1. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 1 Accounting Standards

2. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 2 Session overview. Every profession develops a body of knowledge consisting of principles, which are considered as standard to be attained. Accounting is no exception. In India, the Institute of Chartered Accountants of India has developed Accounting Standards; based on the ‘generally accepted accounting standards’ to be used in preparation of financial statements.

3. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 3 Session coverage During this session, we will learn: the importance of the accounting standards in preparation of financial statements; and  application of AS 1 relating to ‘Disclosure of Accounting Policies’, and  application of AS 4 relating to ‘Events Occurring After the Balance Sheet Date’ for preparation of financial statements.

4. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 4 Learning Objective At the end of the session, the learner will be able to state the importance of Accounting Standards in the preparation of financial statements and application of AS 1 relating to ‘Disclosure of Accounting Policies’ and AS 4 relating to ‘Events Occurring After the Balance Sheet Date’ in the preparation of Financial Statements.

5. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 5 Importance of Accounting Standards The users of the financial statements need an assurance that the entities preparing their financial statements follow the accepted standards while presenting their financial information in the financial statements.

6. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 6 Accounting Standard Board The main function of the ASB is to formulate standards so that the Council of the ICAI may establish such standards, to be followed by all the entities while preparing and presenting their financial statements.

7. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 7 LIST OF ACCOUNTING STANDARDS ISSUED SO FAR Institute of Chartered Accountants of India has so far issued 29 Accounting Standards on the advise of the accounting Standards Board

8. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 8 LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 1-Disclosure of Accounting Policies AS 2-Valuation of Inventories AS 3-Cash flow Statements AS 4-Contingencies and Events Occurring After the Balance Sheet Date AS 5 -Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies AS 6-Depreciation Accounting

9. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 9 LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 7-Accounting for Construction Contracts AS 8-Accounting for Research and Development AS 9-Revenue Recognition AS 10-Accounting for Fixed Assets AS 11-Accounting for the Effects of Changes in Foreign Exchange Rates AS 12-Accounting for Government Grants

10. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 10 LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 13-Accounting for Investments AS 14-Accounting for Amalgamations AS 15-Accounting for Retirement Benefits in the financial Statements of Employers AS 16-Borrowing Costs AS 17-Segment Reporting AS 18-Related Party Disclosures AS 19-Leases

11. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 11 LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 20-Earnings Per Share AS 21-Consolidated Financial Statements AS 22-Accounting for Taxes on Income AS 23-Accounting for Investments in Associates in Consolidated Financial Statements AS 24-Discontinuing Operations AS 25-Interim Financial Reporting

12. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 12 LIST OF ACCOUNTING STANDARDS ISSUED SO FAR AS 26-Intangible Assets AS 27-Financial Reporting of Interests in Joint Ventures AS 28-Impairment of Assets AS 29-Provisions, contingent Liabilities and Contingent Assets

13. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 13 Accounting Standard (AS 1) – Disclosure of Accounting Policies

14. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 14 AS 1 – Disclosure of Accounting Policies Fundamental Accounting Assumptions Accounting Policies

15. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 15 Fundamental Accounting Assumptions Going concern Consistency Accrual

16. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 16 Areas in which differing accounting Policies are encountered  Methods of depreciation, depletion and amortization;  Treatment of expenditure during construction;  Conversion or translation of foreign currency items;

17. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 17 Areas in which differing accounting Policies are encountered  Valuation of inventories;  Treatment of goodwill;  Valuation of investments;  Treatment of retirement benefits;

18. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 18 Areas in which differing accounting Policies are encountered  Recognition of profit on long-term contracts;  Valuation of fixed assets;  Treatment of contingent liabilities.

19. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 19 Considerations in the selection of Accounting Policies Prudence Substance over form Materiality

20. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 20 Accounting Standard-1  All significant accounting policies adopted in preparation and presentation of financial statements should be disclosed.  The disclosure of significant accounting policies as such should form part of the financial statement and the significant accounting policies should normally be disclosed in one place.

21. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 21 Accounting Standard-1  Any change in the accounting policies which has a material, affect in the current period or which is reasonably expected to have a material affect in later periods should be disclosed. In the case of a change in accounting policies, which has a material affect in the current period, the amount by which any item in the financial statement is affected by such change should also be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact should be disclosed.

22. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 22 Accounting Standard-1  If the fundamental accounting assumptions, viz., going concern, consistency and accrual are followed in financial statements, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact should be disclosed.

23. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 23 Accounting Standard (AS) 4 - Contingencies and Events Occurring After the Balance Sheet Date

24. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 24 Accounting Standard-4 This standard deals with treatment in financial statements of: Contingencies; and Events occurring after the balance sheet date.

25. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 25 Accounting Standard-4 Does not apply to: (a) Liabilities of life assurance and general insurance enterprises arising from policies issued; (b) Obligations under retirement benefit plans; and ©Commitments arising from long-term lease contracts.

26. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 26 Definitions A contingency is a condition or situation, the ultimate outcome of which, gain or loss, will be known or determined only on the occurrence or non- occurrence of one or more uncertain future events. Events after the balance sheet date are those significant events, both favourable and unfavourable, that occur between the balance sheet date and the date on which the financial statements are approved by the Board of Directors

27. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 27 Accounting Standard-4 Contingencies  The amount of a contingent loss should be provided for by a charge in the statement of profit and loss if: a. it is probable that future events will confirm that, after taking into account any related probable recovery, an asset has been impaired or a liability has been incurred as at the balance sheet date, and

28. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 28 Accounting Standard-4 Contingencies b. a reasonable estimate of the amount of the resulting loss can be made.  The existence of a contingent loss should be disclosed in the financial statements if either of the conditions is not met, unless the possibility of a loss is remote.  Contingent gains should not be recognized in the financial statements

29. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 29 Accounting Standard-4 Events Occurring after the Balance Sheet Date  Assets and liabilities should be adjusted for events occurring after the balance sheet date that provide additional evidence to assist the estimation of amounts relating to conditions existing at the balance sheet date or that indicate that the fundamental accounting assumption of going concern (i.e., the continuance of existence or substratum of the enterprise) is not appropriate.

30. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 30 Accounting Standard-4 Events Occurring after the Balance Sheet Date  Dividends stated to be in respect of the period covered by the financial statements, which are proposed or declared by the enterprise after the balance sheet date but before approval of the financial statements, should be adjusted.  Disclosure should be made in the report of the approving authority of those events occurring after the balance sheet date that represent material changes and commitments affecting the financial position of the enterprise

31. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 31 Accounting Standard-4 Disclosure  If disclosure of contingencies is required by this Statement, the following information should be provided: a. the nature of the contingency; b. the uncertainties which may affect the future outcome; c. an estimate of the financial effect, or a statement that such an estimate cannot be made.

32. Financial Audit Autonomous Bodies AS 1 and 4 Session 1.3 32 Accounting Standard-4 Disclosure  If disclosure of events occurring after the balance sheet date in the report of the approving authority is required by paragraph 15 of this Statement, the following information should be provided: a. the nature of the event; an estimate of the financial effect, or a statement that such an estimate cannot be made.