Generally Accepted Accounting Principles

Generally accepted accounting principles (GAAP) refer to a common set of accepted accounting principles, standards, and
procedures that business reporting entity must follow when it prepares and presents its nancial statements.

MCA
Accounting Standards (ASs) are written policy documents issued by the Government with the support of other
regulatory bodies e.g., Ministry of Corporate A airs (MCA) issuing Accounting Standards for corporates in consultation
with National Financial Reporting Authority (NFRA) covering the following aspects of accounting transaction or events in
the nancial statements:
are
• recognition;
• measurement;
what
Q advant8 uniformity
• presentation; and the
benefits
• disclosure. whatare thedifferent areas or
a covered
ofAS
AS by
Imparab disclosures

STANDARDS SETTING PROCESS

21141 77
The Institute of Chartered Accountants of India (ICAI), being a premier ac counting body in the country, took upon itself the
leadership role by constituting the Accounting Standards Board (ASB) in 1977. The ICAI has taken signi cant initiatives for
the issuance of Accounting Standards to ensure that the standard- setting process is fully consultative and transparent. The
ASB considered the International Accounting Standards (IASs)/International Financial Reporting Standards (IFRSs) while
framing Accounting Standards (ASs) in India and tried to integrate them, in the light of the applicable laws, customs, usages
and business environment in the country. The composition of ASB includes representatives of industries, associations of
industries (namely, ASSOCHAM, CII, FICCI), regulators, academicians, government departments, etc. Although ASB is a body
constituted by the Council of the ICAI, it (ASB) is independent in the formulation of accounting standards. NFRA recommend
these standards to the MCA. MCA has to spell out the accounting standards applicable for companies in India.

Q
HOW MANY ACCOUNTING STANDARDS?
MCO
The Institute of Chartered Accountants of India has, so far, issued 29
Accounting Standards. However, AS 6 on ‘Depreciation Accounting’
has been withdrawn on revision of AS 10 ‘Property, Plant and
Equipment and AS 8 on ‘Accounting for Research and Development’
has been withdrawn consequent to the issuance of
AS 26 on ‘Intangible Assets’.
Thus e ectively, there are 27 Accounting Standards at present. The
‘Accounting Standards’ issued by the Accounting Standards Board
establish standards which have to be complied by the business entities
so that the nancial statements are prepared in accordance with GAAP.
NEED FOR CONVERGENCE TOWARDS GLOBAL STANDARDS
Companies (Accounting Standards) Rules, 2021, has replaced Companies (Accounting Standards) Rules, 2006, (as amended
from time to time) noti ed by the Central Government and Accounting Standards issued by the ICAI. The Companies
(Accounting Standards) Rules, 2021 will apply to accounting periods beginning on or after April 1, 2021. The last decade has
witnessed a sea change in the global economic scenario. The emergence of trans-national corporations in search of money,
not only for fuelling growth, but to sustain on-going activities has necessitated raising of capital from all parts of the world,
cutting across frontiers. Few key aspects which required the need for convergence are as under:
1. Raising funds from international markets
2. Comparability of Financial Statements Mcd 1991 LPS
3. Uniformity, Comparability Transparency etc
4. Global Investment

INTERNATIONAL ACCOUNTING STANDARD BOARD (IASB)

With a view of achieving the objective of setting global standards, the London based group namely the International
Accounting Standards Committee (IASC), responsible for developing International Accounting Standards (IAS), was
established in June, 1973. It is presently known as International Accounting Standards Board (IASB), The IASC comprises the
professional accountancy bodies of over 75 countries (including the ICAI). Primarily, the IASC was established, in the public
interest, to formulate and publish, IASs to be followed in the preparation and presentation of nancial statements. IASs were
issued to promote acceptance and observance of IASs worldwide. The members of IASC undertook a responsibility to support
the standards developed by IASC and to propagate those standards in their respective countries.

INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) AS GLOBAL STANDARDS Mco

standards
IEEE Indas convergence of
Intentions
FEF IFRS IAS

IFRIC InternationalFinancial Reporting

Interpretations committee

standardIndustrial committee

BECOMING IFRS COMPLIANT

Any country can become IFRS compliant either by adoption process or by convergence process.

As it is implement phase wise

consider these as the base prepare whole new

set
of standards which are in line with IFRS
 Q what are the benefits reasons
for becoming IFRS compliant

WHAT ARE CARVE OUTS/INS IN IND AS?

