What is IASB, FASB, IFRS, Ind AS and US GAAP? with Difference
What is IASB, FASB, IFRS, Ind AS and US GAAP? with Difference. Meaning of IASB, Meaning of FASB, Meaning of IFRS, Ind AS, Meaning of Indian GAAP US GAAP.
Content in this Article
What is IASB, FASB, IFRS, Ind AS and US GAAP?. Every individual performs some kind of economic activity. A salaried person gets salary and spends to buy provisions and clothing, for children’s education, construction of house, etc. A sports club formed by a group of individuals, a business run by an individual or a group of individuals, a local authority like Calcutta Municipal Corporation, Delhi Development Authority, Governments, either Central or State, all are carrying some kind of economic activities.In this article you can find complete details for IASB, FASB, IFRS, Ind AS and US GAAP like - What is IASB and FASB?, What is GAAP?, Is there a difference between GAAP and IASB ?, Difference between Indian and US GAAP, Are IFRS different from US GAAP?, What are Ind AS then?, Difference between Ind AS and IFRS, The Roadmap for implementation of Ind AS etc.IASB is and independent body that was founded on April 1, 2001 in London, as the successor to the International Accounting Standards Committee (IASC).It is established with the objective of developing IFRS. What happened in 2002? In the year 2002, i.e. one year after the establishment of IASB, IASB and FASB signed a MOU to work in close co-operation and to develop transparent and uniform Accounting standards.To have a uniform Accounting standard applicable to all countries, which was due to increase in international trade and size of countries, IASB set a framework of guidelines , known as GAAP or Generally Accepted Accounting Principles that were to be followed by different countries of the world to bring standardization in accounting. It was built to maintain standard of accounting that is transparent and uniform across the world. With companies becoming multinational, uniform accounting standards became all the more necessary to let potential investors compare the performance of a company operating in different countries. Due to the differences in accounting principles of various countries, IASB has admitted that to impose GAAP successfully in all parts of the world is a difficult task that will take years and a final solution will emerge only slowly and with tacit approval of member countries.IASB is is an independent body whereas GAAP refers the set of guidelines that IASB wishes countries to adopt as standard Accounting principles.Recommended ArticlesThe IFRS which are used in more than 110 countries has some differences from US GAAP. IFRS is considered more as a principal based accounting standard in comparison to US GAAP which are more rule based. Some of the differences are mentioned hereunder :There are many differences between Ind AS and IFRS but they shall be discussed in our separate notes on Accounting standards. Thus while giving my notes I shall elaborate the major points about how the standard is different from IFRS. These are also called the carve outs which you can even find in FR Rtp for may’ 15. On, 16th February, 2015 MCA notified Companies Rules, 2015 (pending publication in the official Gazette of India ). These rules specify the Ind AS applicable to specific class of companies and it’s date of applicability. Once a company follows Ind AS it will be required to follow the same for all subsequent financial statements.Voluntary adaptation Companies may voluntarily adopt Ind As for accounting period beginning on or after 1st April 2015 with comparatives for the period ending 31st March 2015. Mandatory AdoptationFor the accounting periods beginning on or after 1st April, 2016Recommended Articles
What is IASB, FASB, IFRS, Ind AS and US GAAP?
What is IASB and FASB?IASB stands for International Accounting Standard Board and FASB stands for Financial Accounting standard board. These two boards are international bodies that have been trying to evolve uniform accounting standards applicable in all countries of the world. FASB is the older body which was established in 1973 and it replaced Committee on Accounting Procedure (CAP) and Accounting Principles Board (APB), which were organs of the American Institute of Certified Chartered Public Accountants. The two bodies IASB and FASB that were earlier working independently are now working in close cooperation with each other so as to achieve the objective of convergence of accounting in different parts of the world to an international standard. Why was the need to replace Committee on Accounting Procedure (CAP) and Accounting Principles Board (APB) ? The main objective for the establishment of FASB was to bring financial reporting in US closer to GAAP for safeguarding the public interest. IASB
What is GAAP?
Is there a difference between GAAP and IASB ?
Difference between Indian and US GAAPWe all know that Indian accounting has undergone lot of changes but still there are big differences between Indian GAAP and US GAAP. Some of them are listed below:
- US GAAP does not follow principle of Conservatism
- There is no prescribed specific presentation requirement in case of US GAAP, as long as they comply with the disclosure requirement of US GAAP, whereas as per Indian GAAP the financial Statements should be as per Schedule III of Company’s Act 2013.
- Under the Company’s Act 2013, Cash flow statements shall be prepared for all companies (including private company) but certain exemption is available to one person Company, Dormant Company and Small Company. This means that for a private company with paid up share capital less than 50 lacs or turnover of less than 2 crore, is not required to prepare Cash Flow statements. But as per US GAAP every company is required to prepare Cash Flow statements for 3 years, for current year and 2 immediately preceding years.
