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UNIVERSITY OF MUMBAI

RAYAT SHIKSHAN SANSTHASKARMAVEER BHAURAO PATIL COLLEGEVASHI, NAVI MUMBAI

COLLEGE CODE 33

PROJECT REPORT ONACCOUNTING STANDARDS

SUBMITTED BYGAUTAMI .J.KOLI

PROJECT GUIDEPROF. SHIVAJI GHUTUKADE IN PARTIAL FULFILLMENT FOR THE COURSE OFMASTER OF COMMERCE M.COM.PART I (SEMESTER I) ACADEMIC YEAR 2014-15

ACKNOWLEGEMENT

On the occasion of completion and submission of project we would like to express our deep sense of gratitude to Mr. PROF. SHIVAJI GHUTUKADE.for providing us platform of accounting studies. We thank to our chairman and faculty members for their moral support during the project. We are glad for providing us an opportunity to carryout project on European Union and also their help and tips whenever needed. Without his co-operation it was impossible to reach up this stage. At last, I sincere regards to my parents and friends who have directly or indirectly helped me in the project.

RAYAT SHIKSHAN SANSTHASKARMAVEER BHAURAO PATIL COLLEGEVASHI, NAVI MUMBAI 400 703.

CERTIFICATE

This is to certify that GAUTAMI KOLI, student of M.Com.Part-I Semester I has completed his project on ACCOUNTING STANDARDS and has submitted a satisfactory report under the guidance of PROF. SHIVAJI GHUTUKADE In the partial fulfillment of M.Com. Course of University of Mumbai in the academic year 2014-15.

. .... Project guide Coordinator Principal

....University Examiner DECLARATION I, GAUTAMI J KOLI student of KARMAVEER BHAURAO PATIL COLLEGE, studying in M.Com.Part-I. (Semester I) hereby declare that I have completed this project report on ACCOUNTING STANDARDS And has not been submitted to any other University or Institute for the award of any degree, diploma etc. The information is submitted to me is true and original to the best of my knowledge.

Date . .. (Name & Sign of Student)Place Vashi, Navi Mumbai.

ContentsACKNOWLEGEMENT3DECLARATION4CERTIFICATE5INTRODUCTION6HISTORY7LIST OF INDIAN ACCOUNTING STANDARDS9AS 1 : DISCLOSURE OF ACCOUNTING POLICIES:9AS 2: VALUATION OF INVENTORIES:10AS 3: CASH FLOW STATEMENT11A4: CONTENGENCIES AND EVENTS OCCURRING AFTER BALANCE SHEET DATE12A5: NET PROFIT OR LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS AND CHANGES IN ACCOUNTING POLICIES.13A6: DEPRECIATION ACCOUNTING:13A7: CONSTRUCTION CONTRACTS14A9: REVENUE RECOGNITION14A10: ACCOUNTING FOR FIXED ASSETS16A11: THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES17A12: ACCOUNTING FOR GOVERNMENT GRANTS17A13: ACCOUNTING FOR INVESTMENTS18A14: ACCOUNTING FOR AMALGAMATIONS19A15: EMPLOYEE BENEFITS19A16: BORROWING COSTS20A17: SEGMENT REPORTING20A18: RELATED PARTY DISCLOSURES20A19: LEASES20A20: EARNINGS PER SHARE21A21: CONSOLIDATED FINANCIAL STATEMENTS21A22: ACCOUNTING FOR TAXES ON INCOME21A23: ACCOUNTING FOR INVESTMENTS IN ASSOCIATES IN CONSOLIDATED FINANCIAL STATEMENTS22A24: DISCONTINUING OPERATIONS22A25: INTERIM FINANCIAL REPORTING23A26: INTANGIBLE ASSETS23A27: FINANCIAL REPORTING OF INTERESTS IN JOINT VENTURES23A28: IMPAIRMENT OF ASSETS23A29: PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS24BIBLIOGRAPHY25

INTRODUCTIONIndian Accounting Standards(abbreviated asIndia AS) are a set of accounting standards notified by theAffairs which are converged withInternational Financial Reporting Standards(IFRS). These accounting standards are formulated by Accounting Standards Board ofInstitute of Chartered Accountants of India. Now India will have two sets of accounting standards viz. existing accounting standards under Companies (Accounting Standard) Rules, 2006 andIFRSconverged Indian Accounting Standards (Ind AS). The Ind AS are named and numbered in the same way as the corresponding IFRS.NACASrecommend these standards to theMinistry of Corporate Affairs. The Ministry of Corporate Affairs has to spell out the accounting standards applicable for companies in India. As on date theMinistry of Corporate Affairsnotified 35 Indian Accounting Standards(Ind AS). But it has not notified the date of implementation of the same.[1]OBJECTIVEThe basic objective of Accounting Standards is to remove variations in the treatment of several accounting aspects and to bring about standardization in presentation. They intent to harmonize the diverse accounting policies followed in the preparation and presentation of financial statements by different reporting enterprises so as to facilitate intra-firm and inter-firm comparison.

