Chapter 1: Accounting Standards

Introduction to Accounting Standards

An Accounting Standard is a guideline that directs and standardizes accounting practices.

Accounting standards provide a standardized framework to ensure that the financial
statements of businesses are meaningful and standardized so that interpreting and
understanding them would be easy.

Definition of Accounting standards

According to ICAI Accounting standards are “Written documents, policies, procedures issued
by expert accounting body or government or other regulatory body covering the aspects of
recognition, measurement, treatment, presentation and disclosure of accounting transactions
in financial statements”

A set of standards compiled together are called principles. Businesses are typically mandated
to follow a set of accounting standards which are either specific to the country or
internationally accepted ones like IFRS, or the GAAP.

Why use accounting standards?

• Accounting standards ensure that the financial statements are prepared fairly and
consistently across the businesses. Without accounting standards, users of financial
statements would be required to understand the accounting principles of each
company whose financial statements are under study.
• Each publicly traded company in a particular jurisdiction is required to report their
financial statements following the accounting standards adopted by them.

Features of Standards

• Relevance: So that it makes a difference to the decisions about a company made by

users of the statements.
• Faithful representation: Financial statements are complete and free from bias and
error.

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 • Comparability: You can compare financial statements from one period to the next or
for two companies in the same industry so that you can make informed decisions
about the companies.
• Verifiability: Different people could reach the same decision based on the
information, but not necessarily reach complete agreement.
• Timeliness: You make information available to users in good time. Historical
information quickly becomes out of date.
• Understandability: You present and classify information clearly and concisely to
make it understandable to users.

Need for Accounting Standards

(a) Comparison between two firms is possible if both maintain the same principle, otherwise
proper comparison is not possible. For example, if Firm A follows the FIFO method of
valuation of stock whereas Firm B follows the LIFO method for valuing stock, the
comparison between the two firms becomes useless. The same is possible only when both
follow identical method of valuing closing stock.

(b) Regulatory compliance the firms are not allowed to maintain and present their accounts
according to their own will or choice or cannot prepare report of financial statements for
various interested groups. The same is possible only when there is some fixed standard for
setting practice.

(c) Uniformity the Accounting Standards recognise the principle of equity applicable for
different users of accounting information, viz. creditors, investors, shareholders etc. Thus the
purpose of setting Accounting Standards is nothing but to find a uniformity in accounting
practice while formulating financial reports and make consistency and proper comparison of
data which are contained in financial statements for the users of accounting information.
Practically.
(d) Transparency Accounting standards have been presented to maintain fairness,
consistency and transparency in accounting practice which will satisfy the users of
accounting.
(e) Reliability, Assessing the performance and accounting reforms.

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Objectives and Features of Accounting Standards:

The objectives of IASC which are set out in its revised agreement and constitution are:
(i) To formulate and publish in the public interest Accounting Standards to be observed in the
presentation of financial statements and to promote their worldwide acceptance and
observation.

(ii) To work for the improvement and harmonisation of regulation of Accounting Standards
and procedures relating to the presentation of financial statements.

Development of Accounting Standards:

A. International Accounting Standards (IAS): International Accounting Standard
Committee (IASC): It came into being on 29th June 1973 when 16 accounting bodies (Viz.
The Institute of Chartered Accountants from 10 nations i.e., USA, Canada, UK and Ireland,
Australia, France, Germany, Japan, Mexico and Netherlands) signed the constitution for its
formation. Its headquarters is situated at London. The Objectives of IAS is to develop
accounting standards which are to be observed in the presentation of audited financial
statements and to promote their worldwide acceptance.
Moreover, its other responsibility is to keep member bodies informed of the latest
development and standards by issuing exposure drafts form time to time. Needless to mention
that the Institute of Chartered Accountants of India and the Institute of Cost and Works
Accountants of India are Members of the International Accounting Standards Committee.

