Preparation and presentation of financial statements based on accounting standards usually known as Indian GAAP has emerged as an effective way of harmonizing different accounting practices followed in India. Besides other benefits, Financial Statements prepared on the basis of these Standards are considered to present a true and fair view of financial results of the enterprises. In this article, the various aspects of accounting standards like the advantages, scope, procedure, compliance etc., are discussed, along with their contents and applicability. An Enterprise needs to take care that its financial statements are prepared in accordance with the accounting standards. If the organization is operating globally, statements of various US GAAP are also to be taken care of. These accounting standards are applicable only to the items that are material in nature. Deviation from these accounting standards requires a disclosure in the financial statement along with the impact thereof.

Each business entity prepares financial statements to depict its performance in monetary terms, as either profits or losses. These financial statements are used by various people. While preparing these statements, there are various methods available to an entity for recording such business transactions. Even the preparations of financial statements are not governed by a practice of uniformity for recording transactions by various business entities. These accounting standards have been prepared with a view to harmonize the various accounting practices used in India to prepare financial statements. These standards are also known as Indian Generally Accepted Accounting Principles (GAAP).

The Institute of Chartered Accountants of India (ICAI) being the body responsible for framing accounting standards in India, constituted the Accounting Standard Board in the year 1977. The reason behind framing the ASB was to harmonize the diverse accounting policies and practices that are being used in India. These accounting standards assumed increased importance after 1990's, as globalization throws new challenges to enterprises by exposing them to the best. One of them is that management not only needs to be honest, but also open and transparent to the shareholders, government and stakeholders. The Kumara Manglam Committee Report on Corporate Governance hastened the process of harmonizing and updating Indian Standards with those that are acceptable internationally by highlighting the gaps between them. To keep pace with the new challenges, ICAI has issued about 14 new standards in the last three years. Till date, ASB has issued 29 Standards.

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