GAAP

ASB (1977)
IASC
IAS 1 TO IAS 41( during 1973 to 2000)
IASB
IFRS (from April 2001 onwards)
 Generally Accepted
Accounting Principles (GAAP)
Accountants all over the world developed certain rules ,
procedures and conventions. These accounting
procedures and practices are known as GAAP.
.
Generally Accepted Accounting
Principles (GAAP)
• But GAAP permits a number of alternative treatments for the
same item. Therefore there was a need to harmoinise and
standarise the diverse accounting policies and practices.
• Later on International Accounting Standards Committee
(IASC)was established for formulating international accounting
standards .
• These are formulated to convey the accounting language
to all people in the world
Constitution of ASB on 21st April
1977
• The institute of Chartered Accountants of India (ICAI) recognising the
need to harmonise the diverse accounting policies and practices use
in India, constituted the Accounting Standards Board (ASB) on 21st
April 1977
Objectives of ASB
• Suggest the areas in which accounting standards need to be
developed
• Formulate standards to assist ICAI
• To adopt changes in international accounting standards and financial
reporting standards
• To review at regular interval
• To provide time to time interpretation
• To carry out various other functions relating to accounting standards
Functions of ASB
• To formulate Accounting standards
• To adopt the changes in IFRS and IAS
• To review the accounting standards at periodic intervals
Institutions engaged in Accounting
harmonization at global level
• There are some institutions engaged in accounting harmonisation at
global level. Important among them are:
United Nations ,
Europeon Union,
International Accounting standards Foundation,
International Accounting standards Board,
Financial Accounting Standards Board etc,.
Of these the most important are IASB, And FASB.
ACCOUNTING STANDARDS-
MEANING AND EXAMPLE
• Accounting standards are
authoritative standards for financial reporting and are the
primary source of generally accepted accounting principles
(GAAP). Accounting standards specify how transactions and
other events are to be recognized, measured, presented and
disclosed in financial statements.
• Some common examples of accounting standards are
segment reporting, goodwill accounting, an allowable method
for depreciation, business combination, lease classification, a
measure of outstanding share, and revenue recognition.
International Accounting Standards
Board (IASB)
• In April 2001 , under the recommendations made by the Volcker trustees , the IASC
became to be known as IASB. Thus IASC has been reconstituted as the IASB. It began
operations on I st April 2001 when it succeeded the IASC. IASB is an independent
accounting Standard setting body based in LONDON . It has 15 members from 9
countries.
• IASB issues accounting standards in a series of IFRS.
• Series of Accounting standards known as International Accounting Standrads , were
released by the IASC between 1973 and 2000 and were ordered numerically. The
series started with IAS 1 and concluded with IAS 41, in December 2000, at the time
when IASB was established.
• IASB agreed to adopt the set of standards that are issued by the IASC , ie, IAS 1 to IAS
41. But any standards published there after would follow a new series of standards
known as the INTERNATIONAL REPORTING FINANCIAL STANDARDS.
International Accounting Standards
Board (IASB)
• IASB is entrusted with the task of developing international accounting
standards .
• The International Accounting Standards issued by the IASB are known
as IFRS.
• It is the authoritative independent body for establishing and
promoting Financial reporting standards at the global level.
• IASB is committed in developing high quality and global accounting
standards . Such standards provide transparent and comparable
information in general purpose financial statements.
Role and functions of IASB in
developing IFRS
• Creating and developing global Accounting Standards: The primary purpose of IASB is to create and
develop a single set of high quality understandable, enforceable and globally acceptable
international financial reporting standards. Such standards help to give transparent and comparable
information in financial statements as well as in other financial reports.
• Enforcement of Standards: The Accounting standards fixed by the IASB should be made enforceable.
The IASB has the power to enforce the companies to comply with the accounting standards.
• Convergence of Accounting standards; It is the role of IASB to bring about convergence of national
accounting standards and IFRS to high quality , understandable and enforceable accounting
standards.
• Promoting adoption of IFRSs: The IASB place the role of promoting and faciliatating adoption of IFRS
through the convergence of national accounting standards and IFRSs.
• Research on enterprises: IASB conducts in depth research on special matters in connection with
special issues of companies, especially small and medium enterprises. It helps SMEs to follow IFRS in
their financial reporting.
Role and functions of IASB in
developing IFRS……CONTINUES….
• Assuring quality in financial reporting: it’s the duty of IASB to assure quality reporting on a global
screen in the financial reports of corporations.
• Assisting the auditors: IASB assist the auditors in providing opinion relating to financial statement.
• Assisting interested parties: IASB assists the users of financial statements such as investors,
creditors, suppliers, employees etc.
• Exposure drafts: IASB takes the active role of preparing and issuing of IFRSs and exposure drafts.
• Approval of interpretations: the interpretations on the IFRS made by IFRS interpretation committee
should be accepted and approved by IASB
• IASB is taking a leading role in the development of IFRS.
• It plays a vital role in harmonization of accounting policies and practices across the globe.
• IASB provides Uniformity, Understandability, comparability etc in the preparation of financial
statements.
• IASB has a decisive role in the overall economic development of many nations through issuing IFRS
International Accounting Standards
• International Accounting Standards is a set of standards stating how
particular types of transactions and other events should be reflected
in financial statements.
• The IAS are issued by IASB, the board of international accounting
standard committee.
Objectives of International
Accounting Standards
• Formulating Accounting standards:-IAS help to formulate and publish in the
public interest, accounting standards to be observed in the presentation of
financial statements and promote their world wide acceptance and observation.
• Improvement in regulation of Accounting Standards;IAS helps in improvement
and harmonisation of regulation of Accounting Standards and Procedures
relating to the presentation of financial statements.
• Ensure Global Financial Reporting Framework: IAS ensure that the financial
centres of the world use a global financial reporting framework that ensures
effective regulation of financial markets.
• Effective Capital Flow; IAS ensures that the capital markets located in different
jurisdictions create the most effective capital flows that are benefical to
regulators , organisations, and the market as a whole.
List of International Accounting Standards
set up by IASC – IAS 1 to IAS 41
• International Accounting Standards (IASs) were issued by the
antecedent International Accounting Standards Council (IASC), and
endorsed and amended by the International Accounting Standards
Board (IASB). The IASB will also reissue standards in this series where
it considers it appropriate.

