The Need and Objective of Accounting Standards an IFRS

8/12/2019 The Need and Objective of Accounting Standards an IFRS

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Assignment

ON

NEED AND OBJECTIVE

OF

ACCOUNTING STANDARDS AN IFRS.

POST GRADUATE DIPLOMA IN MANAGEMENT

SESSION: 2013-2015

SUBMITTED TO: SUBMITTED BY:

Dr. Simmi Agarwal Gaurav.k.Gautam - BM-013026

Faculty - Finance


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What is Accounting standards?

Accounting Standards are the statements of code of practice of

the regulatory accounting bodies that are to be observed in the

preparation and presentation of financial statements. In layman

terms, accounting standards are the written documents issued by

the expert institutes or other regulatory bodies covering various

aspects of measurement, treatment, presentation and disclosure

of accounting transactions.

What are the Objectives?

The basic objective of Accounting Standards is to remove

variations in the treatment of several accounting aspects and tobring 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.


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The Need and Objective of Accounting

Standards an IFRS

International Financial Reporting Standards(IFRS) are designed as a

common global language for business affairs so that company accounts are

understandable and comparable across international boundaries. They are

a consequence of growing international shareholding and trade and are

particularly important for companies that have dealings in several countries.

They are progressively replacing the many different national accounting

standards. The rules to be followed by accountants to maintain books of

accounts which is comparable, understandable, reliable and relevant as perthe users internal or external.

IFRS began as an attempt to harmonize accounting across the European

Union but the value of harmonization quickly made the concept attractive

around the world. They are sometimes still called by the original name

of International Accounting Standards(IAS).

IAS were issued between 1973 and 2001 by the Board of the InternationaAccounting Standards Committee (IASC). On 1 April 2001, the new

International Accounting Standards Board took over from the IASC the

responsibility for setting International Accounting Standards.

During its first meeting the new Board adopted existing IAS and Standing

Interpretations Committee standards (SICs). The IASB has continued to

develop standards calling the new standards International Financial

Reporting Standards(IFRS).

The IFRS Foundation is an independent, not-for-profit private sector

organization working in the public interest.


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The principal objectives of the IFRS Foundation are:

To develop a single set of high quality, understandable, enforceable

and globally accepted International Financial Reporting Standards

(IFRSs)through its standard-setting body, the Internationa

Accounting Standards Board (IASB);

To promote the use and rigorous application of those standards;

To take account of the financial reporting needs of emerging

economies and small and medium-sized entities (SMEs); and

To promote and facilitate adoption of IFRSs, being the standards and

interpretations issued by the IASB, through the convergence of

national accounting standards and IFRSs.

The governance and oversight of the activities undertaken by the IFRS

Foundation and its standard-setting body rests with its Trustees, who are

also responsible for safeguarding the independence of the IASB and

ensuring the financing of the organization. The Trustees are publicly

accountable to a Monitoring Board of public authorities.


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There are numerous numbers of account ing standards

which l ies in Internat ional Acco un t ing Standards such as:

N TitleOriginally

issuedEffective

Fully

withdrawn

Superseded

by

IAS 1

Disclosure of Accounting Policies (1975)

Presentation of Financial Statements

(1997)

1975January 1,1975

IAS 2

Valuation and Presentation of Inventories

in the Context of the Historical CostSystem (1975)

Inventories(1993)

1975January 1,1976

IAS 3 Consolidated Financial Statements 1976January 1,1977

January 1, 1990IAS 27andIA28

IAS 4 Depreciation Accounting 1976January 1,1977

July 1, 1999 IAS 36

IAS 5 Information to Be Disclosed in FinancialStatements

1976 January 1,1977

July 1, 1998 IAS 1

IAS 6 Accounting Responses to Changing Prices 1977January 1,1978

January 1, 1983 IAS 15

IAS 7

Statement of Changes in Financial Position(1977)

Cash Flow Statements(1992)

Statement of Cash Flows (2007)

1977January 1,1979

IAS 8

Unusual and Prior Period Items and

Changes in Accounting Policies (1978)

Net Profit or Loss for the Period,

Fundamental Errors and Changes in

Accounting Policies (1993)

Accounting Policies, Changes in

Accounting Estimates and Errors (2003)

1978January 1,1979

IAS 9 Accounting for Research and Development 1978 January 1, July 1, 1999 IAS 38
http://en.wikipedia.org/wiki/IAS_1http://en.wikipedia.org/wiki/IAS_2http://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/w/index.php?title=IAS_27&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_27&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_28&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_28&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_28&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_28&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_36&action=edit&redlink=1http://en.wikipedia.org/wiki/IAS_1http://en.wikipedia.org/wiki/IAS_7http://en.wikipedia.org/wiki/Cash_flow_statementhttp://en.wikipedia.org/wiki/Cash_flow_statementhttp://en.wikipedia.org/w/index.php?title=IAS_8&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_38&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_38&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_8&action=edit&redlink=1http://en.wikipedia.org/wiki/Cash_flow_statementhttp://en.wikipedia.org/wiki/IAS_7http://en.wikipedia.org/wiki/IAS_1http://en.wikipedia.org/w/index.php?title=IAS_36&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_28&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_28&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_27&action=edit&redlink=1http://en.wikipedia.org/wiki/Inventoryhttp://en.wikipedia.org/wiki/IAS_2http://en.wikipedia.org/wiki/IAS_1


