Simplified Summary Of Significant Differences between

US GAAP, Indian GAAP and International Accounting

Standards.

CA Parsun Garg

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 Summary Of Significant Differences between US GAAP, Indian GAAP and
International Accounting Standards.

Particulars Indian GAAP US GAAP IFRS

1. Revenue Revenues are recognized when all Industry specific revenue Revenues are recognized when all
Recognition significant risks and rewards of recognition significant risks and rewards of
ownership are transferred or on a guidelines. Could be different from ownership are transferred.
percentage of completion basis. No what I-GAAP has recognized.
detailed industry specific
guidelines.

2. Balance sheet Conforms to statute and captions
are
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, equity other than those arising
including the number of shares
outstanding for all years
presented.
Balance sheet captions are
presented in the inverse order of
liquidity i.e.illiquid items appear
earlier.Requires disclosure of
either
changes in equity or changes in
from
capital transactions with owners
and
distribution of owners.

3. Correction of Include effect in current year Restate comparatives.Adjustments Include cumulative effect in current
fundamental errors income required to be made topreviously year income statement.
Statement. issued financial statements. For material items, restate
comparatives.

4.Derivative and other No definitive standard yet. New Gains/losses on hedges of foreign Similar to US GAAP. Except,
financial instrument- standard on financial instruments: entity investments recognized in ineffectiveness of non-derivatives
Measurement of hedges Recognition and Measurement is equity. All hedge ineffectiveness recognized in equity. 2
of foreign entity presently under formulation. recognize in the income statement.
 Particulars Indian GAAP
5. Comprehensive income No standards, not required.
6. Derivatives and other No definitive standard yet. New
financial Standard on financial instruments:
instruments – Recognition and Measurement is
measurement of presently under formulation.
derivative instruments
and hedging activities.
7. Business Combinations Restricts the use of pooling of
interest method to circumstances
which meet the criteria listed for
an
amalgamation in the nature of a
merger. In all other cases, the
purchase method is used.
8. Cash Flow Statement Mandatory only for listed
companies and companies
meeting
certain turnover conditions.
US GAAP
Unrealized gains/losses on
investment and Foreign currency shows all changes or only those
translation disclosed as a separate changes in equity
component of equity.
Measure derivatives and hedge
instrument at fair value: recognize
changes in fair value in income
statement except for effective
cash
flow hedges, defer in equity
until effect of the underlying
transaction is recognized in the
income statement.
Gains/losses on hedge instrument
used to hedge forecast
transaction,
included in cost of asset/liability.
Only accounted for by the
purchase
method. Several differences can
arise in terms of date of
combination, calculation
Of share value to use for purchase
price, especially if the I-GAAP
method is ‘amalgamation’.
Mandatory for all entities.
IFRS
Option to present a statement that
that did not arise from capital
transactions with owners or
distributions to owners.
Similar to US GAAP. Gains/losses
on hedge instrument used to
hedge
forecast transaction, included in
the
cost of asset/liability ( basis
adjustment ).
Business combinations under IFRS
should be accounted for as an
acquisition (purchase method).
Where an acquirer cannot be
identified then the pooling of
interests method should be
adopted.
Mandatory for all entities.
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 Particulars Indian GAAP US GAAP IFRS
9. Property, Plant and Use historical costs or revalued Revaluations not permitted. Tested Use historical cost or revalued
Equipment amounts. for amounts. .
On revaluation, an entire class of impairment whenever events or On revaluation, an entire class of
assets is changes assets is
revalued, or selection of assets for in circumstances indicate that its revalued.
revaluation is made on a systematic carrying
basis. amount may not be recoverable.
No current restriction on frequency of
valuation.

10. Share Issue Expenses May be accounted for as deferred Expenses are written off when There is no specific requirement
expenses and amortized. incurred under
against proceeds of capital. IFRS.

11. Dividends Dividends are reflected in the Dividends are accounted for when Dividends are classified as a financial
financial approved by the Board/shareholders. liability and are reported in the
statements of the year to which they If income
Relate even if proposed or approved the approval is after the year end, the statement as an expense. If dividends
after dividend is not considered as a are
the year end. subsequent event to adjust the declared subsequent to the balance
financials. sheet
date, it is not recognized as a
liability.

12. Leases Similar to US GAAP but, no Leases are classified as capital and Similar to US except that the criteria
quantitative operating leases as per certain for
thresholds defined. criteria. distinguishing between capital and
Capital leases are included under revenue leases is different.
property, plant and equipment of the
lessor. Lease rentals on operating
leases
are expensed as incurred.
Quantitative
thresholds have been defined.

