2/7/2021 Formulation of Accounting Standards in India: Steps Taken by ASB

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Principles and Practice of Accounting > Accounting Standards > Formulation of Accounting Standards in India
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Accounting Standards
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Formulation of Accounting Standards in
India
CONCEPTS

Since 1977 after the government passed a statute, the Accounting Standard
Board (ASB) a committee of the ICAI has been responsible for the
formulation of accounting standards in India. Let us take a brief look at the
functioning of the ASB and the procedure behind the formulation of
accounting standards in India.

Accounting Standard Board

ICAI is the highest accounting body in the country. And the ASB is a
committee of the ICAI. But to ensure maximum transparency and
independence, the ASB is a completely independent body.

The ASB formulates all the accounting standards for the Indian companies.
This process is fully transparent, very thorough and completely independent
of any government involvement. While framing the standards the ASB will
try and incorporate the IFRS and its principles in the Indian standards. While
India does not plan to adopt the IFRS, this process will help the convergence
of the two standards. So the ASB will modify the IFRS to suit the laws,
customs and common usage in the country.

The ASB is composed of various members. There are representatives

of industries like the FICCI and ASSOCHAM. There are also certain
government officials, a few academics, and regulators from various

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2/7/2021 Formulation of Accounting Standards in India: Steps Taken by ASB

departments. The idea is to make the ASB as inclusive and representative as

possible.

Browse more Topics under Accounting Standards

Accounting Standards- Objectives, Benefits, Limitations

Procedure for Formulation of Accounting Standards

Let us take a brief look at the procedure setting process that the ASB follows

First, the ASB will identify areas where the formulation of

accounting standards may be needed

Then the ASB will constitute study groups and panels to discuss and
study the topic at hand. Such panels will prepare a draft of the
standards. The draft normally includes the definition of important
terms, the objective of the standard, its scope, measurement
principles and the representation of said data in
the financial statements.

The ASB then carries out deliberations of the said draft of the
standard. If necessary changes and revisions are made.

Then this preliminary draft is circulated to all concerned authorities.

This will generally include the members of the ICAI, and any other
concerned authority like the Department of Company Affairs (DCA),

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2/7/2021 Formulation of Accounting Standards in India: Steps Taken by ASB

the SEBI, the CBDT, Standing Conference of Public Enterprises

(SCPE), Comptroller and Auditor General of India etc. These
members and departments are invited to give their comments.

Then the ASB arranges meetings with these representatives to discuss

their views and concerns about the draft and its provisions

The exposure draft is then finalized and presented to the public for
their review and comments

The comments by the public on the exposure draft will be reviewed.

Then a final draft will be prepared for the review and consideration of
the ICAI

The Council of the ICAI will then review and consider the final draft
of the standard. If necessary they may suggest a few modifications.

Finally, the Accounting Standard is issued. In the case of standard for

non-corporate entities, the ICAI will issue the standard. And if the
relevant subject relates to a corporate entity the
Central Governmentwill issue the standard.

Solved Question for You

Q: What are the functions of the Accounting Standard Board?

Ans: Some of the functions of the ASB are as follows,

i. Point out the areas for which Accounting Standards should be

developed

ii. Formulate such standards according to the procedure

iii. Review the accounting standards at regular intervals and revise them
if necessary

iv. Provide interpretation and guidance notes from time to time

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2/7/2021 Formulation of Accounting Standards in India: Steps Taken by ASB

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2/7/2021 Formulation of Accounting Standards in India: Steps Taken by ASB

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uttam singh

“Accounting principles are the rules and guidelines that companies must follow when
Guest reporting financial data” comment?

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