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Why International Accounting Standards are framed?


Enterprises are willing to toddle (walk) down to the Global Market and want to reach their products and services to the Global Customers, as well inviting the Global Investors to invest in their company.

An organization follows certain Accounting Standards notified by the Government of the corresponding countries. In order to attain the capital beyond the frontiers then it has to prepare Financial Statements according to the policies of the other countries, from where it expects to gain the capital.

The Global Investors would like to compare the Financial Statements based on uniformed standards. Hence, it laid the seed for the formation of the Standard which are followed by all the organization around the World, who are willing to step towards the International Business.

Having multiple Accounting Standards from country to country it is against the interest of the public. Therefore, the government of the various countries found the requirement of the Global Standards to bring about uniformity, rationalization, comparability, transparency, and adaptability of Accounting Standards in the preparation and presentation of Financial Statements.

Hence, Global Standards will reduce the capital gaining cost as the companies need not to translate their Financial Statement and as well the Investor will trust the companies for the investment, as the investors can easily compare the Financial Statement against the various companies.

International Accounting Standards Board

A London based group named International Accounting Standards Committee (IASC) has taken the responsibility of developing and setting of the Global Standards known as International Accounting Standards. This committee was established purely in public interest in June, 1973.

Image: International Accounting Standards Board

In the preparation of IAS, IASC has been transformed as International Accounting Standards Board. It consists of the Professional Accounting Bodies of 75 countries including the ICAI. The members of the IASB has taken the responsible to promulgate the Standards formulated by the IASB and propagating these Standards in their respective countries.

The main objective of the IASB is to formulate and publish the IAS, that to be followed in the presentation of Audited Financial Statements.

  1. Between 1973 – 1999: IASC restructured its organization in the formation of IASB.
  2. Between 1973 – 2001: IASC released IAS.
  3. The IASB and IAS released by the IASB came into effect on 1st April, 2001.
  4. 2001-Present: IASB issued the IAS of current and future standards.
  5. IASB publishes its standards in a series of pronouncements (a formal public statement) called International Financial Reporting Standards (IFRS) and these pronouncements continue to be designed as International Accounting Standards.
  6. Even thought, IASB has not yet rejected the standards issued by IASC.
  7. IASB approved IASB Resolution on IASC standards at the meeting on 1st April 2001. And confirmed all the IASC standards and Standard Interpretations Committee’s (SIC) Interpretations.

International Financial Reporting Standards

IFRS are considered as “Principle based” set of standards as they dictate the broad rules rather than any specific accounting treatment. Major nations are adopting these standards up to some extent. These standards are being used by; the public companies to list in the Stock Exchange; Insurance and Stock Exchanges Companies, Banks to prepare statutorily required reports. Beyond that lenders and Governments are taking IFRS to fulfill the local financial reporting obligations related to financing or licensing.

Image: International Financial Reporting Standards

IFRS in India

Indian companies are acquiring the overseas companies; hence they need to follow the internally accepted standards to convince the foreign enterprises; in the preparation and presentation of the Financial Statements. Indian Capital Market is also willing to converge with IFRC. Therefore, the convergence of Indian Accounting Standards with the IFRC would require changes in our Laws.

ICAI, is already on its way to minify the deviations in convergence of IFRC. For this purpose ICAI constituted a Task Force to examine the various issued involved. While adopting IFRS as it is, in our Standards, ICAI makes some deviations from the corresponding IFRS according the legal and other conditions prevailing in India.

Accounting Standard Board of ICAI with consultation of the Core Group, constituted by the MCA (Ministry of Corporate Affairs) decided that in India there will be two sets of Accounting Standards for the convergence of India Accounting Standards with IFRS.

Existing Accounting Standards

These standards are not converged with the IFRS and will be followed by the entities which are not falling within the prescribed threshold limits of the IFRS, in the preparation and presentation of Financial Statements.

