Similarities and Differences Between Indian GAAP Vs US GAAP


Similarities and Differences Between Indian GAAP Vs US GAAP 

Indian GAAP Vs US GAAP :  Comparison between Indian GAAP, IFRS and US GAAP’ is to help readers identify the significant differences and similarities between Indian GAAP, IFRS, as issued by the IASB, and US GAAP. This publication primarily focuses only on recognition and measurement principles and certain presentation requirements. This publication includes only those key similarities and differences that in our experience are more commonly encountered in practice in India.

Recommended Read :  Basic Aspects of International Taxation

Indian GAAP Vs US GAAP – Similarities and Differences Between Indian and Us GAAP

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Indian GAAP Vs US GAAP : Indian GAAP considered in this publication comprises of Accounting Standards notified by the MCA, Schedule VI to the Companies Act, 1956 and selected Guidance Notes issued by the Institute of Chartered Accountants of India (ICAI) applicable to companies other than SMEs for the financial year ending on March 31, 2014. This publication considers only US GAAP standards that are mandatory for the financial year ending on March 31, 2014; standards issued but not yet effective or permitting early adoption have not been considered.

This publication does not address industry-specific guidance for industries such as financial institutions including banks, not-for-profit organisations and retirement benefit plans. In particular, the following IFRS and corresponding Indian GAAP and US GAAP guidance have not been included in this publication due to their specialized nature:

Recommended Read : IFRS in India Beginning of A New Journey

Indian GAAP and US GAAP specialized nature:

• IAS 26, Accounting and Reporting by Retirement Benefit Plans

• IAS 41, Agriculture

• IFRS 4, Insurance Contracts

• IFRS 6, Exploration for and Evaluation of Mineral Resources

• IFRIC 12, Service concession arrangements

• IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine

 Recommended Read : Ind AS Applicability – Complete details for quick reference

Indian GAAP Vs US GAAP – Similarities and Differences Between Indian and Us GAAP

Indian GAAP Vs US GAAP  : “Multinational companies are increasingly looking at the Indian market to grow their business, as India continues to be committed to adopting highest standards of corporate governance and financial reporting. IFRS is once again back in the news with India looking at converging to this global financial reporting framework in the near future. Therefore, it is imperative that accountants, auditors, investors and other stakeholders are aware of the international standards in order to keep pace. I am confident that this publication by Grant Thornton India LLP, will serve as a concise ready reference for everyone to navigate through the significant differences and similarities between Indian GAAP, IFRS and US GAAP.”

 Recommended Read :

Indian GAAP Vs US GAAP – Similarities and Differences Between Indian and Us GAAP

Subjects

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Indian GAAP

Subjects

                                                                                                 Accounting framework
Historical costUses historical cost, but property, plant and equipment may be revalued to fair value.Certain derivatives are carried at fair value.No comprehensive guidance on derivatives and biological assets.No revaluations except for certain types of financial instruments
First-time adoption of accounting frameworksSimilar to IFRSSimilar to IFRS; rarely used in practice.
Fair presentation overrideSimilar to US GAAP.First-time adoption of US GAAP requires retrospective application
                                                                                                   Financial statements
Components of financial statementsSingle-entity parent company (standalone) two years’ balance sheets, income statements, cash flow statements, and accounting policies and notes. Public listed company: Additionally are required to prepare consolidated financial statements along with the standalone financial statementsSimilar to IFRS, except three years required for SEC registrants (public companies) for all statements except balance sheet. Specific  accommodations in certain circumstances for foreign private issuers that may offer relief from the three-year requirement
Balance sheet Accounting standards do not prescribe a particular format; certain items must be presented on the face of the balance sheet.

Formats are prescribed by the Companies Act and other industry regulations like banking, insurance, etc.

Entities may present either a classified or non- classified balance sheet. Items on the face of the balance sheet are generally presented in decreasing order of liquidity
Income StatementDoes not prescribe a standard format; but certain income and expenditure items are disclosed in accordance with accounting standards and the Companies ActPresent as either a single-step or multiple-step format.Expenditures are presented by function.US public companies .
cash flow statement -format and methodSimilar to IFRS. However, indirect method is required for listed companies and direct method for insurance companies.Similar headings to IFRS, but more specific guidance for items included in each category. Direct or indirect method is used; SEC encourages the direct method.
                                                                                                      Business combinations
Types No comprehensive accounting standard on business combinations.

