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Indian GAAP Complete Guide


Indian GAAP Complete Guide

Indian GAAP : Indian gaap is nothing but a set of accounting standards that every company operating in India has to follow when reporting its financial results. Generally Acceptable Accounting Standards differ for each country as they incorporate policies and procedures that have to be followed for financial disclosures as per the standards set in each country! ICAI is the body in India that has set the Accounting standards(Indian Accounting Standards) that need to be followed while financial reporting, all CAs, its members, are an integral part of the corporate in India have the responsibility to report and furnish the financial results as per the set standards. So Indian Accounting Standards are termed as Indian Gaap. While US has its own set of accounting Standards termed as US Gaap; a non-US company when presenting its financial results in US has to follow US Gaap. This helps in that all companies follow an uniform procedure in financial disclosures which are widely acceptable and followed in the country.

Indian GAAP Complete Guide

Indian GAAP : The cumulative amount of the change is included in the income statement for the period in which the change is made except as specified in certain standards (transitional provision) where the change during the transition period resulting from adoption of the standard has to be adjusted against opening retained earnings and the impact disclosed.Where a change in accounting policy has a material effect in the current period, the amount by which any item in the financial statements is affected by such change should also be disclosed to the extent ascertainable. Where such an amount is not ascertainable this fact should be indicated.

Indian GAAP : In Indian GAAP Measurement of derivative instruments and hedging activities are  Foreign exchange contracts held for trading or speculative purposes are carried at fair value, with gains and losses recognised in the income statement.In the absence of specific guidance, equity options are carried at the lower of cost or market value.There is no specific guidance on hedge accounting since Accounting Standard 30 is not mandatory. However, requirements of AS 30 with respect to hedge accounting are largely similar to that of IAS 39.

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

Indian GAAP Complete Guide

Indian GAAP :  Indian GAAP  how to affected the financial results of the individually .The summary does not purport to be complete and is subject and qualified in its entirety by reference to the pronouncements of the International Accounting Standards Board (IASB), and  with the pronouncements of the Indian accounting profession.Indian GAAP that could have a significant effect on profit attributable to parent company shareholders for the year ended 31 December 2012 and 31 December 2011 and total parent company shareholders’ equity as at the same date. Indian GAAP, nor undertaken a reconciliation of IFRS and Indian GAAP financial statements. Indian GAAP has some roles and regulation of following this points:

Indian GAAP  pronouncements of the International Accounting Standards management process.

  • Changes in accounting policy
  • Functional and presentation currency
  • Consolidation
  • Consolidation of Special Purpose Entities
  • Business combinations
  • Goodwill
  • Acquired and internally generated intangible assets
  • Property, plant and equipment
  • Recognition and measurement of financial instruments
  • Measurement of derivative instruments and hedging activities
  • Disclosure of Notional
  • Impairment of financial assets
  • Available-for-sale assets
  • Derecognition of financial assets
  • Liabilities and equity
  • Provisions for liabilities and charges
  • Pension obligations
  • Share-based compensation
  • Deferred taxation
  • Interest income and expense
  • Dividends

     Recommended read : Basic Aspects of International Taxation

Indian GAAP Complete Guide

Indian GAAP : Treatment of a business combination depends on whether the acquired entity is held as a subsidiary, whether it is an amalgamation or whether it is an acquisition of a business. For an entity acquired and held as a subsidiary, the business combination is accounted for as an acquisition. The assets and liabilities acquired are incorporated at their existing carrying amounts. For an amalgamation of an entity, either pooling of interests or acquisition accounting may be used. The assets and liabilities amalgamated are incorporated at their existing carrying amounts or, alternatively, if acquisition accounting is adopted, the consideration can be allocated to individual identifiable assets (which may include intangible assets) and liabilities on the basis of their fair values.

Indian GAAP:  Adjustments to the value of acquired or amalgamated balances are not permitted after initial recognition. Any excess of acquirer’s interest in the net fair values of acquirer’s identifiable assets is recognised as capital reserve, which is neither amortised nor available for distribution to shareholders. However, in case of an amalgamation accounted under the purchase method, the fair value of intangible assets with no active market is reduced to the extent of capital reserve, if any, arising on the amalgamation. Minority interests arising on the acquisition of a subsidiary are recognised at their share of the historical book value.

 Recommended read : IFRS in India Beginning of A New Journey

Requires investments to be categorised as follows:

  • Current investments, which are those readily realisable and intended to be held for less than one year, are carried at the lower of cost and fair value, with changes in fair value taken directly to profit or loss;
  • Long-term investments, which are those investments not classified as current, are carried at cost unless there is a permanent diminution in value, in which case a provision for diminution is required to be made by the entity.
  • For investments, Reserve Banking India regulations require similar classifications to IFRS, but the classification criteria and measurement requirements differ from those set out in IFRS.
  • Financial liabilities are usually carried at cost.
  • There is no ability to designate instruments at fair value.

