GENERAL ACCOUNTING FRAMEWORK: Historical cost: In IFRS accounting framework is based on Historical cost, but intangible assets, property

plant and equipment (PPE) and investment property may be revalued. Derivatives, biological assets and most securities must be revalued. In Indian GAAP accounting is also based upon Historical cost concept, but fixed assets, other than intangibles, may be revalued. Adoption of accounting frameworks first-time: Full retrospective application of all IFRSs effective at the reporting date for an entitys first IFRS financial statements, with some optional exemptions and limited mandatory exceptions. While in Indian GAAP, the accounting standard on Disclosure of Accounting Policies addresses the issue of adoption of accounting policies. Also, particular standards specify the transitional treatment upon the first-time application of those standards FINANCIAL STATEMENTS

Contents of financial statements: In IFRS, Two years balance sheets, income statements, cash-flow statements, changes in equity, accounting policies and notes are required to be maintained. While in Indian GAAP, Two years balance sheets, profit and loss accounts, accounting policies and notes are maintained. Listed entities are required to give their consolidated financial statements and the related notes along with the standalone financial statements. (Financial Statements should also include cash flow statements in certain cases) Balance Sheet: IFRS does not prescribe a particular format; an entity uses a liquidity presentation of assets and liabilities, instead of a current/non-current presentation, only when a liquidity presentation provides more relevant and reliable information. Certain items must be presented on the face of the balance sheet. In Indian GAAP, The Indian Companies Act and other industry-specific laws like

banking, insurance, etc. specify respective formats of balance sheet. Income Statements: IFRS does not prescribe a particular format. However, expenditure must be presented in one of two formats (function or nature). Certain items must be presented on the face of the income statement. In Indian GAAP, the Indian Companies Act does not prescribe a particular format. The Company law and accounting standards however, prescribes certain disclosure norms for income and expenditures. For certain industries, industry specific laws specify formats. Reporting currency: IFRS requires the measurement of profit using the functional currency. Entities may, however, present financial statements in a different currency. In Indian GAAP Schedule VI to the Companies Act, 1956 specifies Indian Rupees as the reporting currency.

Statement of changes in shareholders equity: In IFRS Statement showing capital transactions with owners, the movement in accumulated profit and a reconciliation of all other components of equity. The statement must be presented as a primary statement. In Indian GAAP, Changes in shareholders equity are disclosed by way of a schedule. Statement of recognised gains and losses / other comprehensive income: IFRS provide a statement of recognised gains and losses either as a separate primary statement or highlight it separately in the primary statement of changes in shareholders equity. While Indian GAAP does not prescribed such kind of statements Accounting Practice Differences: There are several areas of difference for accounting practices between Indian GAAP and IFRS. These differences are being shown in following table:

Table 1: Accounting Differences between IFRS Indian GAAP Subject IFRS Special Purposes In IFRS there is entities/organisation provision for s (SPEs) consolidation where the substantial evidence indicates that control is required on SPEs. Non-consolidation of Activities of subsidiaries Dissimilar nature or temporary control are not a justification for nonconsolidation. Combinations of Here all business Business combinations are acquisitions. Indian GAAP No specific guidance is available in Indian GAAP.

Only if acquired and held for resale or there are severe long-term restrictions to transfer funds to the parent. There is no comprehensive accounting standard on business combinations. All business

Uniting of interests It is Prohibited. method

Acquisition intangible assets

of It is capitalising if recognition criteria are met; intangible assets must be amortised over

combinations are acquisition; however, required use of pooling of interests method in certain amalgamations [when all the specified conditions are met]. Here it is Required for certain amalgamations when all the specified conditions are met, else accounted under the purchase method. It is capitalising if recognition criteria are met; intangible assets must be amortised over useful life

useful life. Intangibles assigned an indefinite useful life must not be amortised but reviewed annually for impairment. Revaluations are permitted in rare circumstances. Accounting of plant, Use historical property, and cost or revalued equipment amounts. Regular valuations of entire classes of assets are required when revaluation option is chosen.

with a rebuttable presumption of not exceeding 10 years. Revaluations of such assets are not permitted.

