The paradigm shift in the economic environment in India during
last few years has led to increasing attention being devoted to accounting standards as a means towards ensuring potent and transparent financial reporting by corporate. Further, cross- border raising of huge amount of capital has also generated considerable interest in the generally accepted accounting principles in advanced countries such as USA. Initiatives taken by International Organisation Securities Commission (IOSCO) towards propagating International Accounting Standards (IASs)/ International Financial Reporting Standards (IFRSs), issued by the International Accounting Standards Board (IASB), as the uniform language of business to protect the interests of international investors have brought into focus the IASs/ IFRSs. Accounting as a “language of business” communicates the financial performance and position of an enterprise to various interested parties by means of financial statements which have to exhibit a ‘true and fair’ view of financial results and its states of affairs. Like any other language, accounting has its own complicated set of rules. The basic conventions or rules used in preparing financial statements had evolved over many years as a product of the collective experience of practicing accountants. As a result a wide variety of accounting methods were used by different companies. It was, then, felt that there should be some standardized set of rules and accounting principles to reduce or eliminate confusing variations in the methods used to prepare financial statements. The draft of the proposed standard will normally include the following: (a) Objective of the Standard, (b) Scope of the Standard, (c) Definitions of the terms used in the Standard, (d) Recognition and measurement principles, wherever applicable, (e) Presentation and disclosure requirements. However, such accounting rules should have a reasonable degree of flexibility in view of specific circumstances of an enterprise and also in line with the changes in the economic environment, social needs, legal requirements and technological developments. In order to suggest rules and criteria of accounting measurements, several accounting standard setting bodies were established in developed and developing countries. The setting of accounting standards is a social decision. Standards place restrictions on behaviour and therefore they must be accepted by affected parties. The accounting standards seek to describe the accounting principles, the valuation techniques and the methods of applying the accounting principles in the preparation and presentation of financial statements so that they may give a true and fair view. The ostensible purpose of the standard setting bodies is to promote the dissemination of timely and useful financial information to investors and certain other parties having an interest in company’s economic performance. The ASB will consider the preliminary draft prepared by the Study Group and if any revision of the draft is required on the basis of deliberations, the ASB will make the same or refer the same to the Study Group. The ASB will circulate the draft of the Accounting Standard to the Council members of the ICAI and the following specified bodies for their comments: Department of Company Affairs (DCA) Comptroller and Auditor General of India (C and AG) Central Board of Direct Taxes (CBDT) The Institute of Cost and Works Accountants of India (ICWAI) The Institute of Company Secretaries of India (ICSI) Associated Chambers of Commerce and Industry (ASSOCHAM), Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI) Reserve Bank of India (RBI) Securities and Exchange Board of India (SEBI) Standing Conference of Public Enterprises (SCOPE) Indian Banks’ Association (IBA) Any other body considered relevant by the ASB keeping in view the nature of the Accounting Standard. The ASB will hold a meeting with the representatives of specified bodies to ascertain their views on the draft of the proposed Accounting Standard. On the basis of comments received and discussion with the representatives of specified bodies, the ASB will finalize the Exposure Draft of the proposed Accounting Standard. The Exposure Draft of the proposed Standard will be issued for comments by the members of the Institute and the public. The exposure Draft will specifically be sent to specified bodies (as listed above), stock exchanges, and other interest groups, as appropriate. After taking into consideration the comments received, the draft of the proposed Standard will be finalized by the ASB and submitted to the Council of the ICAI. The Council of the ICAI will consider the final draft of the proposed Standard, and if found necessary, modify the same in consultation with the ASB. The Accounting Standard on the relevant subject will then be issued by the ICAI. ACCOUNTING STANDARDS IN INDIA
The need for accounting standards specifically for the
country’s economic environment was also felt in India. Recognizing the need to harmonize the diverse accounting policies and practices in India and keeping in view the international developments in the field of accounting, the Council of Institute of Chartered Accountants of India (ICAI) constituted the Accounting Standards Boards (ASB) in April, 1977. Over a period, the ASB has issued 32 Accounting Standards till date. CONCLUSION
From the above discussion, it is clear that Accounting Standards
play a very vital role in preparation of Financial Statements. Considering the need for accounting standards specifically suitable for our economic environment and recognizing the need to harmonies the diverse accounting policies and practices in India and keeping in view the international developments in the field, the council of Institute of Chartered Accountants of India (ICAI) constituted the Accounting Standards Board (ASB) which takes care of development, revision and issuance of Accounting Standards in India. PRESENTED BY-