How accounting standards r formulated (All you need to know about)
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How accounting standards r formulated
The Institute of chartered accountants of India constituted the accounting standards board in 1997. The accounting standards board is the apex body for forming the accounting standards in India.
Accounting standards board (ASB) is comprising of representatives of industry, various departments of government and regulatory authorities, financial institutions and academic & professional bodies.Industry is represented on the ASB by their associations like ASSOCHAM ,CII and FICCI etc.
The Accounting standards setting process is an iterative process which includes the following steps:
- 1. Identification of the broad areas by the ASB for formulating the Accounting standards.
- 2. Constitution of study groups by the ASB for preparing the preliminary drafts.
- 3. Consideration of preliminary drafts prepared by the study group by the ASB.
- 4. Circulation of the drafts among the council members of the ICAI and some specific outside bodies such as standing conference of public enterprises , Indian banks association,CII, SEBI ,CAG, DCA.
- 5. Meeting with representatives of specified outside bodies to ascertain their views on the drafts of the proposed Accounting Standard.
- 6. Finalization of the exposure draft of the proposed Accounting Standards on the basis of comments received and discussion with the representatives of specified outside bodies.
- 7. Issuance of the exposure draft inviting public comments.
- 8. Consideration of the comments received and finalization of the drafts accounting standards for submission to the council of the ICAI for its consideration and approval for issuance.
- 9. Consideration of the drafts Accounting standards by the council of the institute and if found necessary ,modifications of the drafts in consultation with ASB.
- 10. The accounting standards so finalized ,is issued under the authority of the council.
Members of Accounting standards board (ASB)
- Elected Members of council of ICAI
- Members Appointed as nominee by ICAWAI, ICSI
- Govt. Nominee
- RBI, SEBI Nominee
- Nominee from Industry (FICCI)
However the accounting standards prepared and issued by the ICAI were mandatory only for its members who, while discharging their audit functions ,were required to examine whether the said standards of accounting were complied with.
Today in pursuance of the statutory mandate provided under the companies act 1956, the central government prescribes accounting standards in consultation with the national advisory committee on Accounting standards (NACAS), established under section 210A of companies act. NACAS a body of experts including representatives of various regulatory bodies and government agencies has been engaged in the exercise of examining accounting standards prepared by ICAI for use by indian corporate entities , since its constitution in 2001.