13. Prior period adjustments Prior period items are separately Correction of an error in previously Prior period errors are generally
disclosed issued corrected
in the current statement of Profit financial statement is recognized by in the current financial statements.
and Loss together with their nature restating previously issued financial However, where the error is of such
and statements. significance that the prior period
amount in a manner that their impact financial
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on statements cannot be considered to
 Particulars Indian GAAP US GAAP IFRS
14. Accounting for Foreign Exchange differences on foreign All exchange differences are included All exchange differences are included
Currency Transactions currency in in
transactions are recognized in the determining net income for the determining net income for the
profit and loss account with the period in which differences arise. period in which differences arise.
exception
that exchange differences related to
the
acquisition of fixed assets adjusted to
the
carrying cost of the relevant fixed
asset.

15. Goodwill Goodwill is capitalized and tested for Goodwill is not amortized but Goodwill is amortized to expense on a
impairment annually. Except for goodwill is systematic basis over its useful life
goodwill to be tested for impairment annually. with a
from amalgamation, which is maximum of twenty years. The
amortized straight
over 3-5 years. line method should be adopted
unless the
use of any other method can be
justified.

16. Negative Goodwill (i.e. Negative goodwill is credited to the Negative goodwill is allocated to Negative goodwill that relates to
the capital reserve account, which is a reduce expectations of future losses and
excess of the fair value component of stockholders’ equity. proportionately the value assigned to expenses should be recognized as
of net assets acquired non-current assets. Any remaining income
over excess when the future losses and expenses
the aggregate purchase Is considered to be extraordinary are
consideration) gain. recognized. Where it does not relate
to
identifiable future losses and
expenses, an
amount not exceeding the fair values
of
the acquired identifiable non-
monetary
Assets should be recognized as
income on
a systematic basis over the remaining
weighted average useful life of such
assets
and the balance, if any immediately
charged to income.
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 Particulars Indian GAAP
18.Pension / Gratuity / Required to be mandatorily
Post provided Based on either actuarial
Retirement Benefits valuation or Contribution to a
defined plan. Follows AS-
15, Acturial gain/losses are
recognized immediately.
US GAAP
To be provided for and funded
based on acturial valuation.
Significant disclosure
requirements exist. Acturial
gains/losses are amortized.
IFRS
To be provided for and funded
based on acturial valuation.
Significant disclosure
requirements exist. Acturial
gains/losses are amortized.

19. Stock Options to Non- No specific guidance Complex guidance with respect to Disclosures required but, no
Employees measurement date and timing of guidance on recognition and
recognition of expense. measurement.

20. Balance sheet Does not need segregation of Segregation necessary. Disclosed only as part of the
current and non-current portions of footnotes.
assets and liabilities.
.

21. Stock based SEBI requires compensation cost to
Compensation be recognized based on intrinsic
value or fair value. Not mandatory
for un-listed companies.
US GAAP had similar rules as what
SEBI later required. However, there
is new standard effective 2005,
which requires fair value to be
expensed for all options.
Compensation costs to be
disclosed. Recognition of
compensation costs is not
mandatory.

22. Investment and Only unrealized depreciation on
Marketable Securities. AFS ( Available-For-Sale ) securities
is
recognized in the income
statement.
Both appreciation and depreciation Similar to US GAAP. Except option
( to recognize gains/losses in AFS e
if unrealized ) is recognized as either income statement or equity.
Other However, the selection is a one-
Comprehensive Income. Separate time
standard for treatment of cost of option. No guideline under IFRS.
development of computer
software.

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 Particulars Indian GAAP US GAAP IFRS
23. Segment Information Specific requirements govern the Disclose revenues, profits and Largely similar to US GAAP
format and content of a reportable assets identified by product and requirements however, mandatory
segment and the basis of geographically of each reportable only for listed companies.
identification of a reportable segment. Segments based on Segment
segment. The information for information reviewed by CODM liabilities are also to be shown.
disclosure is to be prepared in (Chief Operating Decision Maker)
conformity with the accounting
standards used for the company as
a whole.

24. JV ( Jointly controlled Allows proportionate consolidation Generally only uses Equity method Allows either Equity method or
assets or of accounting except certain proportionate consolidation.
corporation ) specified industries such as Oil and
Gas.

25. Research and Deferred where technical or
development commercial feasibility is
costs established
and the enterprise has adequate
resources to enable the product or
process to be marketed.
Research costs can be capitalized Deferred where technical or
and amortized as intangible assets commercial feasibility is
in established
the following cases: and the enterprise has adequate
Research costs related to activities resources to enable the product or
conducted for others, costs unique process to be marketed.
to
extractive industries and cost of
intangibles which have alternative
future uses. All other costs are
Charged to expense as and when
incurred.