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N Title

Originally

issuedEffective

Fully

withdrawn

Superseded

by

Activities 1980

IAS 10

Contingencies and Events Occurring Afterthe Balance Sheet Date (1978)

Events After the Balance Sheet Date

(1999)

Events after the Reporting Period (2007)

1978January 1,1980

IAS 11

Accounting for Construction Contracts(1979)

Construction Contracts (1993)

1979January 1,1980

IAS 12

Accounting for Taxes on Income (1979)

Income Taxes(1996) 1979

January 1,

1981

IAS 13Presentation of Current Assets and CurrentLiabilities

1979January 1,1981

July 1, 1998 IAS 1

IAS 14

Reporting Financial Information bySegment (1981)

Segment reporting (1997)

1981January 1,1983

January 1, 2009 IFRS 8

IAS 15Information Reflecting the Effects ofChanging Prices

1981January 1,1983

January 1, 2005 N/A

IAS 16

Accounting for Property, Plant andEquipment (1982)

Property, Plant and Equipment(1993)

1982January 1,1983

IAS 17

Accounting for Leases (1982)

Leases(1997)1982

January 1,

1984

IAS 18

Revenue Recognition (1982)

Revenue(1993)1982

January 1,1984

IAS 19

Accounting for Retirement Benefits inFinancial Statements of Employers (1983)

Retirement Benefit Costs (1993)

Employee Benefits (1998)

1983January 1,

1985

IAS 20Accounting for Government Grants andDisclosure of Government Assistance

1983January 1,1984

IAS 21Accounting for the Effects of Changes in

Foreign Exchange Rates (1983)1983

January 1,

1985
http://en.wikipedia.org/w/index.php?title=IAS_10&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_10&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_12&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_12&action=edit&redlink=1http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards#Income_taxeshttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standards#Income_taxeshttp://en.wikipedia.org/wiki/IAS_1http://en.wikipedia.org/w/index.php?title=IAS_14&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_14&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_8&action=edit&redlink=1http://en.wikipedia.org/wiki/IAS_16http://en.wikipedia.org/wiki/IAS_16http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards#Property.2C_plant_and_equipmenthttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standards#Property.2C_plant_and_equipmenthttp://en.wikipedia.org/w/index.php?title=IAS_17&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_17&action=edit&redlink=1http://en.wikipedia.org/wiki/Leaseshttp://en.wikipedia.org/wiki/Leaseshttp://en.wikipedia.org/w/index.php?title=IAS_18&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_18&action=edit&redlink=1http://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/IAS_19http://en.wikipedia.org/wiki/IAS_19http://en.wikipedia.org/w/index.php?title=IAS_20&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_20&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_21&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_21&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_21&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_20&action=edit&redlink=1http://en.wikipedia.org/wiki/IAS_19http://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/w/index.php?title=IAS_18&action=edit&redlink=1http://en.wikipedia.org/wiki/Leaseshttp://en.wikipedia.org/w/index.php?title=IAS_17&action=edit&redlink=1http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards#Property.2C_plant_and_equipmenthttp://en.wikipedia.org/wiki/IAS_16http://en.wikipedia.org/w/index.php?title=IFRS_8&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_14&action=edit&redlink=1http://en.wikipedia.org/wiki/IAS_1http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards#Income_taxeshttp://en.wikipedia.org/w/index.php?title=IAS_12&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_10&action=edit&redlink=1


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N Title

Originally

issuedEffective

Fully

withdrawn

Superseded

by

The Effects of Changes in Foreign

Exchange Rates (1993)

IAS 22

Accounting for Business Combinations

(1983)

Business Combinations (1993)

1983January 1,

1985April 1, 2004 IFRS 3

IAS 23

Capitalisation of Borrowing Costs (1984)

Borrowing Costs (1993)1984

January 1,1986

IAS 24 Related Party Disclosures 1984January 1,1986

IAS 25 Accounting for Investments 1986 January 1,1987

January 1, 2001 IAS 39andIA40

IAS 26Accounting and Reporting by Retirement

Benefit Plans1987

January 1,

1988

IAS 27

Consolidated Financial Statements and

Accounting for Investments in Subsidiaries(1989)

Consolidated and Separate Financial

Statements (2003)

Separate Financial Statements (2011)

