standard establishes the criteria for recognizing, measuring, and reporting financial instruments in the financial statements of an organization. Financial instruments include loans and receivables, as well as investments in equities and debt securities, whereas financial liabilities include borrowings, trade payables, and derivatives.


AS 31: Presentation of Financial Instruments

According to Ind AS 31, joint arrangement parties must disclose in their financial statements the rights and duties resulting from the agreement. This standard discusses financial instrument presentation and defines guidelines for presenting financial instruments as liabilities or equity, as well as balancing financial assets and liabilities.


Ind AS 32- Financial Instruments Disclosure

This standard lays out the guidelines for disclosing financial instruments as either equity instruments, financial obligations, or both. This standard discloses all financial instruments, its primary goal is to improve transparency and comparability of financial statements related to financial instruments and help users make informed decisions.


Bottom Line:

Accounting standards play a key role in ensuring the transparency, consistency, and accuracy of the company's financial reporting. Therefore, companies need to know the updated accounting standards. Say goodbye to the tedious accounting process and switch to cloud-based accounting. Switch to Accoxi,a cloud-based accounting software a powerful tool that simplifies your accounting process and allows you to track your expenses, and manage your cash flow in real-time.




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