“It refers to the code of conduct imposed on accountants by customs, laws and professionals”
- Accounting standards are written statements of uniform accounting rules and guidelines in practice for preparing the uniform and consistent financial statements
Generally Accepted Accounting Principles (GAAP) :
Generally Accepted Accounting principles refer to the rules or guidelines adopted for recording and reporting of business transactions in order to bring uniformity in the preparation and presentation of financial statements. These principles are also referred to as concepts and conventions.
Nature of accounting standards:
1. It lay down the norms of accounting policies and practices by way of codes to direct that how the transactions are to be disclosed in the accounts.
2. It helps to make the financial statements comparable by making the accounting practices and policies similar.
3. They provide with the best accounting treatment from the available methods of solving the problems.
4. They provide information to the users on the basis of which the financial statement is prepared.
5. They are just like laws as they limit the area in which the accountant has to function.
Utility of accounting standards.
1. Improves the reliability and credibility of books of accounts.
2. Ensures comparability and consistency of financial statements.
3. Reduces the chances of frauds and manipulations.
4. Helpful to auditors.
List of some important accounting standards (out of total as32)
As1 disclosure of accounting policies
As2 valuation of inventories
As3 cash flow statement
As6 depreciation accounting
As26 intangible assets
IFRS (INTERANTIONAL FINANCIAL REPORTING STANDARDS)
- The term IFRS is issued by IASB (INTERNATIONAL FINANCIAL REPORTING STANDARDS)
- IFRS also covers a wide range of IAS(INTERNATIONAL ACCOUNTING STANDARDS) issued by IASC (INTERNATIONAL
FINANCIAL REPORTING COMMITEE)
- IFRS has also replaced GAAP.
- Till now 9 IFRS has been issued
Assumptions of IFRS
-Going concern assumption
- Accrual assumption
- Measuring unit assumption(assets are not shown at the historic price but they are the fair value)
Benefits of IFRS:
- Helpful to investors.
- Helpful for enterprise operating globally.
- Helpful to industry.