HISTORY As in other spheres, India was a pioneer in thefield ofaccounting too. As Prof. Max Mueller observedWhatever sphere of the human mind you may select for your study , whether be it language, or religion, or mythology , orphilosophy, whether be it laws or customs ,primitiveart or primitive science, everywhere you have to go to India, whether you like it or not , because some of the most valuable & most instructive materials are treasured up in India, & in India only.Sufficient evidence exists to conclude that art and practice of accounting existed even in Vedic times. There are references to kraya (sale), Vanij (merchant), sulka (price) in Rigveda. Kautilyas Arthashastracontainsdetails onbusiness ofkeeping upaccounts inthe officeof accountants .It provides details of matters which should be recorded, registers to be maintained, system of examination of accounts and even details of punishments for default.Authors, however, generally tracethe originto times of Babylonian Empire around 3500 B.C. Some of the oldest records ofcommercehave been found in the Assyrian, Chaldaean-Babylonian and Sumerian civilizations which were flourishing in the Mesopotamian Valley.During this era (which lasted until 500 B.C.), Sumeria was a theocracy whose rulers held most land and animals in trust for their gods, giving impetus to their record-keeping efforts. Moreover, the legal codes that evolved penalized the failure to memorialize transactions. The Code of Hammurabi, for example, required that an agent selling goods for a merchant give the merchant a price quotation under seal or face invalidation of a questioned agreement.The Mesopotamian equivalent of todays accountant was the scribe. His duties included writing up the transaction and ensuring that the agreements complied with the detailed code requirements for commercial transactions. A typical transaction involved : The parties willing to transact sought the scribe at the gates to the city. They would describe their agreement to the scribe, who use a small quantity of specially prepared clay to record the transaction. The moist clay was molded into a size and shape adequate to contain the terms of the agreement. Using a wooden stylus, the scribe recorded the names of the contracting parties, the goods and money exchanged and any other promises made. The parties then signed their names to the tablet by impressing their respective seals. Men carried their signatures around their necks in the form of stone amulets engraved with the wearers mark, The scribe would dry the tablet in the sun or in a kiln for important transactions which needed a more permanent record. Sometimes a thick clay layer was fashioned and wrapped around the tablet like an envelope. For extra security, the whole transaction would be rewritten on this outer crust, in effect making a carbon copy of the original. Attempted alterations of the envelope could be detected by comparing it with its contents, and the original could not be altered without cracking off and destroying the outer shell.

LIST OF INDIAN ACCOUNTING STANDARDS The following are the mandatory Accounting Standards (AS) as on July 1, 2012 as listed on the site of TheInstitute of Chartered Accountants of India(ICAI).AS 1 : DISCLOSURE OF ACCOUNTING POLICIES: This Standard deals with the disclosure of significant accounting policies Followed in preparing and presenting financial statements. The view presented in the financial statements of an enterprise of its state of affairs and of the profit or loss can be significantly affected by the accounting policies followed in the preparation and presentation of the financial statements. The accounting policies followed vary from enterprise to enterprise. Disclosure of significant accounting policies followed is necessary if the view presented is to be properly appreciated. The disclosure of some of the accounting policies followed in the preparation and presentation of the financial statements is required by law in some cases. The Institute of Chartered Accountants of India has, in Standards issued by it, recommended the disclosure of certain accounting policies, e.g., translation policies in respect of foreign currency items. In recent years, a few enterprises in India have adopted the practice of including in their annual reports to shareholders a separate statement of accounting policies followed in preparing and presenting the financial statements

AS 2: VALUATION OF INVENTORIES: A primary issue in accounting for inventories is the determination of thevalue at which inventories are carried in the financial statements until therelated revenues are recognised. This Standard deals with the determinationof such value, including the ascertainment of cost of inventories and anywrite-down thereof to net realisable value.Scope1. This Standard should be applied in accounting for inventories otherThen:(a) Work in progress arising under construction contracts,including directly related service contracts. (b) Work in progress arising in the ordinary course of business ofService providers;(c) Shares, debentures and other financial instruments held asStock-in-trade; and (d) Producers inventories of livestock, agricultural and forestproducts, and mineral oils, ores and gases to the extent thatthey are measured at net realizable value in accordance withwell established practices in those industries.

