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TRANSCRIPT
Chapter 8
Accounting Standards Ibrahim Sameer (MBA - Specialized in Finance,
B.Com – Specialized in Accounting & Marketing)
Introduction
• Imagine the world without traffic law and
enforcement! Think how people will behave.
Introduction
• Now, can you imagine the accounting profession
without rules and regulations?
Accounting Standards
• Accounting standards are guidelines that need to
be adhered by the accounting profession in
preparing and reporting of the financial statements.
Accounting Standards
• Section 166A of the Companies Act 1965 requires
directors of companies incorporated under the Act
to ensure accounts are prepared in accordance
with the applicable accounting standards to the
extent that the accounts give a true and fair view.
Accounting Standards
• In the past, international accounting standards
were issued by the Board of the International
Accounting Standards Committee (IASC); since
2001, the new set of standards has been known as
the international financial reporting standards
(IFRS) and has been issued by the International
Accounting Standards Board (IASB).
IAS 2 Inventories
• Inventories shall be measured at the lower of cost
or net realisable value (NRV).
• NRV = estimated selling price - estimated costs of
completion to make the sale.
• The cost of inventories shall be assigned by using
the first-in, first-out (FIFO) or weighted average
cost
IAS 8 Depreciation
• IAS 8 is applicable to all depreciable assets,
except the following:
• Expenditure on R&D
• Goodwill
• Live stock
Meaning of Depreciation
• Depreciation mean decline in the value of
depreciable assets on account of use and effluxion
(limited) of time.
• Depreciation is a gradual, continuous & permanent
decrease in the value of an assets.
How to Calculate Depreciation
Causes of Depreciation
• Physical wear & tear.
• Physical deterioration.
• Obsolescence.
Methods of Depreciation
• Straight line depreciation.
• Reducing balance method.
Changes in Depreciation
Methods
• Methods of depreciation once selected
consistently applied.
• Changes in method of depreciation is done in the
following conditions:
• For compliance of status.
• For compliance of IAS
• For more appropriate presentation of the financial
statement.
IAS 16: Fixed Assets
• IAS 16 Property, Plant and Equipment outlines the
accounting treatment for most types of property,
plant and equipment. Property, plant and
equipment is initially measured at its cost,
subsequently measured either using a cost or
revaluation model, and depreciated so that its
depreciable amount is allocated on a systematic
basis over its useful life.
IAS 33: EPS
• IAS 33 Earnings Per Share sets out how to
calculate both basic earnings per share (EPS) and
diluted EPS. The calculation of Basic EPS is based
on the weighted average number of ordinary
shares outstanding during the period, whereas
diluted EPS also includes dilutive potential
ordinary shares (such as options and convertible
instruments) if they meet certain criteria.
Questions & Answers
What else you want to know?
Thank You
Ibrahim Sameer Seek knowledge from cradle to grave