Accounting Standards are written statements of uniform accounting rules and guidelines, which is to be followed while preparing and presenting the financial statements. Various business entities prepare their accounts in their own way because of management policy or accountants have different opinions on various practices. If, in this way, different entities adopt different policies for the same accounting matter, accounts do not remain comparable and useful conclusions cannot be drawn from such accounts.
Therefore, to bring uniformity in preparation and presentation of financial statements, attempts are made at the international. and national level to formulate and issue accounting standards. For this purpose, in the year 1973 International Accounting Standards Committee (IASC) was set up.
On 1st April 2001, International Accounting Standards Board (IASB) took over the responsibility for setting International Accounting Standards. Now, preparation is on in India also for applying IFRS and ICAI has started issuing Indian Accounting Standards Compliant with IFRS.
In the initial years, sometimes, issued accounting standards are recommendatory for entities and are made mandatory gradually after some time. However, accounting standards are not rigid. When business environment or laws change, the accounting standards are revised. The objectives of setting accounting standards is to bring uniformity in accounting policies and practices and to ensure transparency, consistency and comparability.
