![]() ![]() Even today the EU country has adopted almost all of the IFRS rules and the US GAAP is also on its way to do the same.Ĭurrently, India has not yet adopted the IFRS for its domestic or international companies. But instead, all accounting board around the world are working towards reducing the points of difference with their GAAP and the IFRS. In reality, we may never see a full convergence. Currently, this convergence process is on hold. The efforts to converge US GAAP and the IFRS have been ongoing since 2002 but has had limited success. However, this will not be an easy process. ![]() It is hoped that eventually, all countries of the world (including the USA) will merge with the IFRS. This will lead to uniformity, ease of comparison, less confusion and better compatibility among nations. As a result, all companies across the world will report their accounts and financial statements following the same rules and regulations. Hence the IFRS was developed, so all nations could adopt one global accounting standard.Ĭurrently around 120 countries globally have started following the IFRS. Also, it poses a problem for Multi-National Companies having branches in many countries. India has the Indian Accounting Standards. The USA, Canada, Australia, UK all have their own GAAPs. These are developed by the independent accounting body based out of London known as the International Accounting Standards Boards (IASB).Īs we know many countries around the world follow their own versions of the GAAP. The IFRS is an international framework for accounting records and financial statements. The name in itself is pretty self-explanatory. International Financial Reporting Standards (IFRS) Let us take a look at some of the important ones. In total there are some 32 Indian Accounting Standards. They are detailed and informative to avoid any confusion or uncertainty. These standards deal with conflicting accounting issues, detailing the accounting treatment, rules, and directives. They are based on and adapted from the GAAP with modifications necessary for the Indian economy. These Accounting Standards are named as well as numbered similarly to the IFRS. Indian Accounting Standards (IAS) are issued by the Institute Of Chartered Accountants of India (ICAI). So all organizations and business units have a uniform, precise and correct financial statements and records. So this means the entire national economy can implement the same standards and can adopt similar accounting terminology. ![]() These accounting standards are implemented in the whole country. The intention is to make sure all companies and organizations follow the same rules for accounting and have the same format for their financial statements. Accounting Standards (AS)Īccounting standards are the rules, regulations, directives etc that are issued by accounting and governing bodies of the world. Accordingly many countries and accounting bodies modify the GAAP rules to suit their industries and economies. Like for example, in USA GAAP rules have been modified by the Financial Accounting Standards Board (FASB). The details and specifications of GAAP will vary according to different geographic locations, industries, accounting body etc. However, there are no universal code or accounting standards. If GAAP rules are being religiously followed then there is a certain level of certainty in the fairness of the financial statements. These principles will ensure that the management is not manipulating accounts to suit their purposes. GAAP will also allow intra-firm and inter-firm comparisons, which help these users take investment decisions.Īnother purpose of imposing GAAP is to ensure that the representation of the financial statement is true and fair. It enables external users of the financial statements to easily decipher and understand the accounts of a company. The purpose of GAAP is to ensure some basic level of consistency in accounting statement of all different organizations. These accounting principles specify certain definitions, the accounting treatment for confusing entries, and even some industry-specific rules and procedures. These are some commonly followed practices of accounting that have found some level of global acceptance. GAAP stands for Generally Accepted Accounting Principles. ![]() Generally Accepted Accounting Principles (GAAP) ![]()
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