The objectives of IASC, which are set out in its revised agreement and constitution (Nov.
1982), are:
(i) To formulate and publish in the public interest accounting standards to be observed in the
presentation of financial statements and to promote their worldwide acceptance and
observation, and

(ii) To work for the improvement and harmonisation of regulating accounting standards and
procedures relating to the presentation of financial statements.

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Objectives of Accounting Standards

Accounting is often considered the language of business, as it communicates to others the

financial position of the company. And like every language has certain syntax and grammar
rules the same is true here. These rules in the case of accounting are the Accounting
Standards (AS). They are the framework of rules and regulations for accounting and reporting
in a country. Let us see the main objectives of forming these standards.

1. The main aim is to improve the reliability of financial statements. Now because
the financial statements have to be made following the standards the users can
rely on them. They know that not conforming to these standards can have serious
consequences for the companies.

2. Then there is comparability. Following these standards will allow for inter-firm
and intra-firm comparisons. This allows us to check the progress of the firm and
its position in the market.

3. It also looks to provide one set of accounting policies that include the necessary
disclosure requirements and the valuation methods of various financial
transactions

Benefits of Accounting Standards

Accounting Standards are the ruling authority in the world of accounting. It makes sure that
the information provided to potential investors is not misleading in any way.

1] Attains Uniformity in Accounting: Accounting Standards provides rules for standard

treatment and recording of transactions. They even have a standard format for financial
statements. These are steps in achieving uniformity in accounting methods.

2] Improves Reliability of Financial Statements: There are many stakeholders of a

company and they rely on the financial statements for their information. Many of these
stakeholders base their decisions on the data provided by these financial statements. Then
there are also potential investors who make their investment decisions based on such
financial statements. So it is essential these statements present a true and fair picture of the

Ind AS & IFRS 4

financial situation of the company. The Accounting Standards (AS) ensure this. They make
sure the statements are reliable and trustworthy.

3] Prevents Frauds and Accounting Manipulations: Accounting Standards (AS) lay down
the accounting principles and methodologies that all entities must follow. One outcome of
this is that the management of an entity cannot manipulate with financial data. Following
these standards is not optional, it is compulsory. So these standards make it difficult for the
management to misrepresent any financial information. It even makes it harder for them to
commit any frauds.

4] Assists Auditors: Now the accounting standards lay down all the accounting policies,
rules, regulations, etc in a written format. These policies have to be followed. So if an auditor
checks that the policies have been correctly followed he can be assured that the financial
statements are true and fair.

5] Comparability: This is another major objective of accounting standards. Since all entities
of the country follow the same set of standards their financial accounts become comparable to
some extent. The users of the financial statements can analyse and compare the financial
performances of various companies before taking any decisions. Also, two statements of the
same company from different years can be compared. This will show the growth curve of the
company to the users.

6] Determining Managerial Accountability: The accounting standards help measure the

performance of the management of an entity. It can help measure the management’s ability to
increase profitability, maintain the solvency of the firm, and other such important financial
duties of the management. Management also must wisely choose their accounting policies.
Constant changes in the accounting policies lead to confusion for the user of these financial
statements. Also, the principle of consistency and comparability are lost.

Limitations of Accounting Standards

There are a few limitations of Accounting Standards as well. The regulatory bodies keep
updating the standards to restrict these limitations.

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1) Difficulty between Choosing Alternatives: There are alternatives for certain accounting
treatments or valuations. Like for example, stocks can be valued by LIFO, FIFO,
weighted average method, etc. So choosing between these alternatives is a tough decision
for the management. The AS does not provide guidelines for the appropriate choice.

2) Restricted Scope: Accounting Standards cannot override the laws or the statutes. They
have to be framed within the confines of the laws prevailing at the time. That can limit
their scope to provide the best policies for the situation.

3) Brings Inflexibility & Rigidity: It is one of the major disadvantage of accounting

standards. Accounting standards basically establish each & every principles and rules for
accounting treatment. Every company is required to follow the same principles
[Link] all companies are required to fit themselves into guidelines of
accounting standards. Every companies goes through different situations & have different
financial transactions. Sometimes it becomes difficult for them to follow the same
guidelines.