Ind AS

These Standards are formulated with the convergence of the IFRS. The MCA has hosted 35 converged Indian Accounting Standards and these are known as Ind AS. These standards are formulated by eliminating the differences between the IFRS and AS, vice versa. These standards should be followed by the entities falling with the threshold limits prescribed by the IFRS.

How many effective Accounting Standards are there issued by ICAI?


The Council of ICAI has been issued 32 Accounting Standards so far. AS 8 which pertain to "Accounting for Research and Development" has been withdrawn consequent to the issue of AS 26 on “Intangible Assets”. Thus effectively, there are 31 Accounting Standards at present.

The following are the mandatory Accounting Standards as on July 1, 2012 as listed on the site of The Institute of Chartered Accountantsof India.

  • AS 1 : Disclosure of Accounting Policies
  • AS 2 : Valuation of Inventories
  • AS 3 : Cash Flow Statement
  • 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
  • AS 7 : Construction Contracts
  • AS 8 : Accounting for Research and Development (AS-8 is no longer in force since it was merged with AS-26)
  • AS 9 : Revenue Recognition
  • AS 10 : Accounting for Fixed Assets
  • AS 11 : The Effects of Changes in Foreign Exchange Rates (revised 2003),
  • AS 12 : Accounting for Government Grants
  • AS 13 : Accounting for Investments
  • AS 14 : Accounting for Amalgamations
  • AS 15 : Employee Benefits (revised 2005)
  • AS 16 : Borrowing Costs
  • AS 17 : Segment Reporting
  • AS 18 : Related Party Disclosures
  • AS 19 : Leases
  • 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
  • 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
  • AS 30 : Financial Instruments: Recognition and Measurement and Limited
  • AS 31 : Financial Instruments: Presentation
  • AS 32 : Financial Instruments: Disclosures, and limited revision to Accounting Standard

Benefits and Limitations of Accounting Standards - IPCC Group 1 (Paper 1)


Accounting Standards aims to disseminate the true information about financial position and profitability of an enterprise to the stakeholders for prudent management decisions, by preparing and presenting the financial information by applying the valuation techniques and methods of accounting principles, thereon. By setting the standards the accountant has following benefits.

Reduce Alternative Accounting Treatments

By setting up certain Accounting Standards we can reduce the alternative accounting treatments and bring the unity in the applying accounting methods for recording the business transactions. Hence, there will be no confusion for choosing the accounting method to apply among the alternative methods available.

Comparability of Financial Statements

It enables to compare financial statements of various enterprises located different places in the World or situated in the same country. And it should be noted that there would be deviation in adopted accounting policies from one country to another country, in which competition is not possible.

However, there are some limitations of setting of accounting standards:

Accounting Treatment

There will be alternative solution for any specific accounting problem, where each solution has its own argument to choose. Hence, it has complicated to choose the Accounting Treatment among the alternatives.

Rigidity

During the application of the Accounting Standards there is trend towards the inflexibility.

Statute

Accounting Standards should be framed within the limitations, restrictions of the Statute and these should not override the statutes of the government.

Customize ad size using the Custom Ad Size Ad Unit


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Earlier this customizing facility was available only for Premium Adsense Publishers and not for the general publisher. Now the common publishers have got the opportunity to have this feature as equal to the Premium Publishers. Let me explain

Why should i use Custom Ad Size

In one of my blogs i have to display the Ad Unit just above the article content and the width of the article content is 556 pixel. None of the recommended or other types of Ad Sizes meat my Ad Space. Hence, in this case i can use the newly released Custom Ad Size ad unit. Just specify the width and height dimensions of your ad in Pixels.

Will Adsense display blank space if specified Custom Ad Sized Ad not available?

Good question, and the answer is simple An Alternative Ad. Obviously, Adsense will display the next possible ad size for your Custom Ad Size ad unit. Suppose i have 500 x 250 pixel Custom Ad Unit and there is no ad available for that ad space then Adsense will display less that or equal to the ad sized ad unit within the bounds of the ad space that you created, might be 300 x 250 pixel. And that Medium Rectangle will be center aligned and the empty space will be filled with white color.

