Accounting Standards are the rules that govern how financial statements are prepared. A recognised accounting body issues them so that every company reports on the same basis.
They cover both how you record transactions and what you must disclose alongside the numbers.
In India, Accounting Standards are issued by the Institute of Chartered Accountants of India (ICAI) and notified by the Ministry of Corporate Affairs (MCA) under the Companies (Accounting Standards) Rules. These standards guide the preparation and presentation of financial statements for entities to which they apply.
What are Accounting Standards?
Accounting Standards are formal rules and guidelines used to prepare and present financial statements in a consistent, transparent, and comparable manner. They define how businesses should record, measure, disclose, and report financial transactions such as revenue, inventory, taxes, assets, liabilities, and cash flows.
| Question | Answer |
|---|---|
| Meaning | Accounting Standards are rules and guidelines for preparing and presenting financial statements. |
| Issued by | The Institute of Chartered Accountants of India (ICAI) and notified by the Ministry of Corporate Affairs (MCA) in India. |
| Purpose | To ensure uniform, reliable, transparent, and comparable financial reporting. |
| Used by | Companies, accountants, auditors, investors, lenders, regulators, and other stakeholders. |
| Examples | AS 1 – Disclosure of Accounting Policies, AS 2 – Valuation of Inventories, AS 3 – Cash Flow Statements, AS 10 – Property, Plant and Equipment, AS 11 – Effects of Changes in Foreign Exchange Rates, AS 22 – Accounting for Taxes on Income, AS 29 – Provisions, Contingent Liabilities and Contingent Assets. |
Mandatory vs. Non‑Mandatory Standards
Accounting Standards are commonly referred to from AS 1 to AS 29, while AS 30, AS 31, and AS 32 relating to financial instruments were withdrawn. Applicability may vary depending on the entity type and regulatory framework.
List of (Mandatory) Accounting Standards in detail
Below are the 27 standards currently in force, as issued by the ICAI and notified by the Ministry of Corporate Affairs. Preparers, auditors and other stakeholders all work to these.
|
Standard |
Name |
What it Covers |
|
AS 1 |
Disclosure of Accounting Policies |
Significant accounting policies used in financial statements |
|
AS 2 |
Valuation of Inventories |
Inventory valuation and net realizable value |
|
AS 3 |
Cash Flow Statements |
Operating, investing, and financing cash flows |
|
AS 10 |
Property, Plant and Equipment |
Recognition and accounting treatment of fixed assets |
|
AS 11 |
Foreign Exchange Rates |
Accounting for foreign currency transactions |
|
AS 22 |
Taxes on Income |
Accounting treatment of income taxes |
|
AS 29 |
Provisions, Contingent Liabilities and Contingent Assets |
Recognition and disclosure of provisions and contingencies |
- Policies related to accounting disclosure (AS 1)
This standard deals with the disclosure of significant accounting policies which are followed in preparing and presenting financial statements.
- Valuation of Inventories (AS 2)
AS 2 sets the value at which you carry inventory in your financial statements. It covers how to work out the cost of inventory, and when to write that cost down to net realisable value.
- Cash Flow Statements (AS 3)
AS 3 governs how you report movements in cash and cash equivalents. The result is the cash flow statement, which splits the period's cash flows into operating, investing and financing activities. - Contingencies and Events Occurring After Balance Sheet Date (AS 4)
This Standard deals with the treatment of contingencies and events occurring after the balance sheet date.
- Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies (AS 5)
AS 5 tells you how to present profit or loss from ordinary activities, and how to handle four things that sit outside it: extraordinary items, prior period items, changes in accounting estimates, and changes in accounting policies.
- Construction Contracts (AS 7)
This standard prescribes the accounting for construction contracts in the financial statements of contractors.
- Revenue Recognition (AS 9)
AS 9 sets the timing - when revenue enters your profit and loss account. It applies to revenue from ordinary activities: sale of goods, rendering of services, interest, royalties and dividends.
- Property, Plant and Equipment (AS 10)
AS 10 covers the accounting treatment for property, plant and equipment (PPE) - recognition, measurement, depreciation and derecognition. It absorbed the former AS 6 on depreciation.
- The Effects of Changes in Foreign Exchange Rates (AS 11)
AS 11 covers foreign currency transactions and foreign operations. It answers two questions: which exchange rate to use, and how to record the effect of rate movements in your accounts.
- Government Grants (AS 12)
AS 12 covers accounting for government grants. You may see these called subsidies, cash incentives or duty drawbacks.
- Accounting for Investments (AS 13)
This standard deals with accounting for investments in the financial statements of enterprises and related disclosure requirements.
- Accounting for Amalgamations (AS 14)
This standard deals with accounting for amalgamations and the treatment of any resultant goodwill or reserves.
- Employee Benefits (AS 15)
The objective of this standard is to prescribe the accounting treatment and disclosure for employee benefits in the books of an employer except for employee share-based payments. It does not deal with accounting and reporting by employee benefit plans.
- Borrowing Costs (AS 16)
This standard should be applied in accounting for borrowing costs. It does not deal with the actual or imputed cost of owners’ equity, including preference share capital not classified as a liability.
- Reporting on financial segments (AS 17)
The objective of this standard is to establish principles for reporting financial information for different types of segments, products, services and enterprise products and the different geographical areas in which it operates.