4) Involves High Costs : Another disadvantage of following accounting standards is that it

involves high costs. Implementing accounting standards in your accounting standards is
too costly. Company need to change their entire procedures, upgrade their systems &
provide their employee’s training accordingly. Companies need to monitor whether
employees are correctly following standards. All these activities require large costs for
bringing changes.

5) Time-Consuming: Another drawback of Accounting standards is that it is time-

consuming. Implementation of accounting standards requires many steps to be followed
to prepare financial report. It makes the process of preparing financial statements
complex & time-consuming. It defines each & every step for preparation of financial
reports. Accounting standards involves income statement, trial balance & balance sheet
preparation. Accountants need to strictly comply with rules of accounting standards. It
makes their work complex & rigid.

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List of Indian Accounting standards

Ind AS
First time adoption of Ind AS
101

Ind AS
Share Based Payment
102

Ind AS
Business Combination
103

Ind AS
Insurance Contracts
104

Ind AS
Non-Current Assets Held for Sale and Discontinued Operations
105

Ind AS
Exploration for and Evaluation of Mineral Resources
106

Ind AS
Financial Instruments: Disclosures
107

Ind AS
Operating Segments
108

Ind AS
Financial Instruments
109

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Ind AS
Consolidated Financial Statements
110

Ind AS
Joint Arrangements
111

Ind AS
Disclosure of Interests in Other Entities
112

Ind AS
Fair Value Measurement
113

Ind AS
Regulatory Deferral Accounts
114

Ind AS
Revenue from Contracts with Customers (Applicable from April 2018)
115

Ind AS
Leases (Applicable from April 2019)
116

Ind AS 1 Presentation of Financial Statements

Ind AS 2 Inventories

Ind AS 7 Statement of Cash Flows

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Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Ind AS
Events occurring after Reporting Period
10

Ind AS Construction Contracts (Omitted by the Companies (Indian Accounting

11 Standards) Amendment Rules, 2018)

Ind AS
Income Taxes
12

Ind AS
Property, Plant and Equipment
16

Ind AS
Employee Benefits
19

Ind AS
Accounting for Government Grants and Disclosure of Government Assistance
20

Ind AS
The Effects of Changes in Foreign Exchange Rates
21

Ind AS
Borrowing Costs
23

Ind AS
Related Party Disclosures
24

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Ind AS
Separate Financial Statements
27

Ind AS
Investments in Associates and Joint Ventures
28

Ind AS
Financial Reporting in Hyper inflationary Economies
29

Ind AS
Financial Instruments: Presentation
32

Ind AS
Earnings per Share
33

Ind AS
Interim Financial Reporting
34

Ind AS
Impairment of Assets
36

Ind AS
Provisions, Contingent Liabilities and Contingent Assets
37

Ind AS
Intangible Assets
38

Investment Property
Ind AS

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40

Ind AS
Agriculture
41

❖ IFRS – International financial reporting standards

Definition and meaning of IFRS

IFRS (International Financial Reporting Standards) is a set of accounting standards

developed by an independent, not-for profit organization called the International Accounting
Standards Board (IASB).

International Financial Reporting Standards (IFRS) set common rules so that financial
statements can be consistent, transparent and comparable around the world. They specify how
companies must maintain and report their accounts, defining types of transactions and other
events with financial impact. IFRS were established to create a common accounting
language, so that businesses and their financial statements can be consistent and reliable from
company to company and country to country

Evolution and History

 The International Accounting Standards Committee (IASC) was established in June

1973 by accountancy bodies representing ten countries. It devised and published
International Accounting Standards (IAS), interpretations and a conceptual
framework. These were looked to by many national accounting standard-setters in
developing national standards.

 IASC issued - IAS

 In 2001 the International Accounting Standards Board (IASB) replaced the IASC with
a remit to bring about convergence between national accounting standards through the
development of global accounting standards. During its first meeting the new Board
adopted existing IAS and Standing Interpretations Committee standards (SICs). The

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 IASB has continued to develop standards calling the new standards "International
Financial Reporting Standards" (IFRS).