- As per US GAAP effect on change in the method of depreciation is to be given prospectively unlike Indian GAAP which requires retrospective re-computation of depreciation with the difference to be adjusted in the period in which such change is affected.
- As per US GAAP current portion of long term debt shall be recognized as Current liability but such is not in case of Indian GAAP
- In case of US GAAP investment are classified as – Held to maturity, trading security and available for sale and these are further segregated as Current or Non- Current investment on individual basis. But as per Indian GAAP investment are classified as Current, Long Term and Investment in Property.
- As per Indian GAAP, in case if foreign currency transaction, separate treatment is prescribed for integral and non-integral operation. For integral operation exchange difference arising is charged to P/L account while in case of Non – Integral operation the exchange difference is transferred to Foreign Currency Translation Reserve.
- As per Indian GAAP the expenditure incurred during construction of an asset is added to the cost of the asset i.e. such expenditure is capitalized while in case of US GAAP the expenditure incurred during construction period and all other incidental expenditure is divided into two parts a) Direct and b) Indirect. The direct expenditure is capitalized while indirect expenditure is charged to revenue.
- TheInstitute of Chartered Accountants of India (ICAI) frames Accounting Standard which is based on prudence which is in contrast to the US GAAP. US GAAP is "rule oriented", complex and detailed.
- US GAAP does not allow upward revaluation of investment, plant and machinery or equipment.
- As per US GAAP (SFAS 16) while reporting the Prior period Items the adjustments for tax effects are required to be made. Which is not in case of Indian GAAP.
- Goodwill is capitalized and charged to earnings as per Indian GAAP over 5 to 10 years of period but as per US GAAP , goodwill and other intangible assets that have indefinite life are tested for impairment for at least a year. ( As per AS 26 issued by ICAI, If life higher than that prescribed in para63 is taken then it should undergo impairment test to be conducted at the end of every year).
- Under the Indian GAAP( AS 23) , investment in associate companies is initially recorded at Cost using the Equity method whereby the investment is initially recorded at cost, identifying any goodwill/capital reserve arising at the time of acquisition. The carrying amount of the investment is adjusted thereafter for the post acquisition change in the investor’s share of net assets of the investee. The consolidated statement of profit and loss reflects the investor’s share of the results of operations of the investee are carried at cost . Under US GAAP ( SFAS 115) Investments in Associates are accounted under equity method in Group accounts but would be held at cost in the Investor’s own account .
NoteICAI has taken several initiatives under which it has bridged the gap between Indian GAAP and US GAAP. Like when schedule III came it stated that any company having one or more subsidiary is required to prepare consolidated statement with that of it’s subsidiary in the same manner as that of it’s own. This used to be a difference between Indian GAAP and US GAAP. Other measures that bridged the gap were, introduction of Schedule II, introduction of AS-26 (omitting AS-8) etc.
- IFRS An Overview
- IFRS in India
- What is Inflation?
- Non banking financial companies (NBFC)- Complete details
What do you mean by IFRS?IFRS refers to International Financial Reporting Standards. These are the accounting standard that are developed by IASB. These are designed as a common global language for the affairs of the business such that they are understandable and comparable world-wide.
Are IFRS different from US GAAP?
- Acquired Intangible assets are recognized under US GAAP at fair value, while as per IFRS intangible assets shall be recognized at fair value only if they are capable of generating future economic benefit and it’s cost can be measured reliably.
- As per IFRS LIFO is not allowed while accounting for inventory while LIFO is still allowed as per US GAAP. You must be wondering that why does US GAAP allow LIFO ? The answer to this is that during inflationary times, companies can reduce their taxable incomes by using LIFO assumption for inventory, thus resulting in tax savings.
- As per US GAAP once an inventory is written down then any reversal in future is prohibited but in case of IFRS the write down can be reversed.
What are Ind AS then?These are the accounting standards issued by MCA formulated by Accounting Standard Board of ICAI. They are also called converged IFRS. Till date MCA has notified 35 Ind AS but the date of implementation of the same is not yet notified. The main aim in formulating these standards was harmonizing diverse accounting policies and facilitating inter-firm and intra-firm comparison.
Difference between Ind AS and IFRS.
The Roadmap for implementation of Ind AS
- All listed companies or companies in the process of listing it’s securities on any stck exchange and having net worth of 500 crores or more.
- Unlisted companies having net worth if 500 crores or more.
- Holding, subsidiary, joint venture or associate of the listed and unlisted company covered above.
- Comparatives for these financial statements shall be period ending 31st March, 2016 or thereafter.
- Listed company having Net worth of less than 500 crores
- Unlisted companies having Net worth of 250 crore or more but less than 500 crore.
- Holding, subsidiary, joint venture or associate of the listed and unlisted company covered above.
- Comparatives for these financial statements shall be period ending 31st March, 2017 or thereafter.