Use historical cost. Revaluations are permitted, however, no requirement on frequency of revaluation. On revaluation, an entire class of assets is revalued, or selection of assets is made on a systematic basis.

Depreciation Depreciation Accounting methods Allocated on a systematic basis to each accounting period over the useful life of the asset.

Deferred taxes

Income Use full provision method (some exceptions) driven by balance sheet temporary differences. Recognise deferred tax assets if recovery is probable.

Methods are similar to IFRS, except where the useful life is shorter than that envisaged under the Companies Act or the relevant statute, the depreciation is computed by applying a higher rate. Recognise tax effect of timing difference as deferred tax asset or liability. Recognise deferred tax assets (a) for entities with tax losses carry forward, if realisation is virtually certain, whereas (b) for entities with no

Fringe benefits tax

Included as part of related expense (fringe benefit) which gives rise to incurrence of the tax. Convertible debt Account for convertible debt on split basis, allocating proceeds between equity and debt Functional currency Currency of primary economic environment in which entity operates. Compensated Provision on absences actual cost to the company basis

tax losses carry forward, if realisation is reasonably certain. A number of other specific differences. Disclosed as a separate item after profit before tax on the face of the income statement. Convertible debt is recognised as a liability based on legal form without any split. Does not define functional currency.

Provision based on actuarial valuation

Preliminary expenses loans Cost Origination

Charged income statement.

Financial liabilities classification

Capitalisation borrowing costs

of

Foreign exchange fluctuation

to Deferred and written off over the period of 5 years. Origination cost Charged to Profit is amortized in and loss account IFRS Mandatory All preference redeemable shares are preference shares classified as are classified as shareholders liabilities. funds. It is permitted, This is but not required compulsory when for qualifying relates to the assets. construction of certain assets. Under IAS such Indian GAAP gains or losses requires that any are required to be profit/loss arising expensed on the restatement of foreign exchange liabilities incurred for the acquisition of imported fixed assets as a result of change in

Impairment of long IAS require that lived assets assets be reviewed for impairment and impairment losses recognized in the accounts

Leasehold Land

Disclosed as prepaid assets and accounting treatment is similar to operating leases. Changes in Restate accounting policies comparatives and prior-year opening retained earnings.

exchange rates is capitalized as part of the original cost of the assets. Indian GAAP also has adopted the provisions of IFRS with effect from 1.4 2004 for listed companies and commercial enterprise with a turnover > 50 crores Disclosed as a part of fixed assets.

Include effect in the income statement of the period in which the change is made except as specified in certain standards

Correction of Restatement fundamental errors comparatives mandatory. Deferred Taxes

of is

Use full provision method (some exceptions), driven by balance sheet temporary differences. Recognise deferred tax assets if recovery is probable. Has been in place for a much longer time.

Lease Accounting

where the change resulting from adoption of the standard has to be adjusted against opening retained earnings. Include effect in the current year income statement with appropriate disclosure Deferred tax assets and liabilities should be recognised for all timing differences subject to consideration of prudence in respect of deferred tax assets. Applicable since 2001

Investments: IFRS depends on the classification of investment. If it is held up to maturity of loan or receivable, then carry at amortized cost, otherwise at fair value. Unrealized gains/losses on fair value through profit or loss classification (including trading securities) are recognized in the income statement and on available-forsale investments recognized in equity1. In Indian GAAP long-term investments are recorded at cost (with provision for other than temporary diminution in value) and current investments are recorded at lower of cost or fair value as determined on individual basis or by category of investment but they are not recorded on overall (or global) basis. These differences in the treatment of investment need special attention while convergence of Indian GAAP with IFRS.
1

There is an option in IFRS to classify any financial asset at fair value through profit or loss.

Changes in fair values in respect of such securities are recognized in the income statement. It must be noted that it is an irrevocable option to classify a financial asset at fair value through profit or loss.