Indian Accounting Standards 1 Disclosure of Accounting policies Presented by: Amit Vira () Anjali Jalan (13) Ashish Kaushik (18) Murtuza Kothari (20) Utsav Thakkar ()
Indian IFRS US GAAP /IAS GAAPVarious Accounting Standards
Accounting Standard Board („ASB‟) - 1977 Issued by the Institute of Chartered Accountants of India (ICAI) Objective is to standardize the diverse accounting policies and practices. They are termed as „accounting principles‟.Indian GAAP
IFRS stands for “International Financial Reporting Standards” and includes International Accounting Standards (IASs) until they are replaced. Developed and approved by IASB (International Accounting Standard Board) Principle-based standard rather than rule based.What is IFRS ?
Recognised as Global Reporting Standards National GAAP is becoming rare. Global capital markets become increasingly integrated More than 100 countries such as European Union, Australia, New Zealand and Russia currently permit the use of IFRS in their countries. The SEC has allowed the use of IFRS without reconciliation to US GAAP in the financial reports filed by foreign private issuers, thereby, giving foreign private issuers a choice between IFRS and US GAAPWhy IFRS ?
Increasing growth of international business. Encourage international investing Reduced cost of compliances Increase mobility to professionals Better understanding of financial statements of international companies. Enhance comparability across the globe.Benefits of adopting IFRS
Initial increase in cost due to dual reporting Proper training to ensure uniform understanding and consistent application. Additional cost for modifying the companies IT systems and procedures. Limited pool of trained resource and persons having expert knowledge Differences between Indian GAAP and IFRS may impact business decision / financial performance of an entity.IFRS Challenges
Under US GAAP, detailed framework for pronouncing accounting standards are contained in SFAC- Statement of Financial Accounting Concepts .Total seven SFAC have been issued, out of which SFAC-3 is replaced. SFAC forms the basis of pronouncement of FAS. SFAC is not authoritative GAAP, but can be used if no GAAP exists. There are 6 SFAC in force on Objective , Quality Characteristics, Recognition and measurement, Elements and Cash flow. GAAP /SFAC pronouncement are made by FASB which is not an accounting Body like ICAI. AICPA does not pronounce GAAP. Over 150 FAS announced till date, many of which are amendment / replacement. Separate Accounting Board for Government Companies called GASB.US GAAP
Issued in 1979 by ICAI First ever Accounting Standard Mandatory for all enterprises Deals with the disclosureIntroduction to AS1
IFRS, International Financial Reporting Standards. ◦ Worldwide recognition and usage ◦ AS1 corresponds to IAS 1 and IAS 8 US GAAP, General Acceptable Accounting Practices. ◦ Accepted and practiced only within the USA. ◦ AS1 corresponds to SFAS - 154Corresponding Accounting Standards
Basis for presentation of general purpose financial statements. An entity shall apply this Standard in preparing and presenting general purpose financial statements in accordance with Indian Accounting Standards.Objective and Scope
Heading under which Accounting Standard 1 Policies are stated.Figure: 1
Methods of depreciation, depletion & amortization (Fig. 4) Valuation of Fixed assets (Fig. 5) Treatment of expenditure during construction Treatment of employee benefits (Fig. 6) Conversion or translation of foreign currency items. (Fig. 5) Treatment of Goodwill (Fig. 7)*The above list is not intended to be exhaustiveDiffering Accounting Policies
Methods of Depreciation and AmortizationFigure: 4.
Valuation of Fixed Assets Conversion of foreign currency itemsFigure: 5.
Treatment of Employee Benefits This section is not treated as extraordinary in IAS1.Figure: 6.
Treatment of Goodwill IAS 1 requires earliest possible comparative data available and a restatement of the same in IAS 8Figure: 7.
Substance over Form Prudence Materiality Major ConsiderationsConsideration of Accounting Policies
All Significant accounting policies Any change in the accounting policies If the fundamental accounting assumptions are not followed To be disclosed in one placeDisclosures
Disclosure Disclosed on one place in balance sheet Disclose change in accounting policies Disclose different assumptionsMain Principles
Indian GAAP IAS – 1 US GAAPAccounting Accounting The definition US GAAP usespolicy policy refers to of accounting the term specific policy in IAS is „accounting accounting substantially principles‟ to principles and similar to refer to the methods of Indian GAAP. accounting applying them. policy.Disclosure An entity is An entity is The practice is required to required to same as disclose the disclose the stipulated in accounting accounting IAS. policy at one policy in a place as a part separate of financial component – statements „Notes to accounts‟Source: Indian Accounting Standards – Asish k. BhattacharyaComparison b/w AS1, US GAAP & IFRS
Indian GAAP IFRS US GAAPClassification Fixed Current Currentof Assets Current Non- Current Non- Current Investments Loans & AdvancementsClassification Secured Current Currentof Liabilities Unsecured Non- Current Non- Current Current Liab. & ProvisionsTreasury No Not Mentioned Presented.Stock PresentationShare issue Written off Shown as a Shown as aexpenses against a share deduction in deduction in premium equity section equity section accountChanges in Not Required Required RequiredEquityComparison b/w IGAAP, US GAAP & IFRS
Sources: AS1 brochure by ICAI. Indian Accounting Standards by Asish K. Bhattacharya. Annual Report of Tata Motors 2010. Various Misc. sources off Google, soft copies available.