Accounting Standards (AS)
Accounting Standards provide the framework and norms to be followed in accounting so that the financial statements of different enterprises become comparable. It is necessary to standardise the accounting principles to ensure consistency, comparability, adequacy and reliability of financial reporting.
In the words of Kohler, “Accounting standards are codes of conduct imposed by customs, law or professional bodies for the benefit of public accountants and accountants generally”
Thus, Accounting Standards are written policy documents issued by the expert accounting body or by government or other regulatory body covering the aspects of recognition, measurement, treatment, presentation and disclosure of accounting transactions and events in the financial statements.
The need for accounting standards is as follows:
i. To promote better understanding of financial statements
ii. To help accountants to follow uniform procedures and practices
iii. To facilitate meaningful comparison of financial statements of two or more entities.
iv. To enhance reliability of financial statements
v. To meet the legal requirements effectively