Indian GAAP – Key Features

  • Comprehensive guide for financial Statement item-wise accounting and reporting guidance
  • It provides detailed Topic wise Commentary & Analysis
  • It also includes a comprehensive Disclosure Checklists for all the AS ensuring no disclosure is overlooked while finalising the accounts.
  • All the changes flowing from the requirements of Companies Act, 2013, are listed.
  • Detailed guidance with examples on Depreciation and Consolidated Financial Statements as per Companies Act, 2013
  •  EAC opinions collated as per topics for ease of reference.
  • It provides finalisation of accounts both for accounting as well as income tax purposes.
  • It provides numerous practical issues faced while finalisation of the accounts, Industry specific guidance notes.
  • It also provides Illustrative Financial Statements and Suggested Accounting Policies

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Indian GAAP Complete Guide

Indian GAAP : In India, financial reporting requirement has undergone a significant shift over the past few years. Given the wide range of regulations which presently cover the financial reporting process in India, it can be extremely challenging for finance professionals in the corporate sector to keep track of all these pronouncements.

KPMG in India is pleased to announce its ‘Refresher training program on Indian GAAP’ for Indian corporate. The program is designed to provide working finance professionals with an insight into some of the practical issues faced while preparing and analyzing financial statements under Indian GAAP.

Program highlights

  • The content of the program is customized based on specific requirements
  • The 3-day training program covers accounting standards, guidance notes, recent EAC opinions and other accounting pronouncements relevant for your entity
  • Provides an overview of some of the practical issues commonly faced by entities operating in your sector
  • Covers AS 30 and AS 31 which are permitted to be adopted by corporates in India
  • The training will be conducted by experienced professionals from the KPMG Accounting Advisory Services team. They are regularly involved in advisory engagements involving application of Indian GAAP/IFRS/US GAAP.

Indian GAAP Complete Guide

Indian GAAP : Large companies in India have fewer than two years to change the way they account from Indian GAAP to Ind AS, a set of financial standards converged with IFRS. These changes place India at the centre of high quality financial reporting – an important change given India’s huge role in the globalised world. The new standards focus on the substance and risk and reward of underlying transactions and are predicted to result in accounting that more closely reflects the business rational and true economics of the transaction.

From April 2016, Indian companies worth 500 crore INR will have to use Ind AS in their financial reporting. In April 2017, companies worth 250 crore INR will follow. These companies will no longer be allowed to use Indian GAAP – nor will they be able to use IFRS to prepare their accounts.

Indian GAAP : The volume and breadth of differences between Indian GAAP and Ind AS is enormous, and the impact will vary by industry – and for each company. Businesses, therefore, will have to prepare for extensive data requirements demanded by this type of reporting and will have to set aside considerable time for the effort of transition.

The new standards mark a push towards the increased use of fair value driven accounting and will require adoption of appropriate accounting policies to limit volatility.

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The famous five  Indian GAAP Complete Guide

There are five areas that are likely to require more attention than others guides:

  • Revenue recognition: this is already one of the most important financial statement measures for preparers and users. Where Indian GAAP was less clear, Ind AS will provide comprehensive principles for recognising revenue, making the value of contracts with customers much clearer
  • Financial instruments: experts in India dismiss the contention that only financial institutions will feel the impact of this standard, saying instead that it will be very wide-ranging. India will be the first of adopt this IFRS converged standard – other countries using IFRS will do so in 2018, so there is high visibility for Indian companies here. The use of fair value in recording of financial instruments is set to increase
  • Consolidation: there are significant changes expected here – not least a more ‘bright line’ test regarding parent control of an entity
  • Business combinations: under Indian GAAP, there was a diversity of practice, resulting in a variety of accounting results depending on the legal form or structure of the acquisition. Ind AS fixes this and looks beyond the legal form of the transaction to the underlying economics
  • Taxes: among other differences, there will be a significant effect on the balance sheet approach. Ind AS takes a much broader tack, and is more likely to result in deferred taxes on more items.

Managing the transition

Experts are warning Indian businesses that they will have to make a great many changes in a short space of time. In their reporting primer, PwC India advise that companies take a three step approach:

  • Identify the differences between Indian GAAP and Ind AS and the industry-specific issues affecting your company; evaluate the training needs of your staff
  • Build a project management team to handle the transition; train staff; look carefully at the most complex areas
  • After the transition and first set of accounts under Ind AS, consider preparing an accounting manual and software for your company; make the relevant changes to your business processes and internal controls

 Recommended read : Ind AS – Indian Accounting Standard Complete Guide

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