Accounting Standards And How It Is Issued
Do you know what are the Accounting Standards? These are the guidelines for the preparation & presentation of Financial Statements in a fair manner. Every organization should follow the relevant Accounting standard. This article describes the meaning of accounting standard in a detailed manner and explains its overall Issue procedure.
Accounting standards
Accounting standards are the specific accounting policies and methods of applying those policies adopted by an organization for the preparation and presentation of the financial statements. Accounting standards are the rules in relation to recognition , measurement and disclosure of financial information in preparation of financial statements. High quality accounting standards reduce the uncertainty and increases the overall efficiency and investors confidence by requiring that financial reports provide useful information that is relevant, reliable, comparable and transparent. Procedure Adopted by the Expert Committee in the issue of an Accounting Standard( AS)
1. Determination of the need of an AS
First, the Accounting Standard Board determines the broad areas in which accounting standards needs to be formulated.
2. Constituting Study Group
Study Group will be constituted consisting the members of the Institute of Chartered Accountants of India. The motive behind constitution of this group is to assist the accounting Standard Board in its activities.
3. Drafting the Standard
The Study Group Prepares draft of the proposed Standard. Te proposed draft enlists the following areas
a) Objective of the standard.
b) Scope of the Standard.
c) Definitions of the terms used in the standard
d) Recognition & Measurement Principles
e) Presentation & Disclosure requirements.
4. Analyzing the Draft
ASB in this stage considers the Preliminary draft prepared by the Study Group. In case anything needs to be revised than Accounting Standard Board takes the following steps.
a) ASB makes the revision
b) ASB refers the same to the study Group
5. Circulation of the Draft
In this step the ASB circulates the AS draft to the council members of the Institute of Chartered Accountants of India and the following specifies bodies for their comments.
a) The Institute of Works & Cost Accountants of India
b) The Institute of Company Secretaries of India.
c) Ministry of company affairs.
d) Comptroller & Auditor General of India
e) Central Board of Direct Taxes
f) Standing Committee of Public Enterprises
g) Reserve Bank of India
h) India Banks Association
i) Securities & Exchange Board of India
j) Associated Chamber of Commerce & Industry, Confederation of Indian Industry and Federation of Indian chambers of commerce & Industry
k) Any other body considered relevant by the ASB
6. Holding Discussion and Finalizing Exposure Draft
ASB holds meeting with the representatives of above mentioned bodies for the purpose of determining their views on the Draft Accounting Standard. Based on analyses of the discussion ASB finalizes the exposure draft of proposed accounting standards.
7. Circulation the exposure Draft
The exposure Draft of the proposed standards is issued for comments the members of the ICAI and the public.
8. Finalizing the exposure draft
Based on the comments received, the ASB finalizes the draft of the proposed standards.
It then submits the same to the council of the ICAI.
9. Modifying & Issuing the Accounting Standard.
The council of the ICAI considers the considers the finalized draft standard and if necessary modifies the same in consultation with the ASB. The ICAI then issues the Accounting Standard after modification if any on the relevant subject.