 IASB issued IFRS

 In 2002 the European Union (EU) agreed that, from 1 January 2005, International
Financial Reporting Standards would apply for the consolidated accounts of the EU
listed companies, bringing about the introduction of IFRS to many large entities.
Other countries have since followed the lead of the EU.

History of IFRS

 IFRS originated in the European Union, with the intention of making business affairs
and accounts accessible across the continent. The idea quickly spread globally, as a
common language allowed greater communication worldwide. Although the U.S. and
some other countries don't use IFRS, most do, and they are spread all over the world,
making IFRS the most common global set of standards.

 The goal of IFRS is to make international comparisons as easy as possible. That goal
hasn't fully been achieved because, in addition to the U.S. using GAAP, some
countries use other standards. And U.S. GAAP is different from Canadian GAAP.
Synchronizing accounting standards across the globe is an ongoing process in the
international accounting community.

OBJECTIVES OF IFRS
• To develop, in the public interest, a single set of high quality, understandable and
enforceable global accounting standards that require high quality, transparent and
comparable information in financial statements and other financial reporting to help
participants in the worlds capital markets and other users make economic decisions;
• To promote the use and rigorous application of those standards;
• In fulfilling the objectives associated with (1) and (2), to take account of, as appropriate,
the special needs of small and medium-sized entities and emerging economies.
• To bring about convergence of national accounting standards and International
Accounting standards and IFRS to high quality solutions.

➢ Process of setting IFRS

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Setting the Agenda: IASB always seeks to address a demand for better quality information
that is of value to those users of financial reports Under the setting of the agenda the staff of
the IASB is asked to identify, review and raise issue that might gather IASB’s [Link]
decision making regarding its agenda priorities, the IASB also considers the factors related to
convergence initiatives with accounting standard , and finalised agenda will be approved by
Vote
Project Planning : IASB after additions decides whether to conduct the project alone or
jointly with another [Link] of issues are done to be included in annual
improvement process criteria for Clarifying, Correcting , Well defined, Compilation on
timely basis, Enhance the quality of IFRS
Development and Publication of Discussion paper: This Step is not a mandatory step in
IASB’s Due process Invite public comment for the discussion paper for a period of 120 days
but period may be extended for major [Link] conveys the project team analyses and
summarises the comment letters for IASB’s Consideration
Development and Publication of Exposure draft: It is a mandatory step-Exposure draft is
the IASB’s main vehicle for consulting the public. After considering comment on Discussion
paper- draft will be prepared and published After comment period end it conducts meeting
and finalised the exposure draft will be published for next 120 days
Development and Publishing the standards: In meeting discussion would be held on the
matter of comment & suggestion when all the issues are resolved IASB is satisfied and have
reached the conclusion on issues arised on Exposure draft , IFRS will be issued and would be
reviewed by IFRIC .
Procedure after a standard is issued : After the standards is issued , IASB will be
conducting meeting with Interested parties to help understand , Unanticipated issued related
to the practical implementation and post implementation review

❖ PROBLEMS AND CHALLENGES

IFRS are formulated by International Accounting Standard Board. However, the

responsibility of convergence with IFRS vests with local government and accounting and
regulatory bodies, such as the ICAI in India. Thus ICAI need to invest in infrastructure to
ensure compliance with IFRS. India has several constraints and practical challenges to
adoption and compliance with IFRS. So there is a need to change some laws and regulations
governing financial accounting and reporting in India.