Creating the Custom Ad Size ad unit is similar as you created the other Ad Units in the Adsense but you need to choose Custom Ad Size under Other - Custom Ad size as i already said in the beginning of the article. and need to specify the width and size of the Ad Unit and the rest of the setting are same as creating an Ad Unit in Google Adsense My Ads page.

While creating ad unit you find a notice that it has small size of ad inventory and it recommends you to use the Responsive Ad Unit.

Policies and Restrictions to implement Custom Size ad unit

Yet Adsense has kept certain policies and restriction to keep the better user experience on the top. It set restrictions on minimum and maximum sizes for your Custom Ad Size ad unit.

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  • The minimum width is 120 pixels
  • The minimum height is 50 pixels
  • Neither height nor width can exceed 1200 pixels.

If we have designed an ad outside bounds of the above points it wont appear when we use such an ad unit in our blog or website.

Accounting Standard Interpretations in India - IPCC Group 1 (Paper 1)


In the process of application of the Accounting Standards while drawing up the Financial Statements and its presentation, some practical questions would rise in the starting stage. To answer these issues Accounting Standard Interpretation(ASI) were issued. Earlier these were issued by the Accounting Standard Board. ASIs are issued after the AS issuance on the relevant standard.

Image: Accounting Standard Interpretation

Authority of ASI will be equal to the authority of the AS, to which it belongs, as ASI will become part of the AS.

Image: Authority of Accounting Standard Interpretation

ICAI will issue the AS, as we already learned and the AS will be notified by the Central Government (Ministry of Corporate Affairs) for the Companies. If the Government merge the ASI as “Explanation” to the relevant portion of the AS, then the Council of ICAIalso decides to do the same in order to harmonize the both the set of ASs issued by the ICAI and notified by the Government.

Image: Merge of ASI as Explanation by ICAI and Central Government

Accounting Standard setting process in India - IPCC Group 1 (Paper 1)


ICAI, the premier (most important) accounting body in India, has constituted the Accounting Standards Board(ASB) in 1977. Accounting Standard Setting and Issuing procedure is initiated by the ICAI and it is fully

  • Consultative (Advising) and
  • Transparent

In the Standard Setting process ASB will consider the following International Standards while drafting the Standard.

  1. International Accounting Standards (IAS)
  2. International Financial Reporting Standards (IFRS)

And finally ICAI will incorporate them in our

  • Applicable Laws,
  • Customs,
  • Usages & Business Environment.
Accounting Standard Board includes Representatives of Industries (ASSOCHAM, CII, FICCI), Regulators, Academicians, and Others.

Council of ICAI doesn’t have any power to amend the Draft of the Accounting Standard formulated by the ASB without its consent. Hence, ASB has independent power to formulate the Accounting Standard.

ASB will follow certain procedure, while setting up the Accounting Standards and the procedure of the Standard Setting will be as follows.

  1. Identificationof the area where the Accounting Standard to be formulated or amended as of today accounting needs of the Industry.
  2. Based on the Identification areas or subject, it will prepare a Proposed Accounting Standard.
  3. Based on the Proposed Accounting Standard, ASB will constitute Study Groups, which will prepare the Preliminary Draft that includes
  4. Objective & Scope of Proposed Accounting Standard.
  5. Definition of the Terms used in the Standard.
  6. Recognition & Measurement of Accounting Principles, and where such principles are applicable.
  7. Presentation and disclosure requirements of the Accounting Standard.
  8. The Preliminary Draft prepared by the Study Group will be deliberated (carefully consider) by the ASB.
  9. The Reviewed Draft will be circulated to the following bodies for comments.
  10. Members of ICAI
  11. And Other Specified Outside Bodies such as
    • Department of Company Affairs (DCA)
    • Securities and Exchange Board of India (SEBI)
    • Comptroller & Auditor General of India (C & AG)
    • Central Board of Direct Taxes (CBDT)
    • Standing Conference of Public Enterprises (SCOPE) etc.,
  12. After circulation a meeting will be held to ascertain the views of the Outside Bodies, on the Preliminary Draft.
  13. Exposure Draft will be issued in public and the comments of the public will be considered.
  14. After consideration of the public comments Exposure Draft will be forwarded to the Council of ICAI for approval.
  15. Council of ICAI will verify the Final Draft if any alteration is to be done then the draft will be modified with the consent of ASB.
  16. Finally, the Accounting Standard will be on issued on the specified area where it need was found by the ICAI.

