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Ifrs vs. Indian Gaap

Ifrs vs. Indian Gaap

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Published by Pankaj

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Published by: Pankaj on Jul 09, 2010
Copyright:Attribution Non-commercial


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IFRS vs. Indian GAAP
There are a number of differences between IFRS and Indian GAAP, andit would be appropriate to understand some of the qualitative as well as procedural differences between the two. An analysis of differences between Indian GAAP and IFRS is given in table.
Table: Indian GAAP vs. IFRS
.ParticularsIndian GAAPIFRS1ConceptualDifferenceIndian Accounting Standards aregenerally rule based and are lessflexible in comparison withIFRS. Regulatory authorities likeSEBI, ROC, RBI, IRDA, etc. play a very important role indefining rules.At various stages IFRS provides scope of  judgement and requiresinformation to be presentedon the basis of substancerather than rules.2Law vs.Standards‘Law overrides standards’ is anaccepted principle in India.Latest example is option given tothe corporates regardingtreatment of foreign exchangefluctuation in AS-11While applying IFRS usage by investor is kept in mindand requirement of law andmanagement takes a back seat.3FairlyPresentedStatementsIndian GAAP has direction inTrue and Fair presentation of financials.IAS allows overriding trueand fair concept in extremecases. Rather the emphasisis on fairly presentedstatements.4PresentationFor companies of schedule VI othe Companies Act, 1956,defines format of balance sheetIAS-1 Presentation of financial statement providesguidelines and overall
and its related statements. For listed companies, Insurancecompanies, Banks, etc., SEBI,IRDA and other regulatoryauthorities also guide as to howthe financials are to be projected.requirements, For exampleit defines certaininformation, which is to be presented on the face of  balance sheet.5ExtraordinaryitemsExtraordinary items are requiredto be separately disclosed inIndian GAAP.There is no provision of  presenting extraordinaryitem, separately.6ReportsGenerally in India, as peschedule IV of the companiesAct, 1956, a business entity isrequired to present the following.
Balance sheet
Profit and loss A/c
 Notes to accountsIn a few cases, cash flowstatement is required to be presented (AS-3), but is notmandatory for all enterprises.IAS-1 require a businessentity to report the financialin the following fivestatements:
Balance sheet
Income Statement
Cash Flow Statement
Statement of changein Equity
 Notes to accounts
Cash Flow statementsare mandatory innature.7DepreciationSchedule XVI of the CompaniesAct, 1956, defines minimum rateof depreciation to be applied bycompany.IAS-16 Property Plant andEquipments allowsmanagement to chargedepreciation, based onuseful life of asset.8RevenuerecognitionAS-9 Revenue Recognition provides an option to use either  proportionate completionIAS 18-Provides thatrevenue can be recognizedwhen risks rewards and
method or completed servicemethod.controls have beentransferred to the buyer.In construction contracts,stage of completion methodcan be applied to recognizerevenue, if reliablevaluation is possible.9First timeadoption No such standard is availableIFRS-1 sets the standard for first time adoption of IFRSin great detail. Previous year comparables are alsorequired to be mentioned.10Valuationof takenover assetsTaken over assets to be valued atcost and not on Fair Value.IFRS 3 BusinessCombinations allows theAssets require Goodwill to be tested for impairment ateach balance sheet date.11GoodwillDoes not require goodwill to betested for impairment at each balance sheet date.IAS-36 Impairment of assets requires Goodwill to be tested for impairment ateach balance sheet date.12ReversalPermitted subject to certainconditions.Once impairment loss isrecognized on goodwill,reversal is not permitted.13Share-basedemployee benefitsAllows Fair Value method, or intrinsic value method. Hence,choice is available here.IAS 19 provides that ashare-based payment toemployees is to be takeninto account, using Fair Value method.14Treasuryshare No such guidance is availableProvides detailed guidelinesfor treasury share

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