- Disclosure of related party transactions (AS 18)
This standard should be applied in reporting related party transactions between a reporting enterprise. The standard applies to the financial statements of each reporting enterprise and also to the consolidated financial statements presented by a holding company.
- Accounting policies and disclosure on Lease transactions (AS 19)
The objective of this standard is to prescribe the appropriate accounting policies and disclosures in relation to finance leases and operating leases.
- Per Share Earnings or Earnings per share (AS 20)
AS 20 prescribes principles for the determination and presentation of earnings per share which will improve the comparison of performance among different enterprises for the same accounting period and among different accounting periods for the same enterprise.
- Preparation and Presentation of Consolidated Financial Statements (AS 21)
The objective of this standard is to lay down principles and procedures for the preparation and presentation of consolidated financial statements. Consolidated financial statements are designed to present financial information about a parent and its subsidiaries as a single economic entity.
This is done to show the economic resources controlled by the entity as a whole, obligations of the group and results the group achieves with its resources.
- Accounting for Taxes on Income (AS 22)
The objective of this Standard is to prescribe the accounting treatment of taxes on income since the taxable income may be significantly different from the income displayed in financial statements due to many reasons, posing problems in matching of taxes against revenue for a period.
- Accounting for Investments in Associates (AS 23)
This standard should be applied in accounting for investments in associates in the preparation and presentation of consolidated Financial Statements (CFS) by an investor.
- Discontinuing Operations (AS 24)
The objective of AS 24 is to establish principles for reporting information about discontinuing operations. This helps the users of financial statements to make an estimate of an enterprise’s cash flows, earnings-generating capacity, and financial position by segregating information about discontinuing operations and continuing operations. This accounting standard applies to all discontinuing operations of an enterprise.
- Interim Financial Reporting (AS 25)
This standard applies if an entity is required or elects to publish an interim financial report. The prime objective of this standard is to prescribe the minimum content of an interim financial report. This standard also prescribes the principles for the recognition and measurement of financial statements for an interim period.
- Intangible Assets (AS 26)
AS 26 prescribes the accounting treatment for intangible assets. Intangible assets refer to non-monetary assets which are identifiable, without physical substance, held for use in the production or supply of goods, services, administrative purposes, and so on.
- Joint Ventures reporting of interest in Financial statements (AS 27)
The objective of AS 27 is to set out the principles and procedures for accounting for interests in joint ventures and reporting venture assets, liabilities, income and expenses in the financial statements of ventures and investors.
- Impairment of Assets (AS 28)
The objective of AS 28 is to prescribe the procedures that an enterprise applies to ensure that its assets are carried at no more than their recoverable amount.
The asset can be reported as impaired if its carrying amount exceeds the amount to be recovered through the use or sale of the asset and it requires business entities to recognise an impairment loss in such cases.
- Contingent Liabilities and Contingent Assets and Provisions (AS 29)
The objective of AS 29 is to ensure that appropriate recognition criteria and measurement bases are applied to provisions and contingent liabilities. This ensures that sufficient information is disclosed in the notes to the financial statements which enable users to understand their nature, timing, and amount. The objective here is also to lay down appropriate accounting for contingent assets.
Withdrawn accounting standards
The ICAI withdrew the following three standards. They were issued but never brought into force:
AS 30 – Financial Instruments: Recognition and Measurement
AS 31 – Financial Instruments: Presentation
AS 32 – Financial Instruments: Disclosures
How to Apply AS 1 – Disclose Accounting Policies (Step‑by‑Step)
- Identify all significant accounting policies used in the preparation of financial statements.
- Document each policy in a clear, concise paragraph (e.g., inventory valuation method, revenue recognition criteria).
- Place the policies in the "Notes to Accounts", grouped together in one place rather than scattered across individual notes.
- Update the note whenever a policy change occurs and disclose the effect of the change on the current period.
Comparison: AS vs. Ind AS vs. IFRS
AS are Indian accounting standards used by certain entities under Indian GAAP, while Ind AS are accounting standards converged with IFRS and applicable to specified classes of companies. IFRS are global financial reporting standards issued by the International Accounting Standards Board.
ICAI also has a separate Compendium of Indian Accounting Standards for 2025–2026, which shows that Ind AS is a distinct and current standards framework.
| Aspect | AS (Accounting Standards) | Ind AS (Indian Accounting Standards converged with IFRS) | IFRS |
|---|---|---|---|
| Regulatory Body | ICAI & MCA | ICAI, MCA & RBI (for banks) | IASB |
| Scope | Companies not required to apply Ind AS | Listed companies, large unlisted, and certain banks | Globally applicable |
| Principle‑Based vs. Rule‑Based | More rule‑based | Principle‑based, IFRS‑aligned | Principle‑based |
| Key Differences |
Simpler recognition and measurement rules; fewer fair-value requirements |
Fair value used more widely; substance-over-form emphasis; extensive disclosures | Broadly the same as Ind AS, with limited carve-outs for Indian conditions |
Accounting standards followed – Across the globe
Indonesia
Indonesia's standards come from the DSAK, the Financial Accounting Standards Board within the Indonesian Institute of Accountants (IAI). Both public and private companies must follow them.
Kenya
The financial statements must comply with International Financial Reporting Standards (IFRS). ICPAK (Institute of Certified Public Accountants of Kenya) also requires that all audits are conducted in accordance with International Standards on Auditing (ISA).
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