Indian Accounting


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11.29.2012

What is Accounting Standard and Applicabilty



WHAT IS ACCOUNTING STANDARD

Accounting standards are written , policy documents issued by expert accounting
body or by Government or other regulatory authorities covering the aspects of recognition, measurement, treatment, presentation and disclosure of accounting transaction in the financial statement.
--> The main purpose of formulating accounting standard is to standardize the diverse
accounting policies with a view to eliminate to the extent possible the in-comparability of information provided in financial statements and add reliability to such financial statements. To discuss on whether such standards are necessary in present days it will be beneficial to go through the advantages and disadvantages which they are said to provide.

APPLICABILITY

A three tier classification has been framed to ensure compliance of accounting standards for reporting enterprises.

Level I Enterprises:
Enterprises whose equity or debt securities are listed whether in India or
outside India.
Enterprises which are in the process of listing their equity or debt securities
--> as evidenced by the Board resolution in this regard.
Banks including co-operative banks
Financial institutions
Enterprises carrying insurance business
Enterprises whose turnover exceeds Rs.50 crores
Enterprises having borrowings in excess of Rs.10 crores at any time during the
accounting period.
Holding companies and subsidiaries of enterprises falling under any one of the
categories mentioned above.

Level II Enterprises:
Enterprises whose turnover exceeds Rs.40 lakhs but does not exceed Rs.50 crores.
Enterprises having borrowings in excess of Rs.1 crore but not in excess of Rs.10
crores at any time during the accounting period.
Holding companies and subsidiaries of enterprise falling under any one of the
categories mentioned above.

Level III Enterprises:

Enterprises which are not covered under Level I and Level II.
Accounting Standard Applicability (Based on the three tier classification)

AS 3,17,18,24, Not applicable to Level II and Level III enterprises in
their entirety.
AS 19,20,29 All enterprises but relaxation given to Level I and Level II
enterprises for certain disclosure requirements.
AS 21,23,27 Not applicable to Level II and Level III enterprises
AS 25 Not mandatorily applicable to Level II and Level III
enterprises
AS 30,31,32 W.e.f. accounting periods commencing on or after 1-4-2009
and will be recommendatory in nature for an initial period
of two years.
It will be mandatory for on or after 1-4-2011 for all commercial, industrial and business entities except to a Small and Medium-sized Entity.
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