Ind AS & IFRS 13

Therefore, there are several challenges that will be faced on the way of IFRS
convergence. These are:

1. Awareness about International practices: Adoption of IFRS means that the entire set of
financial statements will be required to undergo a drastic change. There are a number of
differences between the two GAAP’s (discussed below). This may cause the users of
financial statements to look at them from a new perspective. It would be a challenge to bring
about awareness of IFRS and its impact among the users of financial statements. Another
structural problem that needs to be overcome is the lack of knowledge of International
Standards on the part of the clients that retain the services of the large accounting firms. One
partner who was interviewed revealed that only two of the accountants and one of the top
Russian enterprises had any knowledge of the international standards whatsoever. This low
level of knowledge makes it more difficult for any accounting firm to provide the proper
services. Over time, this problem will shrink in importance, as the accounting firms train their
clients and as a new crop of accounting graduates take their places in the accounting
departments of these enterprises. But this process takes time.

2. Training: Professional accountants are looked upon to ensure successful implementation

of IFRS. The biggest hurdle for the professionals in implementing IFRS is the lack of training
facilities and academic courses on IFRS in India. As the implementation date draws closer
(2011), it is observed that there is acute shortage of trained IFRS staff. The solution to this
problem is that all stakeholders in the organisation should be trained and IFRS should be
introduced as a full time subject in the universities.

3. Amendments to the existing Law: It is observed that implementation of IFRS may result
in a number of inconsistencies with the existing laws which include the Companies Act 1956,
SEBI regulations, banking law and regulations and the insurance law and regulations.
Currently, the reporting requirements are governed by various regulators in India and their
provisions override other Laws. IFRS does not recognise such overriding laws. Although
steps to amend these Laws have been initiated, the authorities need to ensure that the Laws
are amended well in time.

4. Taxation: IFRS convergence would affect most of the items in the financial statements
and consequently the tax liabilities would also undergo a change. Thus the taxation Laws
should address the treatment of tax liabilities arising on convergence from Indian GAAP to

Ind AS & IFRS 14

IFRS. It is extremely important that the taxation Laws recognise IFRS compliant financial
statements otherwise it would duplicate administrative work for the organizations.

5. Fair value: IFRS uses fair value as a measurement base for valuing most of the items of
financial statements. The use of fair value accounting can bring a lot of volatility and
subjectivity to the financial statements. It also involves a lot of hard work in arriving at the
fair value and valuation experts have to be used. Moreover, adjustments to fair value result in
gains or losses which are reflected in the income statements. Whether this can be included in
computing distributable profit is also debated.

6. Management Compensation Plan: The terms and conditions relating to management

compensation plans would also have to be changed. This is because the financial results
under IFRS are likely to be very different from those under the Indian GAAP. The contracts
would have to be re-negotiated which is also a big challenge.

7. Reporting Systems: The disclosure and reporting requirements under IFRS are completely
different from the Indian reporting requirements. Companies would have to ensure that the
existing business reporting model needs to be amended to suit the reporting requirements of
IFRS. The information systems should be designed to capture new requirements related to
fixed assets, segment disclosures, related party transactions, etc. Existence of proper internal
control and minimizing the risk of business disruption should be taken care of while
modifying or changing the information systems. Conclusion: Harmonization of accounting
standards has become a highly demanded issue of discussion and debate among accounting
professionals around the globe. Accounting Standards are the authoritative statements of best
accounting practices issued by recognized expert accountancy bodies relating to various
aspects of measurements, treatments and disclosures of accounting transactions and events, as
related to the codification of GAAP.

Accounting Bodies

A professional accounting body is an organization or association of accountants in a

particular jurisdiction.

ICAI, ICWA, ICMA etc

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Formulation of Accounting standards in India

Accounting Standard Board

ICAI is the highest accounting body in the country. And the ASB is a committee of the ICAI.
But to ensure maximum transparency and independence, the ASB is a completely
independent body.

The ASB formulates all the accounting standards for the Indian companies. This process is
fully transparent, very thorough and completely independent of any government involvement.
While framing the standards the ASB will try and incorporate the IFRS and its principles in
the Indian standards. While India does not plan to adopt the IFRS, this process will help the
convergence of the two standards. So the ASB will modify the IFRS to suit the laws, customs
and common usage in the country.

