Accounting Standard setting process in India – IPCC Group 1 (Paper 1)

ICAI, the premier (most important) accounting body in India, has constituted the Accounting Standards Board(ASB) in 1977. Accounting Standard Setting and Issuing procedure is initiated by the ICAI and it is fully

• Consultative (Advising) and
• Transparent

In the Standard Setting process ASB will consider the following International Standards while drafting the Standard.

1. International Accounting Standards (IAS)
2. International Financial Reporting Standards (IFRS)

And finally ICAI will incorporate them in our

• Applicable Laws,
• Customs,
• Usages & Business Environment.

Accounting Standard Board includes Representatives of Industries (ASSOCHAM, CII, FICCI), Regulators, Academicians, and Others.

Council of ICAI doesn’t have any power to amend the Draft of the Accounting Standard formulated by the ASB without its consent. Hence, ASB has independent power to formulate the Accounting Standard.

ASB will follow certain procedure, while setting up the Accounting Standards and the procedure of the Standard Setting will be as follows.

1. Identificationof the area where the Accounting Standard to be formulated or amended as of today accounting needs of the Industry.
2. Based on the Identification areas or subject, it will prepare a Proposed Accounting Standard.
3. Based on the Proposed Accounting Standard, ASB will constitute Study Groups, which will prepare the Preliminary Draft that includes
4. Objective & Scope of Proposed Accounting Standard.
5. Definition of the Terms used in the Standard.
6. Recognition & Measurement of Accounting Principles, and where such principles are applicable.
7. Presentation and disclosure requirements of the Accounting Standard.
8. The Preliminary Draft prepared by the Study Group will be deliberated (carefully consider) by the ASB.
9. The Reviewed Draft will be circulated to the following bodies for comments.
10. Members of ICAI
11. And Other Specified Outside Bodies such as
• Department of Company Affairs (DCA)
• Securities and Exchange Board of India (SEBI)
• Comptroller & Auditor General of India (C & AG)
• Central Board of Direct Taxes (CBDT)
• Standing Conference of Public Enterprises (SCOPE) etc.,
12. After circulation a meeting will be held to ascertain the views of the Outside Bodies, on the Preliminary Draft.
13. Exposure Draft will be issued in public and the comments of the public will be considered.
14. After consideration of the public comments Exposure Draft will be forwarded to the Council of ICAI for approval.
15. Council of ICAI will verify the Final Draft if any alteration is to be done then the draft will be modified with the consent of ASB.
16. Finally, the Accounting Standard will be on issued on the specified area where it need was found by the ICAI.