All business combinations are acquisition; except uniting of interests method is used in certain amalgamations when all the specified conditions are met. Accounting would defer for following:

 

· Similar to IFRS.

Purchase method –values on acquisition For an entity acquired and held as a subsidiary, the assets acquired and liabilities assumed are incorporated at their existing carrying amounts for consolidation purposes

On amalgamation, they may be incorporated at their existing carrying amounts or, alternatively, the consideration is allocated to individual identifiable assets and liabilities at their fair values. However, a court order approving  an amalgamation may provide different and/or additional accounting entries.

 

 

Similar to IFRS, except minority interest is stated at pre-acquisition carrying value of net assets, and contingent liabilities of the acquiree are not  recognised at the date of acquisition. Specific rules exist for acquired in- process research and development (generally expensed) and contingent liabilities.

Some restructuring liabilities relating solely to the acquired entity may be recognised if specific criteria about restructuring plans are met.

                                                                                                         Business combinations

Subjects

US GAAP

Indian GAAP

TypesSimilar to IFRS. No comprehensive accounting standard on business combinations.

All business combinations are acquisition; except uniting of interests method is used in certain amalgamations when all the specified conditions are met. Accounting would defer for following:

·    An entity acquired and held as a subsidiary

·    An acquisition by way of amalgamation of entity

·    A business acquisition (assets & liabilities only)

Purchase method –values on acquisition Similar to IFRS, except minority interest is stated at pre-acquisition carrying value of net assets, and contingent liabilities of the acquiree are not  recognised at the date of acquisition. Specific rules exist for acquired in- process research and development (generally expensed) and contingent liabilities.

Some restructuring liabilities relating solely to the acquired entity may be recognised if specific criteria about restructuring plans are met.

For an entity acquired and held as a subsidiary, the assets acquired and liabilities assumed are incorporated at their existing carrying amounts for consolidation purposes

On amalgamation, they may be incorporated at their existing carrying amounts or, alternatively, the consideration is allocated to individual identifiable assets and liabilities at their fair values. However, a court order approving  an amalgamation may provide different and/or additional accounting entries.

On business acquisition, they may be incorporated at their fair values or value of surrendered assets.

No separate restructuring provision is recognised on acquisition.

                                                                                                      Revenue recognition
Revenue recognitionSimilar to IFRS in principle, based on four key criteria. Extensive detailed guidance exists for specific types of transactions.Similar to IFRS conceptually, although several differences in detail.
Construction contractsSimilar to IFRS; however, completed  contract method is permitted in rare circumstances.Similar to IFRS.
Multiple-element contractsArrangements with multiple deliverable are divided into separate units of accounting if deliverable  in arrangement meet specified criteria outlined in EITF 00-21. Specific guidance exists for software vendors with multiple-element revenue arrangements.Similar to IFRS.
                                                                                                                   Assets
Acquired intangible assetsSimilar to IFRS, except revaluations are not permitted. Capitalized if recognition criteria are met; all intangibles are amortized over useful life with a rebuttable presumption of not exceeding 10 years.

Revaluations are not permitted.

Internally generated intangible assetsResearch and development costs are expended as incurred. Some software and website development costs are capitalized.Similar to IFRS.
Property, plant and equipmentHistorical cost is used; revaluations are not permitted. Historical cost is used. 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.

Non-current assets held for sale or disposal groupSimilar to IFRS.Similar to IFRS; however there is no requirement to classify and present an asset as held for sale on the face of the balance sheet or in the notes.
                                                                                                                     Liabilities
Provisions – generalSimilar to IFRS, with rules for specific situations such as environmental liabilities, loss contingencies, etc.Similar to IFRS, except that discounting is not permitted.
Provisions – restructuringRecognition of liability based solely on commitment to plan is prohibited. In order to recognise, restructuring plan has to meet the definition of a liability, including certain criteria regarding likelihood that no changes will be made to plan or that plan will be withdrawn.Restructuring provisions is recognised when recognition criteria for provisions are met.
ContingenciesSimilar to IFRS.Similar to IFRS, except that contingent  gains  are neither recognised nor disclosed.

 Recommended Read : Ind AS – Indian Accounting Standard Complete Guide

 Recommended Read : Indian GAAP Complete Guide

Preparing for CA Final? - Must read below
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