• Main Difference among IFRS, Indian GAAP and US GAAP

     

    Sl No.

    Category

    Accounting Standards

    Main Points

    1 Accounting Basis IFRS Subsequent to initial recognition most of the assets and liabilities like property, plant, equipment, investment, derivatives etc are based on fair value and not on historical cost basis.
    Indian GAAP Indian GAAP emphasis on historical cost with an exception to fixed assets which may be revalued.
    U.S GAAP Like IFRS most of the assets/liabilities are valued at fair value with certain exception like property, plant, investments, provisions, intangible assets which are not permitted to be measured at fair value under U.S GAAP.
    2 Consolidated Financial Statements IFRS Entity with at least one subsidiary must present consolidated financial statement unless specific criteria are met.
    Indian GAAP All entities with at least one subsidiary must prepare consolidated financial statement and there is no exemption at all.
    U.S GAAP Indian GAAP does not specify entities that are required to present consolidated financial statements. The standard is required to be followed if consolidated statements are presented.
    3 Balance Sheet IFRS Balance sheet need not to be presented in prescribed format, only certain items to be presented on the face of balance sheet.
    Indian GAAP Companies Act, 1956 gives the format in which the balance sheet needs to be updated. For Banking and Insurance format are prescribed by relevant acts.
    U.S GAAP Unlike IFRS, US GAAP does not contain requirement to present a classified balance sheet .Here SEC regulations prescribe the format and certain minimum line item.
    4 Income Statement IFRS IFRS Require certain item to be presented on the face of the income statement, there is no prescribed format.
    Indian GAAP Though no format is prescribed, but Companies Act 1956 gives a list of items which must be disclosed in P&L Account.
    U.S GAAP SEC regulation prescribed the format and certain minimum line item disclosure for SEC registrants.
    For Non SEC registrants there is some guidance on presentations.
    5 Comparative information IFRS Comparative information is required for the preceding year only.
    Indian GAAP One Year comparative information is required.
    U.S GAAP US GAAP does not require comparative information. However, SEC registrants are required to present balance sheets as of the end of current and prior reporting periods.
    6 Cash Flow Statement IFRS An entity having a subsidiary must present CFS unless specific criteria are met.
    Separate Financial statements of parent that represent CFS are not required.
    Indian GAAP There is no mandatory requirement under Companies Act, 1956 for an entity to present CFS. Accounting Standard also Do not mandate.
    U.S GAAP There is no exemption from preparing CFS for parent entity.
    An entity must prepare CFS when it had at least one subsidiary at any time during current reporting period.
    7 Revenue Recognition IFRS 1. Revenue recognition is based on one single standard which contains general principles that are applied to different types of transactions.
    2. In a sale of good transaction, revenue is recognized when the seller transfers the significant risk and rewards of ownership to the buyer.
    Indian GAAP 1. Revenue recognition is based on one single standard which contains general principles that are applied to different types of transactions.
    2. In a sale of good transaction, Indian GAAP recognizes revenue when the seller transfers the property in goods to the buyer. There are some subtle differences in application.
    U.S GAAP 1. Extensive guidance on revenue recognition specific to industry and transactions are available.
    2. Same as IFRS, however detailed criteria underlying these principles are different in U.S GAAP.
    8 Extra-ordinary items IFRS It’s prohibited and not to be disclosed in the financial statement.
    Indian GAAP Like U.S GAAP it has to be reported.
    U.S GAAP It has to be reported in the financial statement.
    9 True and Fair presentation IFRS The overriding requirement of IFRS is for financial statements to give a fair presentation.
    Indian GAAP The Companies Act 1985 requires Financial Statement to give true and fair view of state of affairs and its P& L Account. The Act also requires compliance with Accounting Standards .
    U.S GAAP The objective of U.S GAAP is fair presentation in accordance with U.S GAAP, which is more restrictive than the requirement under IFRS.
    10 Share Based Payments IFRS 1. Cash-settled share-based payments are within the scope of the share based payment standard. However there is no explicit guidance when the liabilities are settled by a shareholder or another group entity.
    2. Share-based payment to non-employees generally are measured at the date(s) that the goods are received or services are rendered, based on the fair value of the goods or services received.
    Indian GAAP 1. Guidance given in the guidance note is same as IFRS. However, there is no specific guidance under the SEBI guidelines.
    2. There is no specific guidance under Indian GAAP.
    U.S GAAP 1. Liabilities classified (cash settled) share –based payments are within the scope of the share-based payment standard even if settled by another group entity or a shareholder.
    2. Share-based payments to non-employees generally are measured at the measured at the earlier of the performance and the performance commitment date, based on the fair value of the instrument issued.
    11 Deferred Tax Calculation IFRS 1. A deferred tax liability/asset is not recognized if it arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither accounting profit nor taxable profit.
    2. Deferred tax is measured based on rates and tax laws that are enacted or substantively enacted at the reporting date.
    Indian GAAP 1. It is accounted as a permanent difference under Indian GAAP
    2. Deferred tax is measured based on rates and tax laws that are enacted or substantively enacted at the reporting date.
    U.S GAAP 1. There is no exemption from recognizing a deferred tax liability/asset for the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction affects neither accounting profit nor taxable profit.
    2. Deferred tax is measured based on rates and tax laws that are enacted at the reporting date.
    12 Asset Accounting IFRS 1. Assets are initially recognized at cost and then measured at fair value. All items in the same class are revalued at the same time and revaluations are kept up to date.
    2. If an item of a property has different components with different depreciation rates, each component are depreciated separately.
    Indian GAAP 1. Valuation principle is same as IFRS but revaluation of entire class of assets is not mandatory.
    2. Component accounting is not mandatory.
    U.S GAAP 1. Initial valuation is at historical cost and revaluation of fixed asset is not permitted.
    2. Component accounting is not mandatory.
    13 Foreign currency IFRS Measures assets, liabilities, expenses and incomes at functional currency. Functional currency is different from local currency and it is the currency of the primary economic environment in which the entity operates.
    Indian GAAP No concept of functional currency and entities has to report their financial statements in Indian rupees.
    U.S GAAP Same as IFRS.
    14 Minority Interest IFRS Minority interests are classified as equity in balance sheet but are presented separately from shareholders equity.
    Indian GAAP Disclosed separately from liability and equity of the parent shareholders.
    U.S GAAP It’s presented as long term liability or under equity in Balance Sheet.

    IFRS-India GAAP-US GAAP Difference

    IFRS-India GAAP-US GAAP Difference

    IFRS-India GAAP-US GAAP Difference-2

    IFRS-India GAAP-US GAAP Difference_2

    Source: http://www.ifrs.org/Home.htm

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