1989January 1,1990

IAS 28

Accounting for Investments in Associates(1989)

Investments in Associates (2003)

Investments in Associates and Joint

Ventures (2011)

1989January 1,1990

IAS 29Financial Reporting in HyperinflationaryEconomies

1989January 1,1990

IAS 30

Disclosures in the Financial Statements of

Banks and Similar Financial Institutions 1990

January 1,

1991 January 1, 2007 IFRS 7

IAS 31

Financial Reporting of Interests in JointVentures (1990)

Interests in Joint Ventures (2003)

1990January 1,1992

January 1, 2013IFRS11andIFRS

IAS 32

Financial Instruments: Disclosure and

Presentation (1995)

Financial Instruments: Presentation (2005)

1995January 1,

1996
http://en.wikipedia.org/w/index.php?title=IFRS_3&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_23&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_23&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_24&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_24&action=edit&redlink=1http://en.wikipedia.org/wiki/IAS_39http://en.wikipedia.org/wiki/IAS_39http://en.wikipedia.org/w/index.php?title=IAS_40&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_40&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_40&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_40&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_26&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_26&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_27&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_27&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_28&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_28&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_29&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_29&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_30&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_30&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_7&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_31&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_31&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_12&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_12&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_32&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_32&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_32&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_12&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_31&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_7&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_30&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_29&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_28&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_27&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_26&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_40&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_40&action=edit&redlink=1http://en.wikipedia.org/wiki/IAS_39http://en.wikipedia.org/w/index.php?title=IAS_24&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_23&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_3&action=edit&redlink=1


