Simplified Summary Of Significant Differences between US

GAAP, Indian GAAP and International Accounting

Standards.

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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 Industry specific revenue Revenues are recognized when
Recognition all recognition all
significant risks and rewards of guidelines. Could be different significant risks and rewards of
ownership are transferred or on from ownership are transferred.
a what I-GAAP has recognized.
percentage of completion basis.
No
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,
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
equity other than those arising
from
capital transactions with
owners and
distribution of owners.

3. Correction of Include effect in current year Restate Include cumulative effect in

fundamental errors income comparatives.Adjustments current
Statement. required to be made year income statement.
topreviously For material items, restate
issued financial statements. comparatives.

4.Derivative and other No definitive standard yet. New Gains/losses on hedges of Similar to US GAAP. Except,
financial instrument- standard on financial foreign ineffectiveness of non-
Measurement of instruments: entity investments recognized derivatives
hedges Recognition and Measurement in recognized in equity. 2
of foreign entity is equity. All hedge ineffectiveness
 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. CashFlow Statement Mandatory only for listed
companies and companies meeting
certain turnover conditions.
US GAAP
Unrealized gains/losses on
investment and Foreign currency
translation disclosed as a separate
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
shows all changes or only those
changes in equity
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 carrying
systematic basis. amount may not be recoverable.
No current restriction on frequency
of
valuation.

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

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

13. Priorperiod Prior period items are separately Correction of an error in previously Prior period errors are generally
adjustments disclosed issued corrected
in the current statement of Profit financial statement is recognized in the current financial
and Loss together with their by statements.
nature and restating previously issued However, where the error is of 4
amount in a manner that their financial such
 Particulars Indian GAAP US GAAP IFRS
14. Accounting for Exchange differences on foreign All exchange differences are All exchange differences are
Foreign currency included in included in
Currency Transactions 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 Goodwill is not amortized but Goodwill is amortized to expense
for goodwill is on a
impairment annually. Except for to be tested for impairment systematic basis over its useful life
goodwill 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 Negative goodwill is credited to Negative goodwill is allocated to Negative goodwill that relates to
(i.e. the the reduce expectations of future losses and
excess of the capital reserve account, which is proportionately the value assigned expenses should be recognized as
fairvalue a to income
of netassets acquired component of stockholders equity. non-current assets. Any remaining when the future losses and
over excess expenses are
the aggregate Is considered to be extraordinary recognized. Where it does not
purchase gain. relate to
consideration) 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 5
immediately
charged to income.
 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.
19. Stock Options to Non- No specific guidance
Employees
20. Balance sheet Does not need segregation of current
and non-current portions of assets
and liabilities.
.
21. Stockbased SEBI requires compensation cost
Compensation to
be recognized based on intrinsic
value or fair value. Not
mandatory
for un-listed companies.
22. Investment and Only unrealized depreciation on AFS
Marketable Securities. ( Available-For-Sale ) securities is
recognized in the income statement.
US GAAP
To be provided for and funded
based on acturial valuation.
Significant disclosure
requirements exist. Acturial
gains/losses are amortized.
Complex guidance with respect to
measurement date and timing of
recognition of expense.
Segregation necessary.
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.
Both appreciation and depreciation (
if unrealized ) is recognized as Other
Comprehensive Income. Separate
standard for treatment of cost of
development of computer software.
IFRS
To be provided for and funded
based on acturial valuation.
Significant disclosure
requirements exist. Acturial
gains/losses are amortized.
Disclosures required but, no
guidance on recognition and
measurement.
Disclosed only as part of the
footnotes.
Compensation costs to be
disclosed. Recognition of
compensation costs is not
mandatory.
Similar to US GAAP. Except option
to recognize gains/losses in AFS e
either income statement or equity.
However, the selection is a one-time
option. No guideline under IFRS.
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 Particulars Indian GAAP
23. Segment Specific requirements govern
Information the
format and content of a
reportable
segment and the basis of
identification of a reportable
segment. The information for
disclosure is to be prepared in
conformity with the accounting
standards used for the company
as
a whole.
US GAAP
Disclose revenues, profits and
assets identified by product and
geographically of each
reportable
segment. Segments based on
information reviewed by CODM
(Chief Operating Decision
Maker)
IFRS
Largely similar to US GAAP
requirements however,
mandatory
only for listed companies.
Segment
liabilities are also to be shown.

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

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