An Empirical Study on Compliance of Accounting Standard-2 in India

K M Jagannath and K Nanjegowda

The IUP Journal of Accounting Research and Audit Practices, 2007, vol. VI, issue 3, 53-63

Abstract: Inventory plays a significant role in financial statements due to its significant influence on working capital. Methods of valuing and costing of inventory vary between different businesses, and even between different undertakings in the same trade or industry. This has necessitated the promulgation of Accounting Standard-2 (AS 2). This paper is primarily concerned with examining the extent of compliance of AS 2 in case of inventory valuation and disclosure of costing formula applied, and also to measure the level of harmonization. This study, highlights the importance of inventory, and performs an empirical study of annual reports of manufacturing companies in India. For a comparative analysis, the annual reports, for the years 1997 and 2004, of 100 manufacturing companies in India that are randomly selected, formed the basis for collating the data. It was noted that irrespective of regulations, cent percent compliance is not achieved even when AS 2 is mandatory, but the harmonization level has increased slightly.

Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjar:v:06:y:2007:i:3:p:53-63

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