What are Accounting Standards (AS)? | Advanced Accounting for CA Intermediate PDF Download

Introduction to Accounting Standards

• An Accounting Standard comprises a set of accounting policies or general guidelines concerning the principles and methods to be selected from various options on a specific matter.
• Standards are in alignment with relevant laws, customs, practices, and business environment, although there is no universally accepted set of standards.
• The Institute of Chartered Accountants of India (ICAI) issues Accounting Standards to recommend principles, procedures, and disclosures in financial statements, aiming to narrow down acceptable alternatives.

Meaning of Accounting Standard (AS)

• Accounting Standard is an authoritative statement issued by the Institute of Chartered Accountants of India (ICAI), addressing accounting issues in a specific area.

Coverage of Accounting Standards

• Accounting Standards typically cover aspects related to recognition, measurement, and disclosure of items in financial statements.
• Recognition: It guides on how and when to account for the relevant item, offering multiple alternatives. For instance, deciding whether an item should be treated as an asset or expense.
• Measurement: Provides guidelines on how to measure specific items, what to include or exclude in valuation.
• Disclosure: Specifies the information to be disclosed in annual financial statements concerning a particular area.

Importance of Accounting Standards

• Uniformity and full disclosure of relevant information in financial statements are essential to cater to the interests of various stakeholders.
• Accounting Standards aim to minimize the range of acceptable alternatives, emphasizing the qualitative characteristics of true and fair financial statements.

Scope of Accounting Standards

• The responsibility for preparing financial statements and ensuring adequate disclosure lies with the enterprise's management.
• The Auditor is accountable for forming an opinion and reporting on the financial statements.
• Accounting Standards are intended to apply only to material items and must conform to relevant laws, customs, and business practices.

Objectives and Advantages of Accounting Standards

• Accounting Standards aim to establish guidelines ensuring that financial statements comply with generally accepted accounting principles.
• They provide rules and criteria for recognition, measurement, and disclosure in financial reporting.
• Harmonizing diverse accounting policies and practices leads to uniformity, comparability, and qualitative enhancement in financial statement preparation.