ISSN: 2347-3215 Volume 3 Number 5 (May-2015) pp.

127-133
www.ijcrar.com

A Study of International Accounting Standard and Indian Accounting

Standard
Parmanand Barodiya1* and Sonal Saxena2
1
Department of Commerce, Madhav Mahavidyalaya, Gwalior (MP), India
2
Department of Management, Jiwaji University, Gwalior (MP), India

*Corresponding author
KEYWORDS ABSTRACT

International The widespread acceptance of International Accounting Standards

Accounting Standard (IAS)/International Financial Reporting Standards (IFRS) makes it timely to
& Indian examine their technical determinants as well as their implications for the
Accounting accounting profession and the process of accounting harmonization. In this
Standard respect, we suggest that the principles-based approach to the standards and its
inner flexibility enables the application of IAS/IFRS to countries with diverse
accounting traditions and varying institutional conditions. Furthermore, the
principles-based approach involves major changes in the expertise held by
accountants and, hence, in their educational background, training programs,
and in the organizational and business models of accounting firms. Finally,
we submit that the standards set by the IAS/IFRS constitute a step forward in
the process of accounting harmonization, although there is still far to go in the
comparability of accounting measures across countries and regions. In the
paper we discourse to study of International Financial Reporting Standard &
Indian Accounting Standard and understand the procedure for issue of
International Financial Reporting Standard & Indian Accounting Standard.

Introduction

Accounting Standards are used as regulatory transaction in the financial statement.

mechanisms for preparation of financial Objective of accounting standard is to
reports in almost all the countries of the standardize the diverse accounting policies
world. Accounting Standard are written & practices with a view to eliminate to the
policy documents issued by expert extent the non-comparability of financial
accounting body or government or other statements & add the reliability to the
regulatory body covering the aspects of financial statements. The rapid growth of
recognition, measurement, treatment, international trade & Internationalization of
presentation & disclosure of accounting firms create need of global harmonization of

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accounting standards as a company having Reporting Standard & Indian
presence in different countries has to prepare Accounting Standard.
financial reports as per GAAP of the country
where it operates. Under this global business
Research methodology
environment, companies are in need of
common accounting language in the form of
In the present study, descriptive research
harmonized accounting standard across the
design was used. Data has been collected
world. From 1973 to 2000 International
from secondary sources.
Accounting Standard Committee
(IASC) was the body upon which the
Procedures after an IFRS is issued
responsibility was set to issue International
Accounting Standards. In 2001 IASC was
Setting the agenda: The IASB, by
replaced by International Accounting
developing high quality financial reporting
Standards Board (IASB). Since
standards, seeks to address a demand for
then International Accounting Standards
better quality information that is of value to
Board (IASB), based at London - UK is now
those users of financial reports. When
responsible to issue International Financial
deciding whether a proposed agenda item
Reporting Standards
will address users needs the IASB
(IFRS) and International Accounting
considers:
Standards (IAS). IASB is independent body
and consists of members from nine different
a) The relevance to users of the
countries around the globe having variety of
functional backgrounds. In India information and the reliability of
the Institute of Chartered Accountants of information that could be provided,
India (ICAI) has formed Accounting b) Existing guidance available,
Standards Board (ASB) in 1977, upon which c) The possibility of increasing
the responsibility was set to develop convergence,
accounting standards to be issued and d) The quality of the IFRS to be
revised in the country from time to time.
developed,
Though ASB is shaped by ICAI, it is
independent in the formulation of e) Resource constraints.
accounting standards. ASB comprises
members from various fields and To help the IASB in considering its future
organization and it also takes in to agenda, its staff is asked to identify, review
consideration customs, usages and business and raise issues that might warrant the
environment prevailing in the country while IASB s attention. New issues may also arise
formulating the standards. from a change in the IASB s Conceptual
Framework for Financial Reporting. In
Objectives of the study addition, the IASB raises and discusses
potential agenda items in the light of
a) To study of International Financial comments from other standard-setters and
Reporting Standard & Indian other interested parties, the IFRS Advisory
Council and the IFRS Interpretations
Accounting Standard.
Committee, and staff research and other
b) To understand the procedure for recommendations. In making decisions
issue of International Financial regarding its agenda priorities, the IASB
also considers factors related to its

