ACCOUNTING STANDARDS :

Accounting as a “language of business” communicates the financial results of an enterprise to various interested parties by means of financial statements, which have to exhibit a “true and fair” view of its state of affairs. Like any other language, accounting, has its own complicated set of rules. However, these rules have to be used with a reasonable degree of flexibility in response to specific circumstances of an enterprise and also in line with the changes in the economic environment, social needs, legal requirements and technological developments. Therefore, these rules cannot be absolutely rigid nor they can be applied arbitrarily.

Accounting standards (ASs) are written policy documents issued by expert accounting body or by government or any other regulatory body. Accounting Standards cover the aspects of recognition, measurements, presentation and disclosure of accounting transactions in the financial statements. These are set in the form of general principles and left to the professional judgment for application.

An accounting standard may be regarded as a sort of law – a guide to action, a settled ground or basis of conduct or practice. The objective of setting standards is to bring about uniformity in financial reporting and to ensure consistency and comparability in the data published by enterprises. The Institute of Chartered Accountants of India (ICAI) constituted the Accounting Standards Board (ASB) on 21st April, 1977, with a view to harmonising the diverse accounting policies and practices in use in India. The ICAI has issued 32 Accounting Standards and 29 Accounting Standards Interpretations so far.