Accounting Standards Accounting Standards are written statements of accounting rules and guidelines to prepare financial statements.

It may also be said that Accounting Standards are codified forms of GAPP. Accounting Standards consists of detailed rules to be adopted for the treatment of various items in accounting process so as to attain uniformity and consistency in internal and external reporting process. Significance of Accounting Standards Accounting standards facilities uniform preparation and reporting of general purpose financial statements published annually for the benefit of shareholders, creditors, employee and public at large. They are very useful to the investors and other external groups in assessing the progress and prospects of alternative investments in different companies in different countries. Need for Accounting Standards Accounting standards can be seen as providing an important mechanism to help in the resolution of potential financial conflicts of interest between the various important groups in society. It is essential that accounting standards should command the greatest possible credibility among shareholders, creditors, employee and public at large. Accounting Standards are exceedingly useful because they attempt to standardize and regulate accounting definitions, assumptions, and methods. The accounting standards enable us to assume that there is consistency from year to year in the methods used to prepare a company's financial statements. Although variations may exist, we can make reasonably confident conclusions when comparing one company to another, or comparing one company's financial statistics to the statistics for its industry, thanks to accounting standards. Without the standards, users of financial statements such as the public, commercial banks and other statutory institutions would need to learn the accounting rules of each and every client or company they deal with and comparisons between these companies would be very difficult. OBJECTIVE The 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.

Compliance with Accounting Standards issued by ICAI Sub Section(3A) to section 211 of Companies Act, 1956 requires that every Profit/Loss Account and Balance Sheet shall comply with the Accounting Standards. 'Accounting Standards' means the standard of accounting recomended by the ICAI and prescribed by the Central Government in consultation with the National Advisory Committee on Accounting Standards(NACAs) constituted under section 210(1) of companies Act, 1956. Procedure for Issuing Accounting Standards Procedure for Issuing Accounting Standards Accounting Standard Board (ASB) determines the broad areas in which Accounting Standards need to be formulated. In the preparation of AS, ASB is assisted by Study Groups. ASB also holds discussions with representative of Government, Public Sector Undertakings, Industry and other organizations (ICSI/ICWAI) for ascertaining their views. An exposure draft of the proposed standard is prepared and issued for comments by members of ICAI and the public at large. After taking into consideration the comments received, the draft of the proposed standard will be finalized by ASB and submitted to the council of the Institute. The council of the Institute will consider the final draft of the proposed Standard and If found necessary, modify the same in consultation with ASB. The AS on the relevant subject will then be issued under the authority of the council. OBJECTIVES AND FUNCTIONS OF THE ACCOUNTING STANDARDS BOARD 1. The following are the objectives of the Accounting Standards Board: (i) To conceive of and suggest areas in which Accounting Standards need to be developed. (ii) To formulate Accounting Standards with a view to assisting the Council of the ICAI in evolving and establishing Accounting Standards in India. (iii) To examine how far the relevant International Accounting Standard/International Financial Reporting Standard (see paragraph 3 below) can be adapted while formulating the Accounting Standard and to adapt the same. (iv) To review, at regular intervals, the Accounting Standards from the point of view of acceptance or changed conditions, and, if necessary, revise the same. (v) To provide, from time to time, interpretations and guidance on Accounting Standards. (vi) To carry out such other functions relating to Accounting Standards. 2. The main function of the ASB is to formulate Accounting Standards so that such standards may be established by the ICAI in India. While formulating the Accounting Standards, the ASB will take into consideration the applicable laws, customs, usages and business environment prevailing in India. 3. The ICAI, being a full-fledged member of the International Federation of Accountants (IFAC), is expected, inter alia, to actively promote the International Accounting Standards Boards (IASB) pronouncements in the country with a view to facilitate global harmonisation of accounting standards. Accordingly, while formulating the Accounting Standards, the ASB will give due