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N Title

Originally

issuedEffective

Fully

withdrawn

Superseded

by

IAS 33 Earnings per Share 1997January 1,1999

IAS 34

Interim Financial Reporting 1998

January 1,

1999

IAS 35 Discontinuing Operations 1998 July 1, 1999 January 1, 2005 IFRS 5

IAS 36 Impairment of Assets 1998 July 1, 1999

IAS 37Provisions,Contingent LiabilitiesandContingent Assets

1998 July 1, 1999

IAS 38 Intangible Assets 1998 July 1, 1999

IAS 39Financial Instruments: Recognition and

Measurement1998

January 1,

2001

IAS 40 Investment Property 2000January 1,

2001

IAS 41 Agriculture 2000January 1,2003

IFRS 1First-time Adoption of InternationalFinancial Reporting Standards

2003January 1,2004

IFRS 2 Share-based Payment 2004January 1,2005

IFRS 3 Business Combinations 2004 April 1, 2004

IFRS 4 Insurance Contracts 2004January 1,

2005

IFRS 5Non-current Assets Held for Sale and

Discontinued Operations2004

January 1,

2005

IFRS 6Exploration for and Evaluation of Mineral

Resources2004

January 1,

2006

IFRS 7 Financial Instruments: Disclosures 2005January 1,2007

IFRS 8 Operating Segments 2006January 1,2009

IFRS 9 Financial Instruments 2009January 1,2015

IFRS 10 Consolidated Financial Statements 2011January 1,2013

IFRS 11 Joint Arrangements 2011January 1,2013

IFRS 12 Disclosure of Interests in Other Entities 2011January 1,2013

IFRS 13 Fair Value Measurement 2011January 1,

2013
http://en.wikipedia.org/w/index.php?title=IAS_33&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_33&action=edit&redlink=1http://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/w/index.php?title=IAS_34&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_34&action=edit&redlink=1http://en.wikipedia.org/wiki/IFRS_5http://en.wikipedia.org/w/index.php?title=IAS_36&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_36&action=edit&redlink=1http://en.wikipedia.org/wiki/IAS_37http://en.wikipedia.org/wiki/IAS_37http://en.wikipedia.org/wiki/Provision_(accounting)http://en.wikipedia.org/wiki/Provision_(accounting)http://en.wikipedia.org/wiki/Contingent_Liabilitieshttp://en.wikipedia.org/wiki/Contingent_Liabilitieshttp://en.wikipedia.org/wiki/Contingent_Liabilitieshttp://en.wikipedia.org/w/index.php?title=IAS_38&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_38&action=edit&redlink=1http://en.wikipedia.org/wiki/Intangible_assethttp://en.wikipedia.org/wiki/IAS_39http://en.wikipedia.org/wiki/IAS_39http://en.wikipedia.org/w/index.php?title=IAS_40&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_40&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_41&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_41&action=edit&redlink=1http://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/w/index.php?title=IFRS_1&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_1&action=edit&redlink=1http://en.wikipedia.org/wiki/IFRS_2http://en.wikipedia.org/wiki/IFRS_2http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards#Share-based_paymentshttp://en.wikipedia.org/wiki/International_Financial_Reporting_Standards#Share-based_paymentshttp://en.wikipedia.org/w/index.php?title=IFRS_3&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_3&action=edit&redlink=1http://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/w/index.php?title=IFRS_4&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_4&action=edit&redlink=1http://en.wikipedia.org/wiki/IFRS_5http://en.wikipedia.org/wiki/IFRS_5http://en.wikipedia.org/w/index.php?title=IFRS_6&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_6&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_7&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_7&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_8&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_8&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_9&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_9&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_10&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_10&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_12&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_12&action=edit&redlink=1http://en.wikipedia.org/wiki/IFRS_13http://en.wikipedia.org/wiki/Fair_Value_Measurementhttp://en.wikipedia.org/wiki/Fair_Value_Measurementhttp://en.wikipedia.org/wiki/IFRS_13http://en.wikipedia.org/w/index.php?title=IFRS_12&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_11&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_10&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_9&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_8&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_7&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IFRS_6&action=edit&redlink=1http://en.wikipedia.org/wiki/IFRS_5http://en.wikipedia.org/w/index.php?title=IFRS_4&action=edit&redlink=1http://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/w/index.php?title=IFRS_3&action=edit&redlink=1http://en.wikipedia.org/wiki/International_Financial_Reporting_Standards#Share-based_paymentshttp://en.wikipedia.org/wiki/IFRS_2http://en.wikipedia.org/w/index.php?title=IFRS_1&action=edit&redlink=1http://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/w/index.php?title=IAS_41&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=IAS_40&action=edit&redlink=1http://en.wikipedia.org/wiki/IAS_39http://en.wikipedia.org/wiki/Intangible_assethttp://en.wikipedia.org/w/index.php?title=IAS_38&action=edit&redlink=1http://en.wikipedia.org/wiki/Contingent_Liabilitieshttp://en.wikipedia.org/wiki/Provision_(accounting)http://en.wikipedia.org/wiki/IAS_37http://en.wikipedia.org/w/index.php?title=IAS_36&action=edit&redlink=1http://en.wikipedia.org/wiki/IFRS_5http://en.wikipedia.org/w/index.php?title=IAS_34&action=edit&redlink=1http://en.wikipedia.org/wiki/Earnings_per_sharehttp://en.wikipedia.org/w/index.php?title=IAS_33&action=edit&redlink=1


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Accounting Standard (AS) 6

Depreciat ion Accoun t ing

1. This Standard deals with depreciation accounting and applies to all

depreciable assets, except the following items to which special

considerations apply:

(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 stock.

This standard also does not apply to landunless it has a limited useful life

for the enterprise.

2. Different accounting policies for depreciation are adopted by different

enterprises. Disclosure of accounting policies for depreciation followed by

an enterprise is necessary to appreciate the view presented in the financial

statements of the enterprise.


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What is Depreciation?

Depreciation is a measure of the wearing out, consumption or other loss of

value of a depreciable asset arising from use, efflux ion of time or

obsolescence through technology and market changes. Depreciation is

allocated so as to charge a fair proportion of the depreciable amount in each

accounting period during the expected useful life of the asset. Depreciation

includes amortization of assets whose useful life is predetermined.

Types of depreciation calculation methods:

Straight line method

Written down value method

Straight line method: Straight-line depreciation is the simplest and

most often used method. In this method, the company estimates the

salvage value(scrap value) of the asset at the end of the period during

which it will be used to generate revenues (useful life). (The salvage

value is an estimate of the value of the asset at the time it will be sold

or disposed of; it may be zero or even negative. Salvage value is also

known as scrap value or residual value.) The company will then chargethe same amount to depreciation each year over that period, until the

value shown for the asset has reduced from the original cost to the

salvage value.

Written down value method: Suppose a business has an asset

with $1,000 original cost, $100 salvage value, and 5 years of

useful life. First, the straight-line depreciation rate would be 1/5,

i.e. 20% per year. Under the double-declining-balance method,

double that rate, i.e. 40% depreciation rate would be used.


11/11

,

Example of Depreciation with Straight line method:Depreciation

expense

Accumulated depreciation

at year-end

Book value

at year-end

(original cost) 17,000

3,000 3,000 14,000

3,000 6,000 11,000

3,000 9,000 8,000

3,000 12,000 5,000

3,000 15,000 (scrap value) 2,000

A vehicle that depreciates over 5 years is purchased at a cost of 17,000

and will have a salvage value of 2000. Then this vehicle will depreciate at

3,000 per year, i.e. (17-2)/5 = 3. This table illustrates the straight-line

method of depreciation. Book value at the beginning of the first year of

depreciation is the original cost of the asset. At any time book value equals

original cost minus accumulated depreciation.

We have calculated the book value with the formula given below,

Book value = original cost accumulated depreciation

Then, Book value at the end of year becomes book value at the beginning

of next year. The asset is depreciated until the book value equals scrap

value.

Documents

The Need and Objective of Accounting Standards an IFRS