Accounting standards are authoritative standards for financial reporting and are the primary source of generally accepted accounting principles (GAAP). Accounting standards specify how transactions and other events are to be recognized, measured, presented and disclosed in financial statements. Currently, there are 27 Accounting standards in total.
Objective of Accounting Standards (AS):
Accounting standards have been introduced with the objective to standardise accounting practices as this will help in comparing the financial statements of different entities falling in the same industry to which such accounting standards are applicable.
Names of Accounting Standards
Benefits of Accounting Standards
- Attains Uniformity in Accounting : Accounting Standards provides rules for standard treatment and recording of transactions. They even have a standard format for financial statements. These are steps in achieving uniformity in accounting methods.
- Improves Reliability of Financial Statements : There are many stakeholders of a company and they rely on the financial statements for their information. Many of these stakeholders base their decisions on the data provided by these financial statements.
- Prevents Frauds and Accounting Manipulations : Accounting Standards lay down the accounting principles and methodologies that all entities must follow. One outcome of this is that the management of an entity cannot manipulate with financial data.
- Assists Auditors : The accounting standards lay down all the accounting policies, rules, regulations, etc. in a written format. If an auditor checks that the policies have been correctly followed he can be assured that the financial statements are true and fair.
- Comparability : The users of the financial statements can analyze and compare the financial performances of various companies before taking any decisions.