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convergence initiatives with accounting Developing and publishing: the discussion
standard-setters. The IASB s approval to paper a discussion paper is not a mandatory
add agenda items, as well as its decisions on step in the IASB s due process. Normally
their priority, is by a simple majority vote at the IASB publishes a discussion paper as its
an IASB meeting. first publication on any major new topic as a
vehicle to explain the issue and solicit early
Planning the project: When adding an item comment from constituents. If the IASB
to its active agenda, the IASB decides decides to omit this step, it will state its
whether to conduct the project alone or reasons. Typically, a discussion paper
jointly with another standard-setter. Similar includes a comprehensive overview of the
due process is followed under both issue, possible approaches in addressing the
approaches. When considering whether to issue, the preliminary views of its authors or
add an item to its active agenda, the IASB the IASB, and an invitation to comment.
may determine that it meets the criteria to be This approach may differ if another
included in the annual improvements accounting standard-setter develops the
process. The IASB assesses the issue against research paper. Discussion papers may result
criteria such as- either from a research project being
conducted by another accounting standard-
a) Clarifying. setter or as the first stage of an active agenda
b) Correcting. project carried out by the IASB. If research
c) Well defined and sufficiently narrow in has been performed by another accounting
scope that the consequences of the standard-setter, issues related to the
proposed change have been considered. discussion paper are discussed in IASB
d) Completed on a timely basis, all criteria meetings, and publication of such a paper
must be met to qualify for inclusion in requires a simple majority vote by the IASB.
annual improvements. If the discussion paper includes the
preliminary views of other authors, the
Once this assessment is made, the IASB reviews the draft discussion paper to
amendments included in the annual ensure that its analysis is an appropriate
improvements process will follow the same basis on which to invite public comments.
due process as other IASB projects. The For discussion papers on agenda items that
primary objective of the annual are under the IASB s direction, or include
improvements process is to enhance the the IASB s preliminary views, the IASB
quality of IFRSs by amending existing develops the paper or its views on the basis
IFRSs to clarify guidance and wording, or of Analysis drawn from staff research and
correcting for relatively minor unintended recommendations, as well as suggestions
consequences, conflicts or oversights. After made by the IFRS Advisory Council,
considering the nature of the issues and the working groups and accounting standard-
level of interest among constituents, the setters and presentations from invited
IASB may establish a working group at this parties. All discussions of technical issues
stage and a project team for the project will related to the draft paper take place in public
be selected. The project manager draws up a sessions. When the draft is completed and
project plan under the supervision of the the IASB has approved it for publication the
directors of the technical staff and the discussion paper is published to invite public
project team may also include members of comment. The IASB normally allows a
staff from other accounting standard-setters, period of 120 days for comment on a
as deemed appropriate by the IASB.

3
discussion paper, but may allow a longer dissenting IASB members (if any). The
period on major projects (which are those IASB normally allows a period of 120 days
projects involving pervasive or difficult for comment on an exposure draft. If the
conceptual or practical issues). After the matter is exceptionally urgent, the document
comment period has ended the project team is short, and the IASB believes that there is
analyses and summaries the comment letters likely to be a broad consensus on the topic,
for the IASB s consideration. Comment the IASB may consider a comment period of
letters are posted on the IASB s website. In no less than 30 days, but it will set such a
addition, a summary of the comments is short period only after formally requesting
posted on their website as a part of IASB and obtaining prior approval from 75 per
meeting observer notes. If the IASB decides cent of the Trustees. The project team
to explore the issues further, it may seek collects summaries and analyses the
additional comment and suggestions by comments received for the IASB s
conducting field visits, or by arranging deliberation. After the comment period ends,
public hearings and round-table meetings. the IASB reviews the comment letters
received and the results of other
Draft the IFRS: Publication of an exposure consultations. As a means of exploring the
draft is a mandatory step in due process. An issues further, and soliciting further
exposure draft is the IASB s main vehicle comments and suggestions, the IASB may
for consulting the public. Unlike a conduct field visits, or arrange public
discussion paper, an exposure draft sets out hearings and round-table meetings. The
a specific proposal in the form of a proposed IASB is required to consult the IFRS
IFRS (or amendment to an IFRS). The Advisory Council and maintains contact
development of an exposure draft begins with various groups of constituents.
with the IASB considering issues on the
basis of staff research and recommendations, Developing and publishing the standard
as well as comments received on any
discussion paper, and suggestions made by The development of an IFRS is carried out
the IFRS Advisory Council, working groups during IASB meetings, when the IASB
and accounting standard-setters and arising considers the comments received on the
from public education sessions. After exposure draft. Changes from the exposure
resolving issues at its meetings, the IASB draft are posted on the website. After
instructs the staff to draft the exposure draft. resolving issues arising from the exposure
When the draft has been completed, and the draft, the IASB considers whether it should
IASB has balloted on it, with a minimum of expose its revised proposals for public
nine votes necessary to publish an exposure comment, for example by publishing a
draft, the IASB publishes it for public second exposure draft. If the IASB decides
comment. An exposure draft contains an that re-exposure is necessary, the due
invitation to comment on a draft IFRS, or process to be followed is the same as for the
draft amendment to an IFRS, that proposes first exposure draft As it moves towards
requirements on recognition, measurement completing a new IFRS or major
and disclosures. The draft may also include amendment to an IFRS, the IASB prepares a
mandatory application guidance and project summary and feedback statement.
implementation guidance, and will be These give direct feedback to those who
accompanied by a basis for conclusions on submitted comments on the exposure draft
the proposals and the alternative views of identify the most significant matters raised

