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US GAAP
Established by Financial Accounting Standard Board(FASB)
It provides principles for
1)Financial accounting
2)Management accounting
3)Internal revenue
US GAAP , INDIAN GAAP AND
ACCOUNTING STANDARDS
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IASINTERNATIONAL ACCOUNTING STANDARDS
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A set of international accounting and reporting
standards that will help to harmonize company
financial information, improve the transparency of
accounting, and ensure that investors receive more
accurate and consistent reports.
DEFINITION
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Statements ofInternational Accounting Standards are issued bythe Board of the International Accounting Standards Committee(IASC) between 1973 and 2001
Objective of the IASC:
further harmonization of accounting practices through theformulation of accounting standards and to promote theirworldwide acceptance.
IASB founded on April 1, 2001 is the successor of the IASC
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It is responsible for developing the IFRS, and promoting
the use and application of these standards.
40 International Accounting Standards (IASs) to date
covering a range of topics.
It has also issued a Framework for the Preparation and
Presentation ofFinancial Statements.
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Benefits
Investors and analysts - enhanced comparability of
financial statements.
Multinational corporations
Stock exchanges.
developing or other countries
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Accounting Standards in India
AS1: Disclosure of Accounting Policies
Going Concern
Consistency
Accrual
Accounting standards vis--vis accounting estimates
AS2: Valuation of Inventories
AS3: Cash Flow Statements
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AS4: Contingencies and Events occurring after
Balance Sheet Date
AS5: Net Profit or Loss for the Period, Prior
Period Items and Changes in Accounting Policies
AS6: Depreciation Accounting
AS7: Accounting for Construction Contracts
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AS8: Accounting for Research and Development
AS9: Revenue Recognition
AS10: Accounting for fixed asset Revalued amount substituted for historical cost of fixed
assets
The method adopted to compute revalued amount
The nature of indices used The year of any appraisal made, and whether external
value was involved
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AS11: The effects of changes in Foreign
Exchange Rates
AS12: Accounting for Government Grants
AS13: Accounting for Investment
AS14: Accounting for Amalgamations
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AS15: Accounting for Retirement Benefits
AS16: Borrowing Cost
AS17: Segment Reporting
AS18: Related Party Disclosure
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AS19: Leases
AS20: Earnings Per Share
AS21: Consolidated Financial Statements
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AS22: Accounting for Taxes on Income
AS23: Accounting for Investments inAssociates in ConsolidatedFinancial Statements
AS24: Discontinuing Operations AS25: Interim Financial Reporting
AS26: Intangible Assets
AS27: Financial Reporting of Interest inJoint Ventures
AS28: Impairment of Assets
AS29: Provisions, Contingent Liabilitiesand Contingent Assets
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Comparison between Indian GAAP And US
GAAP
Particulars Indian GAAP US GAAP
Balance Sheet Conforms to statute and captionsare in the following order :
--Equity and reserves
--Debt--Fixed assets
--Investments
--Net current assets
--Deferred expenditure and
--Accumulated losses
Required only for the current year
with the prior year comparatives.
Balance sheet captions are
presented in order of liquidity
starting with the most liquid
assets, cash..Also requires disclosure of
movements in stockholders' equity,
including the number of shares
outstanding for all years presented.
Balance Sheet Does not need segregation ofcurrent and non-current
portions of assets and
liabilities.
Segregation necessary
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Particulars Indian GAAP US GAAP
Cash Flow
Statement
Mandatory only for listed
companies and companies meeting
certain turnover conditions
Mandatory for all entities.
Depreciation Depreciation is charged at statutoryrates, which may be higher
than that computed
considering the useful of
assets.
Depreciation is charged based on
the, useful lives of assets.
Deferred
revenue
expenditure
Deferral is not generally permitted. Expenses, such as preoperative
expenditure, restructuring
costs and the costs of
voluntary retirement schemes
are generally amortized over a
period of 3-5 years.
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Particulars Indian GAAP US GAAP
Dividends Dividends are reflected in the financialstatements of the year to which they
Relate even if proposed or approved
after
the year end.
Dividends are accounted for when
approved by the Board/shareholders.
If
the approval is after the year end, the
dividend is not considered as a
subsequent event to adjust the
financials.
R & D Costs R&D costs may be capitalized if thecriteria of technical feasibility of
the product, resource availability
and existence of market, are met
Expensed when incurred (with the
exception of development
costs in, specialized
industries). Purchased R&Dmay be capitalized if it has
alternative future use.
Inventory
valuation
(year end)
Carried at the lower of costs and- net
realizable value.
Carried at the lower of costs or
replacement costs.
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HARMONIZATION
Harmonization of accounting standards implies
the process of ensuring that the GAAP are
formulated , aligned and updated tointernational best practices with suitable
modifications and fine tuning considering the
domestic conditions.
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Obstacles
Difficulties in the
development of
the standards
Difficulties in
enforcement of
the standards
Other
difficulties
1.Provincialism.
2.Different economic
social environment.
3.Diverse accounting
practices.
4.Gap between
developed and
developing countries.
1.Tax laws.
2.Disclosure laws.
3.Existence of local
laws.
4.Competition among
the internal standard.
5.Negative corporate
attitude.
1.Lack of
representation in intl.
bodies.
2.Bias by developedcountries.
3.Lack of political
and local recognition
of IASB.
4.Political pressure.
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BENEFITS
Ensures reliable and high quality financial reporting and disclosure.
Proves to be crucial in the economic and financial development of a
country.
Systematic review and evaluation of performance of M.N.Cs
.
Comparison of the performance of a company against its domestic
and international peers.
Creditworthiness of a corporate house on the intl. level increases
when its accounting data are presented in a more reliable , realistic
and demanding structure.
An organization can access any capital market in the world.