Essay, Pages 4 (958 words)
Now-a-days, more and more enterprises are being managed by the professionals. The persons who provide risk capital to the enterprise do not participate in the day-to-day affairs of the enterprise and their major source of information about the enterprise is the financial reporting made by it. Apart from the providers of risk capital, there are other stakeholders also which include prospective shareholders, bankers, creditors, etc. , who use the financial reporting made by the enterprise to make their economic and financial decisions.
In such a scenario, it is absolutely essential that financial reporting of an enterprise is unbiased, comparable, transparent and free from bias. This necessitates the existence of a sound financial reporting system in country which is based on the Accounting Standards. Realising the need for establishment of sound Accounting Standards in the country, the Institute of Chartered Accountants of India (ICAI), being the premier accounting body in the country, established the Accounting Standards Board (ASB) way back in 1977.
Since then, the Accounting Standards Board has been working relentlessly in this direction by formulating new Accounting Standards as well as by revising the existing Accounting Standards so as to bring them in line with the best international practices.
With a view to improve the quality of financial reporting in the country in real terms, it is also essential that the issues that are arising in implementation of accounting standards are addressed appropriately so that all Accounting Standards are understood and applied in the manner intended.
Keeping this in view and with a view to ensure effective implementation of these standards, the Institute has also issued various interpretations, revised existing interpretations and issued announcements on accounting standards.
Keeping in view the continuous changes that are taking place in Accounting Standards, Accounting Standards Interpretations and announcements on accounting standards, it is imperative on the part of the Institute to make all such pronouncements/ announcements available in one single book and revise it from time to time.
The Institute has, therefore, been publishing the Compendium of Accounting Standards which contains all new/ revised Accounting Standards and other related pronouncements/ announcements, issued upto the date of publication of the Compendium and which are existing on that date. I am happy to state that continuing this practice, the Institute is publishing this Compendium of Accounting Standards – As on July 1, 2006, which incorporates all latest developments in the field of Indian Accounting Standards.
I firmly believe that this edition of the Compendium will be extremely useful not only to the members of the Institute in discharging their professional duties but also to the preparers of financial statements and other users of accounting standards. New Delhi November 17, 2006 T. N. Manoharan President Preface In recent years, there has been an unprecedented increase in the awareness about the need for and importance of Accounting Standards in the country.
The accounting standards which lay down sound and wholesome principles for recognition, measurement, presentation and disclosure of information in the financial statements improve substantially the quality of financial reporting by an enterprise. The accounting standards tend to standardise diverse accounting practices with a view to eliminate, to the extent possible, incomparability of information contained in the financial statements of various enterprises. The accounting standards also improve the transparency of financial statements by requiring enhanced disclosures.
Realising the significance of accounting standards in improving the quality of financial reporting, the accounting standards have been granted legal recognition under the Companies Act, 1956, which require accounting standards to be followed by all companies. Apart from the Companies Act, 1956, various regulatory bodies, e. g. , the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority (IRDA) also require compliance with the accounting standards issued by the Institute by their respective constituents.
This is a clear manifestation of the significance of the accounting standards and high quality of accounting standards being issued by the Institute. With so much faith being reposed by the law and various regulatory authorities in the accounting standards issued by the Institute, the responsibilities of the Institute as an accounting standard-setting body has increased tremendously. The Institute, through its Accounting Standards Board, has been trying to discharge these responsibilities by issuing new accounting standards as well by revising the existing accounting standards. Apart from ssuing new accounting standards and/or revising the existing accounting standards, the endeavour of the Institute has also been to address the issues arising in the implementation of accounting standards through issuance of new interpretations, revision of the existing interpretations and issuance of announcements on accounting standards. With the regular developments taking place in the area of accounting standards, there is a need to publish an updated version of the Compendium of Accounting Standards, which incorporates all the relevant developments that have taken place since the publication of the last edition of the Compendium.
As compared to the last edition of the Compendium of Accounting Standards in 2005, this edition incorporates limited revisions to two accounting standards, viz. , AS 15 (revised 2005), Employee Benefits, and AS 29, Provisions, Contingent Liabilities and Contingent Assets; which were issued subsequent to the last edition. Besides this, one new Accounting Standards Interpretation, two revised Interpretations and six new Announcements on Accounting Standards have also been incorporated.
The Compendium also includes a comparative statement of International Accounting Standards/ International Financial Reporting Standards and Indian Accounting Standards as on date, to apprise the users about the comparative status of Indian Accounting Standards vis-avis the International Accounting Standards/ International Financial Reporting Standards. I would like to take this opportunity to place on record my appreciation of the efforts put in by all the persons involved in the formulation of accounting standards at relevant times.