consideration to International Accounting Standards (IASs) issued by the International Accounting Standards Committee (predecessor body to IASB) or International Financial Reporting Standards (IFRSs) issued by the IASB, as the case may be, and try to integrate them, to the extent possible, in the light of the conditions and practices prevailing in India. 4. The Accounting Standards are issued under the authority of the Council of the ICAI. The ASB has also been entrusted with the responsibility of propagating the Accounting Standards and of persuading the concerned parties to adopt them in the preparation and presentation of financial statements. The ASB will provide interpretations and guidance on issues arising from Accounting Standards. The ASB will also review the Accounting Standards at periodical intervals and, if necessary, revise the same. A value added statement (VAS) is a statement showing the net added value of a business firm during a certain period on its total transaction. The main purpose of value added statement (VAS) is to ascertain how much of the total net value was added and how it was distributed to the contributors of the value. Therefore, a value added statement (VAS) is regarded as a part of social responsibility accounting. A value added statement shows the wealth or value created and attributed to all stakeholders rather than just the shareholders. While the income statement reports on the income of shareholders, the value added statement (VAS) reports on the income earned by a large group of stakeholders, all the providers of capital plus employees and the government. 1. Net Assets Method of Valuation Of Shares Under this method, the net value of assets of the company is divided by the number of shares to arrive at the value of each share. For the determination of net value of assets, it is necessary to estimate the worth of the assets and liabilities. The goodwill as well as non-trading assets should also be included in total assets. The following points should be considered while valuing of shares according to this method: * Goodwill must be properly valued * The fictitious assets such as preliminary expenses, discount on issue of shares and debentures, accumulated losses etc. should be eliminated. * The fixed assets should be taken at their realizable value. * Provision for bad debts, depreciation etc. must be considered. * All unrecorded assets and liabilities (if any) should be considered. * Floating assets should be taken at market value. * The external liabilities such as sundry creditors, bills payable, loan, debentures etc. should be deducted from the value of assets for the determination of net value. The net value of assets, determined so has to be divided by number of equity shares for finding out the value of share. Thus the value per share can be determined by using the following formula: Value Per Share=(Net Assets-Preference Share Capital)/Number Of Equity Shares Factors Affecting Value of Goodwill 1. Location The business located in a suitable place commands more goodwill than others. 2. Capital The more, the capital of business, the more chance of goodwill. A firm with a high debt will have to pay more interest from profit of the firm and naturally goodwill will be less.

3. Nature of Business A firm with constant sales has more chance of earning profit and naturally goodwill too. 4. Efficient Management A good management brings more profits to the business. Increase in the value of goodwill is the result of efficient management. 5. Contract Firm may enter into a contract of sales for long period. A firm can make more profit on sale of goods on that contract by making purchase on reasonable terms. This lead to increase in the value of goodwill 6. Patent Right A firm having patent right for production of goods can earn more goodwill than others 7. Quality of the Product A firm producing qualitative products can easily have name and fame in the market. This lead to increase in the value of goodwill. 8. Special Advantages: The firm has special advantages like importing licenses, long term contracts for supply of material, patents, and trademarks, enjoy higher value of goodwill. 9. Other Factors Besides the factors mentioned above, money market condition, peace in the country, government's policy, tendency of profit etc. also affects the valuation of goodwill. Distinguish between statement of Affairs and Deficiency Account There are some differences between a statement of affairs and a deficiency Account, They are as follows: 1. The statement of affairs is required to be prepared in the form specified in the insolvency laws. But there is no such prescribed form for the preparation of the deficiency account. 2. The statement of affairs is considered as the primary statement, where as the deficiency account is regarded only as a secondary statement. 3. The statement of affairs does not contain items that affect the capital of the insolvent, where as the deficiency account contains only those items that affect the capital of the insolvent. 4. The statement of affairs shows the amount of deficiency, whereas the deficiency account states the reasons for the deficiency shown by the statement of affairs.