AS 3: CASH FLOW STATEMENTInformation about the cash flows of an enterprise is useful in providingusers of financial statements with a basis to assess the ability of theenterprise to generate cash and cash equivalents and the needs of theenterprise to utilise those cash flows. The economic decisions that are takenby users require an evaluation of the ability of an enterprise to generate cashand cash equivalents and the timing and certainty of their generation.The Standard deals with the provision of information about the historicalchanges in cash and cash equivalents of an enterprise by means of a cashflow statement which classifies cash flows during the period from operating,investing and financing activities.Scope: 1. an enterprise should prepare a cash flow statement and should presentit for each period for which financial statements are presented.2. Users of an enterprises financial statements are interested in how theenterprise generates and uses cash and cash equivalents. This is the caseregardless of the nature of the enterprises activities and irrespective ofwhether cash can be viewed as the product of the enterprise, as may be thecase with a financial enterprise. Enterprises need cash for essentially thesame reasons, however different their principal revenue-producing activitiesmight be. They need cash to conduct their operations, to pay their obligations,And to provide returns to their investors.A4: CONTENGENCIES AND EVENTS OCCURRING AFTER BALANCE SHEET DATE. This Standard deals with the treatment in financial statements of(a) Contingencies, and (b) Events occurring after the balance sheet date.The following terms are used in this Standard with the meaningsspecified: A contingency is a condition or situation, the ultimate outcome ofwhich, gain or loss, will be known or determined only on the occurrence,or non-occurrence, of one or more uncertain future events. Events occurring after the balance sheet date are those significantevents, both favourable and unfavourable, that occur between the balancesheet date and the date on which the financial statements are approved bythe Board of Directors in the case of a company, and, by the correspondingapproving authority in the case of any other entity.Two types of events can be identified:(a) those which provide further evidence of conditions that existedat the balance sheet date; and(b) those which are indicative of conditions that arose subsequentto the balance sheet date.

A5: NET PROFIT OR LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS AND CHANGES IN ACCOUNTING POLICIES.The objective of this Standard is to prescribe the classification and disclosureof certain items in the statement of profit and loss so that all enterprisesprepare and present such a statement on a uniform basis. This enhances thecomparability of the financial statements of an enterprise over time and withthe financial statements of other enterprises. Accordingly, this Standardrequires the classification and disclosure of extraordinary and prior perioditems, and the disclosure of certain items within profit or loss from ordinaryactivities. It also specifies the accounting treatment for changes in accountingestimates and the disclosures to be made in the financial statements regardingchanges in accounting policies.A6: DEPRECIATION ACCOUNTING:1. This Standard deals with depreciation accounting and applies to alldepreciable assets, except the following items to which special considerationsapply: (i) forests, plantations and similar regenerative natural resources;(ii) wasting assets including expenditure on the exploration for and extraction of minerals, oils, natural gas and similar non- regenerative resources;(iii) expenditure on research and development;(iv) goodwill and other intangible assets;(v) live stockThis standard also does not apply to land unless it has a limited useful lifefor the enterprise. 2. Different accounting policies for depreciation are adopted by differententerprises. Disclosure of accounting policies for depreciation followed by an enterprise is necessary to appreciate the view presented in the financialstatements of the enterprise.A7: CONSTRUCTION CONTRACTSThe objective of this Standard is to prescribe the accounting treatment ofrevenue and costs associated with construction contracts. Because of thenature of the activity undertaken in construction contracts, the date at whichthe contract activity is entered into and the date when the activity is completedusually fall into different accounting periods. Therefore, the primary issuein accounting for construction contracts is the allocation of contract revenueand contract costs to the accounting periods in which construction work isperformed. This Standard uses the recognition criteria established in theFramework for the Preparation and Presentation of Financial Statements todetermine when contract revenue and contract costs should be recognisedas revenue and expenses in the statement of profit and loss. It also providespractical guidance on the application of these criteria.

A9: REVENUE RECOGNITION1. This Standard deals with the bases for recognition of revenue in thestatement of profit and loss of an enterprise. The Standard is concernedwith the recognition of revenue arising in the course of the ordinary activitiesof the enterprise from the sale of goods, the rendering of services, and the use by others of enterprise resources yielding interest, royaltiesand dividends.2. This Standard does not deal with the following aspects of revenuerecognition to which special considerations apply:(i) Revenue arising from construction contracts;3(ii) Revenue arising from hire-purchase, lease agreements;(iii) Revenue arising from government grants and other similarsubsidies;(iv) Revenue of insurance companies arising from insurance contracts.3. Examples of items not included within the definition of revenue forthe purpose of this Standard are:(i) Realised gains resulting from the disposal of, and unrealised gainsresulting from the holding of, non-current assets e.g. appreciationin the value of fixed assets;(ii) Unrealised holding gains resulting from the change in value ofcurrent assets, and the natural increases in herds and agriculturaland forest products;(iii) Realised or unrealised gains resulting from changes in foreignexchange rates and adjustments arising on the translation offoreign currency financial statements;(iv) Realised gains resulting from the discharge of an obligation atless than its carrying amount;(v) Unrealised gains resulting from the restatement of the carryingamount of an obligation.