The ASB is composed of various members. There are representatives of industries like the
FICCI and ASSOCHAM. There are also certain government officials, a few academics, and
regulators from various departments. The idea is to make the ASB as inclusive and
representative as possible.

Procedure for Formulation of Accounting Standards

• First, the ASB will identify areas where the formulation of accounting standards may
be needed
• Then the ASB will constitute study groups and panels to discuss and study the topic at
hand. Such panels will prepare a draft of the standards. The draft normally includes
the definition of important terms, the objective of the standard, its scope,
measurement principles and the representation of said data in the financial statements.
• The ASB then carries out deliberations of the said draft of the standard. If necessary
changes and revisions are made.
• Then this preliminary draft is circulated to all concerned authorities. This will
generally include the members of the ICAI, and any other concerned authority like the
Department of Company Affairs (DCA), the SEBI, the CBDT, Standing Conference
of Public Enterprises (SCPE), Comptroller and Auditor General of India etc. These
members and departments are invited to give their comments.

Ind AS & IFRS 16

 • Then the ASB arranges meetings with these representatives to discuss their views and
concerns about the draft and its provisions
• The exposure draft is then finalized and presented to the public for their review and
comments
• The comments by the public on the exposure draft will be reviewed. Then a final draft
will be prepared for the review and consideration of the ICAI
• The Council of the ICAI will then review and consider the final draft of the standard.
If necessary they may suggest a few modifications.
• Finally, the Accounting Standard is issued. In the case of standard for non-corporate
entities, the ICAI will issue the standard. And if the relevant subject relates to a
corporate entity the Central Government will issue the standard.

SIMILARITIES / DIFFERENCES BETWEEN IFRS AND US GAAP

CONCEPTS IFRS US GAAP
Transactions are recorded on Historical
cost basis; however, revaluation is
permitted on class of assets such as
Like IFRS, certain financial
intangible assets, property, plant and
Accounting instruments can be carried at fair
equipment, investment property.
Framework value.
Further assets such as biological assets
and
financial instruments can be carried at
fair value.
For US Companies and SEC
Registrants (Public Companies) –
Balance Sheet, Income Statement,
Cash Flow Statement, Statement of
Statement of Financial Position,
Changes in Equity, Accounting
Statement of Profit and Loss and other
Policies and notes.
Constituents of Comprehensive Income, Statement of
Financial changes in equity, Cash Flow
Non-US companies can prepare
Statements Statement, Notes to Financial
financial statements either as per US
Statements and Accounting Policies as
GAAP or as per IFRS along with
part thereof.
reconciliation of net income and
equity to US GAAP as disclosure to
note.

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 One year of comparatives is required
(except in certain circumstances where
Comparatives are not required (except
more than 1year comparative
SEC requirements which require 1
disclosures are required.) Deviations
year comparatives for balance sheet
from standards are permitted only if
and 2 years comparatives for
complying with the standards will
Comparatives other statements.)
make the financial statements
Deviations are generally not allowed.
misleading. In case there is difference
between IFRS and any other
regulation, IFRS must be
applied.
US GAAP also does not prescribe any
IFRS does not prescribe any format, format, but rule S-X of SEC stipulated
but stipulates minimum line of items for listed companies minimum line
like investment, property, financial items to be disclosed either on the
Balance Sheet assets, biological assets, intangible face of balance sheet or note to
assets, inventory and receivables. The accounts. The assets and liabilities are
items are presented in increasing order presented in decreasing order of
of liquidity. liquidity.