Imp Q can come
The Government of India in consultation with the ICAI decided to converge and not to adopt IFRS issued by the IASB. The
decision of convergence rather than adoption was taken after the detailed analysis of IFRS requirements and extensive
discussion with various stakeholders.
Accordingly, while formulating Ind AS, e orts have been made to keep these Standards, as far as possible, in line
with the corresponding IAS/IFRS and departures have been made where considered absolutely essential. These
changes have been made considering various factors, such as:

➢ Terminology di erences: Various terminology related changes have been made to make it consistent
with the terminology used in law, e.g., ‘statement of pro t and loss’ in place of ‘statement of comprehensive income’ (SOCI)
and ‘balance sheet’ in place of ‘statement of nancial position’(SOFP).

➢ Removal of options in accounting principles and practices: Removal of options in accounting principles and practices
in Ind AS vis-a-vis IFRS, have been made to maintain consistency and comparability of the nancial statements to
be prepared by following Ind AS. However, these changes will not result into carve outs.

➢ Di erence in economic environment: Certain changes have been made considering the economic environment of the
country, which is di erent as compared to the economic environment presumed to be in existence by IFRS. These
di erences are due to di erences in economic conditions prevailing in India. These di erences which are in
deviation to the accounting principles and practices stated in IFRS, are commonly known as ‘Carve-outs’.
Additional guidance given in Ind AS over and above what is given in IFRS, is termed as ‘Carve in’.

CONVERGENCE TO IFRS IN INDIA

In the scenario of globalisation, India cannot isolate itself from the accounting developments taking place worldwide. In India,
so far as the ICAI, NFRA and various regulators such as SEBI and Reserve Bank of India (RBI) are concerned, the aim is to
comply with the IFRS to the extent possible with the objective to formulate sound nancial reporting standards for the purpose
of preparing globally accepted nancial statements. The ICAI, being a member of the International Federation of Accountants
(IFAC), considered the IFRS and tried to integrate them, to the extent possible, in the light of the laws, customs, practices and
business environment prevailing in India.
WHAT ARE INDIAN ACCOUNTING STANDARDS (IND AS)?
Ind AS are IFRS converged standards issued by the Central Government of India under the supervision and control of ASB of
ICAI and in consultation with NFRA. NFRA recommends these standards to the MCA. MCA has to spell out the accounting
standards applicable for companies in India. Ind AS are named and numbered in the same way as the corresponding IAS.
However, for Ind AS corresponding to IFRS, one need to add 100 to the IFRS number e g. for IFRS 1 corresponding Ind AS
number is 101

IFRS C Ind AS 101 116

Ind as is the 2ⁿᵈ set of A S In India IAS Ind As 1 41
Ind as is Applicable to companies only
Ind As came into effect from 1 4 15 phase wise

Roadmap of Indas Important can expect a Q

11412015
voluntary basis
1 4 2016 Phase I
Mandatory basis only for co
1 All Listed companies a net worth of 500 crores
2 All unlisted compare Lith th a Networth of 500 crores
3 Subsidiaries Associates Joint ventures of the above companies
1 4 2017 Phase II mandatory basis only for co
1 All listed companies
2 All unlisted companies with Networth 250 crores
3 Subsidiaries Associates
a
of
Joint ventures of the above companies

1 4 2018
mandatory Phase I for Banks WBFC's Insurance to
excluding RRB's G co op Banks
1 All Listed Enterprises with a Networth of 500 crores
2 All unlisted Enterprises with a Networth of 500 crores
3 Subsidiaries Associates Joint ventures of the above companies
 1 4 2019
mandatory Phase II for Banks NB FC's Insurance to
excluding RRB's
1 All Listed Enterprises
2 All unlisted Enterprises with a Networth 250 crores
Subsidiaries Associates Joint ventures
of
3
of the above companies
Banks Insurance
companies through Notifications provided
by MCA RBI IR DAI are exempted from applicability
of IndAs
untill
further Notice Which means they will adopt As only
voluntary application of Ind As is not applicable for Banks NBFC's
Insurance co they will follow only as per Roadmap
co is in the process Listing on any stock Exchange
Even
if a
of
in or outside India will be covered under the Roadmap

Ind As is irrevocable i e once applied shall be applicable for all

the future periods

co listed on SME Index BSE SME are not required to follow Ind AS

Networth can be ve

Yes
Accumulated Losses Equity
Ltd has a Networth of E 560 crores
will Ind As apply to it Itd is listed on NSE from 2018 19

Phase I 1 4 2016 not applicable as ve networth

Phase
I InaTap Titiisted Even if
is
Networth ve