A10: ACCOUNTING FOR FIXED ASSETS1. Financial Statements disclose certain information relating to fixed assets.In many enterprises these assets are grouped into various categories, suchas land, buildings, plant and machinery, vehicles, furniture and fittings,goodwill, patents, trade marks and designs. This standard deals withaccounting for such fixed assets except as described in paragraphs 2 to 5below.2. This standard does not deal with the specialised aspects of accountingfor fixed assets that arise under a comprehensive system reflecting the effectsof changing prices but applies to financial statements prepared on historicalcost basis.3. This standard does not deal with accounting for the following items towhich special considerations apply:(i) forests, plantations and similar regenerative natural resources;(ii) wasting assets including mineral rights, expenditure on theexploration for and extraction of minerals, oil, natural gas andsimilar non-regenerative resources;(iii) expenditure on real estate development.A11: THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATESAn enterprise may carry on activities involving foreign exchange in twoways. It may have transactions in foreign currencies or it may have foreignoperations. In order to include foreign currency transactions and foreignoperations in the financial statements of an enterprise, transactions mustbe expressed in the enterprises reporting currency and the financialstatements of foreign operations must be translated into the enterprisesreporting currency.The principal issues in accounting for foreign currency transactions andforeign operations are to decide which exchange rate to use and how torecognise in the financial statements the financial effect of changes inexchange rates.

A12: ACCOUNTING FOR GOVERNMENT GRANTS1. This Standard deals with accounting for government grants. Governmentgrants are sometimes called by other names such as subsidies, cash incentives,duty drawbacks, etc.2. This Standard does not deal with:(i) the special problems arising in accounting for government grantsin financial statements reflecting the effects of changing pricesor in supplementary information of a similar nature;(ii) government assistance other than in the form of governmentgrants;(iii) government participation in the ownership of the enterprise.A13: ACCOUNTING FOR INVESTMENTS1. This Standard deals with accounting for investments in the financialstatements of enterprises and related disclosure requirements.22. This Standard does not deal with:(a) the bases for recognition of interest, dividends and rentals earnedon investments which are covered by Accounting Standard 9 onRevenue Recognition;(b) operating or finance leases;(c) investments of retirement benefit plans and life insuranceEnterprises.(d) mutual funds and venture capital funds and/or the related assetmanagement companies, banks and public financial institutionsformed under a Central or State Government Act or so declaredunder the Companies Act, 1956.

A14: ACCOUNTING FOR AMALGAMATIONS 1. This standard deals with accounting for amalgamations and thetreatment of any resultant goodwill or reserves. This Standard is directedprincipally to companies although some of its requirements also apply tofinancial statements of other enterprises.2. This standard does not deal with cases of acquisitions which arise whenthere is a purchase by one company (referred to as the acquiring company)of the whole or part of the shares, or the whole or part of the assets, ofanother company (referred to as the acquired company) in consideration forpayment in cash or by issue of shares or other securities in the acquiringcompany or partly in one form and partly in the other. The distinguishingfeature of an acquisition is that the acquired company is not dissolved andits separate entity continues to exist.COUNTING FOR AMALGAMATIONS

A15: EMPLOYEE BENEFITSThe objective of this Standard is to prescribe the accounting and disclosurefor employee benefits. The Standard requires an enterprise to recognise:(a) a liability when an employee has provided service in exchange foremployee benefits to be paid in the future; and(b) an expense when the enterprise consumes the economic benefitarising from service provided by an employee in exchange foremployee benefits.A16: BORROWING COSTSThe objective of this Standard is to prescribe the accounting treatment forborrowing costs.A17: SEGMENT REPORTINGThe objective of this Standard is to establish principles for reporting financialinformation, about the different types of products and services an enterpriseproduces and the different geographical areas in which it operates. Suchinformation helps users of financial statements:(a) better understand the performance of the enterprise;(b) better assess the risks and returns of the enterprise; and(c) make more informed judgements about the enterprise as a whole.