Disclosure for three years may be

Disclosure for two years. Primary shown as a part of notes to accounts
statement shows capital transactions and show capital transactions with
Statement of Changes with owners, movement in owners, movement in accumulated
in Equity accumulated profits and reconciliation profits and reconciliation of equity.
of equity. This is linked to other Other
comprehensive income, which is a part comprehensive income may be shown
of income statement. as a part of it.
US GAAP also does not prescribe any
format, but rules S-X of SEC
IFRS does not prescribe any standard stipulates for listed companies
format, but stipulates minimum disclosure minimum line to be disclosed on face
which includes revenue, finance costs, of income statement and suggests two
share of post-tax results of associates and alternatives such as single step format
joint arrangements using equity method. It where expenses are classified by
suggests two alternatives. i.e. disclosure of function and multi-step format where
expenses by functions or elements. A prior cost of sales are deducted from total
period item/error should be corrected by sales. Mandates retrospective
retrospective effect by restatement of application of errors and requires
Income Statement opening balance of assets and liabilities or
restatement of comparative opening
equities. In case where inflow or outflow of
balance with suitable footnote
cash is delayed through deferred
disclosure. It permits discounting only
settlement, then the income or expenses is
discounted to present value to comply with in certain cases ex: loans, debentures,
the basis of “cash or cash equivalent.” bonds, etc. In case of Extraordinary
Extraordinary items disclosure is items, if the nature is infrequent and
prohibited. unusual, it must be disclosed
separately on the face of the income
statement net of
taxes after results from operations.

Ind AS & IFRS 18

 Inventories should be values at cost or net Inventories are values at cost or
realizable value whichever is less. The cost market value whichever is less. The
includes the cost of purchase, cost of cost includes the cost of purchase,
conversion and other costs only to the cost of conversion and other costs
extent that they are incurred in bringing the only to the extent that they are
Inventories inventories to their present location and incurred in bringing the inventories to
condition. FIFO and weighted average their present location and condition.
method is permitted LIFO
but LIFO is not allowed. method is permitted.
Limited exemptions for certain
No exemptions for any type of business. investment entities. Both direct and
Cash Flow Statement Both direct and indirect methods are indirect methods are allowed to
allowed to prepare cash flow statement. prepare cash flow statement. The
The period to be presented is two years. period to be presented is three
years.

Retrospective effect of change in

accounting policy is accounted and
Changes in Accounting comparative figures restated. Prior period Similar to IFRS from the date of
Policies and Accounting errors are to be corrected retrospectively adoption of FAS 154. Similar to IFRS
and the opening balances in case of prior period items.
Estimates and Errors. of assets, liabilities and equity are restated.

Financial statement are adjusted for events

after the reporting date, providing evidence
Events occurring after of conditions at balance sheet date and Similar to IFRS.
materially affecting amounts in
the reporting date
financial statements. Non-adjusting events
should be disclosed in statements.

Capital based grants are deferred and

matched with the depreciation of the asset
for which the grant arises. Revenue based Similar to IFRS except when
grants are deferred in the balance sheet and conditions are attached to grant. In
released to the income statement to match this case, revenue recognition is
the related expenditure that are intended to delayed until such conditions are met.
Government Grants compensate. Grants related to recognize Long lived asset contributions as
presented in the balance sheet as deferred revenue in the period received.
income and amortized or deducted from the
carrying value of the
asset.

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 Assets are impaired at higher of fair value Impairment is assessed in
less costs to sell and value-in-use based on undiscounted cash flows for assets to
discounted cash flows. Impairment test is be held and used. If less than carrying
to be conducted every year and if there is amount, impairment loss is measured
Impairment of Assets
upward increase in the value of asset then using market value or discounted cash
reversals of impairment losses in required flows. Reversal of losses is
in certain prohibited.
circumstances.
Tangible items are held for use in the
production or supply of goods or services, Fixed costs are carried at historical
or for rentals to others, or for cost. Only downward revaluation is
administrative purpose and are expected to permitted for impairment. Exchange
be used during more than one period. It is fluctuations on loans taken for
recorded on cost basis. The depreciation purchase of fixed assets are expensed
Non-Current Assets and amount of an item of asset is allocated on a
when incurred.
Depreciation systematic basis over its useful life.
Following are the methods are permitted: -
SLM, WDM & Output Method. Change in
depreciation method is considered as
Similar to IFRS in case of
change in accounting estimate and effects
Depreciation.
to be quantified and
disclosed.

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