Importance Of Accounting Standards

Accounting Standards mandatory as on July 01, 2012

• AS 1 Disclosure of Accounting Policies

• AS 2 Valuation of Inventories

• AS 3 Cash Flow Statements

• 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 (revised 2002)

• 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

Accounting Standards not mandatory as on July 01, 2012

• AS 30 Financial Instruments: Recognition and Measurement and Limited Revisions to AS 2, AS 11 (revised 2003), AS 21, AS 23, AS 26, AS 27, AS 28 and                      AS 29

• AS 31, Financial Instruments: Presentation

• AS 32, Financial Instruments: Disclosures, and limited revision to Accounting Standard (AS) 19, Leases

IMPORTANCE OF ACCOUNTING STANDARDS

Running a business is not just about earning profits, depositing money in the bank, paying employees, and luring more clients and customers. It is about knowing if the business is thriving or if the owner is just investing on something that is not going to earn at all.

Businesses have to have accounting standards to ensure that everything goes smoothly and that cash flow is running perfectly. These accounting measures for businesses also have to adhere to the accounting standards set by regulating bodies like the FASB and the IASB. This is because there are policies and other documents that are imperative to every accounting act. In many cases, businesses hire the services of auditors and bookkeepers in order to make sure that all record keeping practices are kept. Doing so will provide access to investor capital, facilitate reasonable assessment of performance, and prevent costs brought about by legal action.

Here are other reasons why accounting standards are important to every business.

• Protecting Investors

By employing accounting standards, investors’ interests are ensured as the documents they review are definitely accurate and genuine. As investors, they are interested to know that their money will eventually earn and go back to them. Accounting standards increase the investors’ confidence in the business.

• Regulatory Compliance

Government regulators set accounting standards that have to be adhered to by all companies. This is both beneficial to the investor or business owner as well as to the customers or clients because it protects them from frauds in businesses. It also promotes transparency among the business’ transactions which will eventually lead to the improved efficiency of the markets. Following accounting standards set by the FASB and the IASB will help prevent a company or business from spending on legal actions initiated by the government against it.

Assessing Business Performance

The use of accounting standards will enable a business to see or assess its performance. By doing so, they can also compare and contrast their business’ performance with other companies or competitors. It further helps a business see its strengths and weaknesses. By also comparing past and current performances, a business can assess the success of its strategies.

Businesses will either prosper or fall. Depending on the trends and the economy of the country, an investment may grow or go down the drain. But in the end, accounting standards will make a difference. That is why all businesses have to follow and strictly adhere to accounting standards

Credits:  www.onlineaccountingblog.shoebooks.com.au

About the Author :

FALGUNI PALEJA

FYBAF student from Nirmala Memorial Foundation College, kandivali (E)