A18: RELATED PARTY DISCLOSURESThe objective of this Standard is to establish requirements for disclosure of:(a) related party relationships; and(b) transactions between a reporting enterprise and its relatedparties.A19: LEASESThe objective of this Standard is to prescribe, for lessees and lessors, theappropriate accounting policies and disclosures in relation to finance leasesand operating leases.A20: EARNINGS PER SHAREThe objective of this Standard is to prescribe principles for the determinationand presentation of earnings per share which will improve comparison ofperformance among different enterprises for the same period and amongdifferent accounting periods for the same enterprise. The focus of thisStandard is on the denominator of the earnings per share calculation. Eventhough earnings per share data has limitations because of different accountingpolicies used for determining earnings, a consistently determineddenominator enhances the quality of financial reporting.A21: CONSOLIDATED FINANCIAL STATEMENTSThe objective of this Standard is to lay down principles and procedures forpreparation and presentation of consolidated financial statements.Consolidated financial statements are presented by a parent (also known asholding enterprise) to provide financial information about the economicactivities of its group. These statements are intended to present financialinformation about a parent and its subsidiary(ies) as a single economic entityto show the economic resources controlled by the group, the obligations ofthe group and results the group achieves with its resources.A22: ACCOUNTING FOR TAXES ON INCOMEThe objective of this Standard is to prescribe accounting treatment for taxeson income. Taxes on income is one of the significant items in the statementof profit and loss of an enterprise. In accordance with the matching concept,taxes on income are accrued in the same period as the revenue and expensesto which they relate. Matching of such taxes against revenue for a periodposes special problems arising from the fact that in a number of cases, taxableincome may be significantly different from the accounting income. Thisdivergence between taxable income and accounting income arises due totwo main reasons. Firstly, there are differences between items of revenueand expenses as appearing in the statement of profit and loss and the itemswhich are considered as revenue, expenses or deductions for tax purposes.Secondly, there are differences between the amount in respect of a particularitem of revenue or expense as recognised in the statement of profit and lossand the corresponding amount which is recognised for the computation oftaxable income.

A23: ACCOUNTING FOR INVESTMENTS IN ASSOCIATES IN CONSOLIDATED FINANCIAL STATEMENTSThe objective of this Standard is to set out principles and procedures forrecognising, in the consolidated financial statements, the effects of theinvestments in associates on the financial position and operating results of agroup.A24: DISCONTINUING OPERATIONSThe objective of this Standard is to establish principles for reportinginformation about discontinuing operations, thereby enhancing the abilityof users of financial statements to make projections of an enterprise's cashflows, earnings-generating capacity, and financial position by segregatinginformation about discontinuing operations from information aboutcontinuing operations.A25: INTERIM FINANCIAL REPORTINGThe objective of this Standard is to prescribe the minimum content of aninterim financial report and to prescribe the principles for recognition andmeasurement in a complete or condensed financial statements for an interimperiod. Timely and reliable interim financial reporting improves the abilityof investors, creditors, and others to understand an enterprise's capacity togenerate earnings and cash flows, its financial condition and liquidity.A26: INTANGIBLE ASSETSThe objective of this Standard is to prescribe the accounting treatment forintangible assets that are not dealt with specifically in another AccountingStandard. This Standard requires an enterprise to recognise an intangibleasset if, and only if, certain criteria are met. The Standard also specifieshow to measure the carrying amount of intangible assets and requires certaindisclosures about intangible assets.A27: FINANCIAL REPORTING OF INTERESTS IN JOINT VENTURESThe objective of this Standard is to set out principles and procedures foraccounting for interests in joint ventures and reporting of joint ventureassets, liabilities, income and expenses in the financial statements ofventurers and investors.A28: IMPAIRMENT OF ASSETSThe objective of this Standard is to prescribe the procedures that an enterpriseapplies to ensure that its assets are carried at no more than their recoverableamount. An asset is carried at more than its recoverable amount if its carryingamount exceeds the amount to be recovered through use or sale of the asset.If this is the case, the asset is described as impaired and this Standard requiresthe enterprise to recognise an impairment loss. This Standard also specifieswhen an enterprise should reverse an impairment loss and it prescribes certaindisclosures for impaired assets.A29: PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETSThe objective of this Standard is to ensure that appropriate recognition criteriaand measurement bases are applied to provisions and contingent liabilitiesand that sufficient information is disclosed in the notes to the financialstatements to enable users to understand their nature, timing and amount.The objective of this Standard is also to lay down appropriate accountingfor contingent assets.

BIBLIOGRAPHYIntroduction: http://en.wikipedia.org/wiki/Indian_Accounting_Standards Accounting standards by ICAI: http://www.icai.org/post.html?post_id=8660