Must Knows

What are accounting standards?

[ecis2016.org] Here’s all you need to know about accounting standards. 

Accounting standards are documented policy statements that include the principles of recognition, evaluation, interpretation, representation, and communication of accounting information in financial statements. These policies might be established by an expert accounting organisation, the government, or any other regulatory agency.

Classification of organisations

Companies are categorised and ranked according to their level, with Level I being the lowest and Level III being the highest. Accounting standards are applied to the companies on the basis of this categorisation and the category into which they fall.

[ecis2016.org] All about written down value method

Level I Organisations

Companies that qualify as Level I Businesses might come from any one of the following categories, or even more than one.

  • Companies that have their equity or debt instruments listed on stock exchanges, in India or outside India.
  • Companies that are currently going through the process of registering their stocks or debt securities. The resolution passed by the board of directors has to be produced as proof.
  • Financial institutions, including cooperative banking systems
  • Companies that are in the business of providing insurance
  • Companies with turnover of more than Rs. 50 crore, as determined by authenticated financial accounts, from all sectors of commerce, industry, and entrepreneurship
  • Companies that have more than Rs. 10 crores debt at any moment in the fiscal period are included in this category.
  • Parent and subsidiary businesses of any of the aforementioned companies at any point in time during the fiscal period.

Level II Organisations

Companies that qualify as Level II Enterprises may be classified in any one of the following categories, or in more than one.

  • Companies with turnover larger than 40 lakhs but less than 50 crores, as determined by authenticated financial accounts, from all sectors of commerce, industry, and entrepreneurship
  • Companies with yearly revenue  larger than 1 crore but less than 10 crores, as determined by authenticated financial accounts, from all sectors of commerce, industry, and entrepreneurship
  • Firms that are managing companies or subsidiaries of any of the aforementioned businesses at any point in time during the fiscal period

Level III Organisations

Enterprises that do not qualify for either Level I or Level II are classified as Level III organisations.

Compliance with accounting norms

Accounting Standards Level
I II III
AS 1 Disclosure of Accounting Principles Yes Yes Yes
AS 2 Valuation of Inventories Yes Yes Yes
AS 3 Cash Flow Statements  Yes No No
AS 4 Contingencies and Events Occurring After the Balance Sheet Date Yes Yes Yes
AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies Yes Yes Yes
AS 6 Depreciation Financial reporting Yes Yes Yes
AS 7 Construction Contracts (Revised 2002) Yes Yes Yes
AS 9 Revenue Recognition Yes Yes Yes
AS 10 Property, Plant and Equipment Yes Yes Yes
AS 11 The Implications Of Foreign Exchange Rate Changes (Revised 2003) Yes Yes Yes
AS 12 Accounting for Grants from the Ministry Yes Yes Yes
AS 13 Accounting for Investments Yes Yes Yes
AS 14 Accounting for Amalgamations Yes Yes Yes
AS 15 Employee Benefits (Revised 2005) Yes Yes Yes
AS 16 Borrowing Costs Yes Yes Yes
AS 17 Segment Reporting Yes No No
AS 18 Related Party Disclosures   Yes No No
AS 19 Leases  Yes Partial Partial
AS 20 Earnings Per Share Yes Partial Partial
AS 21 Consolidated Financial Statements Yes No No
AS 22 Accounting for Taxes on Income Yes Yes Yes
AS 23 Accounting for Investments in Associates in Consolidated Financial Statements Yes No No
AS 24 Discontinuing Operations Yes No No
AS 25 Interim Financial Reporting Yes No No
AS 26 Intangible Assets Yes Yes Yes
AS 27 Financial Reporting of Interests in Joint Ventures Yes No No
AS 28 Impairment of Assets   Yes Yes Yes
AS 29 Provisions, Contingent Liabilities and Contingent Assets Yes Partial Partial

AS 19: Not applicable sections

The following sections of AS 19 are not applicable to level II and III organisations:

  • 22(c), (e) and (f)
  • 25(a), (b) and (e) 
  • 37(a), (f) and (g) 
  • 46(b), (d) and (e) 

Earnings Per Share for AS 20

In accordance with the requirements outlined in Part IV of Appendix VI of the Companies Act of 1956, all businesses are required to provide a disclosure of their earnings per share within their annual financial reports.

Publication of dispersed earnings per share and other information required by section 48 is not mandatory for Level II and III firms under AS 20. As a result, only Level I businesses are obligated to adopt AS 20 in its entirety, without any exemptions or modifications.

Source: https://ecis2016.org/.
Copyright belongs to: ecis2016.org

Debora Berti

Università degli Studi di Firenze, IT

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