Accounting Standards in India, an Introduction - IPCC Group 1 (Paper 1)


Accounting Standards in short known as “ASs” are the Written Policy Documents issued by

  1. Expert Accounting Body(or),
  2. Government(or),
  3. Other Regulator Body

And these Standards cover the aspects of recognition, measurement, presentation and disclosure of Accounting Transactions.

The ostensible (clear) purpose of the Accounting Standards, set up by the Standards Setting Bodies, is to disseminate the rational financial information of the enterprises to the Investors, Stakeholder and outside people.

Accounting Standards purely deals with the

  1. Recognition of Transaction and Events of the Economic Activities
  2. Measurement of the recognized elements of the Financial Transactions.
  3. Presentation of the Information through Financial Statements in a Systematic way to the readers (Accounting Experts) of the Financial Statements apparently.
  4. Disclosure of the Financial Statement in general statements to enable the Investors and Management to take prudent and quick business decisions.

ASs standardize the diverse accounting policies of an enterprise

  1. To eliminate the incomparability of the Financial Statements of the different Enterprises for a specific period, or the Financial Statements of the same enterprise over a number of years.
  2. To provide the Valuation Norms and Disclosure Requirements.

Standards Setting should achieve

Credibility

One must disclose the Accounting Standards adopted to prepare the Financial Statement of an enterprise. Those standards must be applicable and acceptable in all the areas i.e. inventory, depreciation valuation. These standards are to be disclosed, hence the investors will trust the Financial Information prepared based on the Standards as they are open to them.

Comparability

Standardization of Accounting Standards will enable the user of Financial Data to make comparison of one enterprise over years as well as to make a comparison between the enterprises to trace out the profitability of the enterprises. Therefore investor will decide whether to invest or not.

When comparing a company’s Financial Statements with past years then it is termed as Intra-Enterprise Comparison where as if the comparison is done between the companies over a specific Financial Year then it is known as Inter-Enterprise Comparison.

In both the cases Accounting Standards followed by the comparable enterprises in drawing up the Financial Statements should be similar.

Creative Accounting

Creative Accounting means molding the Accounting Policies to produce the Financial Statement in favour of a specific group. By Standardizing the Accounting Policies we can reduce the scope of making such illicit activities.

The main aim of the ASs is to improve the quality of the financial reports; thereby there will be constant, transparent and comparability of the Financial Data for the extent of the user of the Financial Statement. By keeping good Financial Reporting a company can gain the capital at low cost as the investors feel low risk to invest in the company.

Run Adsense Performance Report with Local Currency


Dear Adsense Publishers, the base currency for most of us will be different that the Payment Currency by the Google Adsense i.e. US Dollar. Most of us would be willing to visit our Performance Report in our own currency rather that the default one, i do want to see the report in my Indian Currency i.e. Indian Rupee. And the Adsense team made it available for the Publisher around world to look at their Adsense Performance report in their own currency, hence they can estimate their performance. And i came to know about it by a post written by Mr. Miki Noda, Adsense Payments Specialist.

Image: Updates to the currency feature in performance reports

In the article Miki written that the team was hearing about this requirement from many publisher around the world. We can see a message in top of the reports section that the report would change day to day as the currency rate fluctuation and as well it will not effect your earning based on the default payment currency.