1
in the comment process and explain how the development of the pronouncement and
IASB responded to those matters. At the consideration of any unexpected costs or
same time, the IASB prepares an analysis of implementation problems encountered. A
the likely effects of the forthcoming IFRS or review may also be prompted by: Changes
major amendment. The analysis will in the financial reporting environment and
therefore attempt to assess the likely effects regulatory requirements, Comments made
of the new IFRS on: by the IFRS Advisory Council, the IFRS
Interpretations Committee, standard-setters
a) The financial statements of those and constituents about the quality of the
applying IFRSs. IFRS.
b) The possible compliance costs for
preparers. Presentation of Financial statement
c) The costs of analysis for users
(including the costs of extracting Companies Act requires preparation of
data.
d) Identifying how the data have been a) Balance Sheet.
measured and adjusting data for the b) Profit & Loss Account.
purposes of including them in, for c) Notes to Accounts
example, a valuation model. d) Statement of Financial Position
e) The comparability of financial (Balance Sheet)
information between reporting e) Income Statement (Profit & Loss
periods for an individual entity and Account)
between different entities in a f) Statement of Changes in Equity
particular reporting period, and (SOCIE)
f) The quality of the financial g) Statement of Cash flows.
information and its usefulness in h) Notes comprising a summary of
assessing the future cash flows of an significant accounting policies & other
entity. explanatory information.
i) Statement of financial position as at
After the standard is issued: After an IFRS the beginning of the earliest comparative
is issued, IASB members and staff hold period when an entity applies an accounting
regular meetings with interested parties, policy retrospectively or makes a
including other standard-setting bodies, to retrospective restatement of items in its
help understand unanticipated issues related financial statements, or when it reclassifies
to the practical implementation and potential items in its financial statement.
impact of its provisions. The IFRS
Foundation also fosters educational Balance sheet: IFRS does not prescribe a
activities to ensure consistency in the particular format of Balance Sheet. A
application of IFRSs. The IASB carries out a current/non-current presentation of assets &
post-implementation review of each new liabilities is used, unless a liquidity
IFRS or major amendment. This is normally presentation provides more relevant &
carried out two years after the new reliable information. Certain minimum items
requirements have become mandatory and are presented on the face of the balance
been implemented. Such reviews are sheet. Indian GAAP also does not prescribe
normally limited to important issues a particular format; certain items must be
identified as contentious during the presented on the face of the balance sheet.

1
Whereas Formats prescribed by the & it should be prepared by using indirect
Companies Act, 1956 & other Industry method & direct method is prescribed for
regulations like banking, insurance etc is insurance companies.
applicable for Indian companies for
presentation of financial statement. Changes in accounting policy: IFRS
prescribes if there is changes in accounting
Income statement: IFRS does not prescribe policy then Comparative year s
format for the income statement. The entity information is restated and the amount of the
should select a method of presenting its adjustment relating to prior period is
expenses by either function or nature; this adjusted against opening balances of
can either be, on the face of the income retained earnings of the earliest prior period
statement, as is encouraged, or in the notes. presented, unless specifically exempted.
Additional disclosure of expenses by nature Under Indian GAAP restatement is not
is required if functional presentation is used. required. The effect of changes is included
IFRS requires, as a minimum presentation of in current year income statement. The
the following items on the face of the impact of change is disclosed.
income statement:
Correction of errors: IFRS prescribes if
a) Revenue. error occurred before the earliest prior
b) Finance costs period presented, the opening balances of
c) Share of post-tax result of associates assets, liabilities and equity for the earliest
and Joint ventures accounted for prior period presented are restated. Whereas,
Indian GAAP prescribes if errors occurred
using the equity method tax expense
then restatement is not required. The effect
d) Profit or loss for the period of correction is included in current year
income statement with separate disclosure.
Statement of Changes in Equity (SOCIE)
Conclusion
Under IFRS Statement of Changes in Equity
(SOCIE) is presented as a primary International financial Reporting Standard
statement. In addition to the items required focuses on quality, reliability & relevancy
to be in SOCIE, it should show capital aspects of the information to all its users all
transactions with owners, the movement in over the globe while setting a new standard.
accumulated profit and a reconciliation of all Harmonization of Accounting Standard is a
other components of equity. Whereas under need to create & develop global economy.
Indian GAAP no separate statement is Harmonisation wills result into true & fair
required. Changes in shareholders equity presentation of financial statement that can
are disclosed in separate schedules of Share be easily accessible to all the potential users
Capital and Reserves & Surplus . including potential investors. IFRS provided
detailed guideline for presentation of
Statement of Cash flows: IFRS requires financial statement & it gives more insights
preparation of cash flow statement no about the financial information of the entity
exemptions for preparation of the same. FRS so that investor can compare it with other
permits the preparation of cash flow entity to find out best investment option. For
statement using either direct or indirect MNC s adoption of IFRS will result into
method the In India as per AS-3 cash flow reduction in the cost of preparation of
statement is mandatory for listed companies

1
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