Accounting Standards

This query is : Resolved

Anil Batheja (Querist)
Follow

23 July 2010 Is accounting standards are applicable to individual and partnership firm. If yes kindly provide the specific information that where it is written?

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
Follow

23 July 2010 The Institute of Chartered Accountants of India (ICAI) being a member body
of the then IASC, constituted the Accounting Standards Board (ASB) on 21st April,
1977, with a view to harmonise the diverse accounting policies and practices in use in
India. After the avowed adoption of liberalisation and globalisation as the corner
stones of Indian economic policies in early ‘90s, the Accounting Standards have
increasingly assumed importance.
While formulating accounting standards, the ASB takes into consideration the
applicable laws, customs, usages and business environment prevailing in the country.
The ASB also gives due consideration to International Financial Reporting Standards/
International Accounting Standards issued by IASB and tries to integrate them, to the
extent possible, in the light of conditions and practices prevailing in India.
Although the Accounting Standards Board is a body constituted by the
Council of the Institute of Chartered Accountants of India, it is independent in the
formulation of accounting standards since in case the Council considers it necessary
3
that certain modifications be made in the draft accounting standards formulated by the
ASB, it can only be done in consultation with the ASB.

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
Follow

23 July 2010 Accounting Standards issued by the ICAI had got legal recognition through
insertion of sections 211(3A), (3B) and (3C) in the Companies Act, 1956, which may
be prescribed by the Central Government in consultation with the National Advisory
Committee on Accounting Standards. Recent development in this regard is
Accounting Standards 1to 7 and 9 to 29 as recommended by the ICAI, have been
prescribed by Ministry of Company Affairs, Government of India vide its notification
6
dated December, 7, 2006, in the Gazette of India. This notification provides that every
company and its auditor(s) shall comply with the notified Accounting Standards.
The Securities and Exchange Board of India (SEBI) through the listing
agreement requires that listed companies shall mandatorily comply with all the
Accounting Standards issued by ICAI from time to time.
Also, the Insurance Regulatory and Development Authority (IRDA) requires
insurance companies to follow the Accounting Standards issued by the ICAI.
Apart from the corporate bodies, the Council of the Institute of Chartered
Accountants of India has made various accounting standards mandatory in respect of
certain non-corporate entities such as partnership firms, sole-proprietary
concerns/individuals, societies registered under the Societies Registration Act, trusts,
associations of persons, and Hindu Undivided Families, where financial statements of
such entities are statutorily required to be audited, for example, under Section 44AB
of the Income-tax, 1961. The Council has cast a duty on its members to examine
compliance with the Accounting Standards in the financial statements covered by
their audit in the event of any deviations therefrom, to make adequate disclosures in
their audit reports so that the users of the financial statements may be aware of such
deviations.