• Refer text page number –IV/1.17

International Financial Reporting
Standard(IFRS)

• Accounting standards issued by IASB are known as IFRS

• IFRS are designed as a common global language for business affairs so
that company accounts are understandable and comparable across
international boundaries.
• IFRS are principles-based standards, interpretations and the frame
work adopted by the IASB.
International Financial Reporting
Standard(IFRS)

IFRS INCLUDES

INTERPRETATIONS
IFRS ISSUED IAS ISSUED
MADE BY IFRSIC INTERPRETATIONS
FROM 2001 DURING
ISSUED FROM 2001 MADE BY SIC
ONWARDS 1973-2000
ONWARDS
International Financial Reporting
Standard(IFRS) definition
IFRS may be defined as “a globally recognised set of standards - for the
preparation and reporting of financial statements - by business
entities- and to prescribe the items:-
• that should be recognised as assets, liabilities,income and expenses;
• the methods of measurement of those items;
• the mode of presentation of them in a set of financial statements;
• and the related disclosures about those items.
International Financial Reporting
Standard(IFRS) - FEATURES
• These are global Accounting standards
• These are principle based and not ruled based
• IFRSs are developed and maintained by IASB
• these are issued with the intention of applying those standards across the globe on a consistent basis.
• they ensure high quality transparent reporting that would ensure comparability among the entities
across the globe
• Every standard has a specific structure toensure uniformity and facilitates reading, interpretation and
application.
• under IFRS fixed assets are recorded at current cost.
• under IFRS the assets, liabilities, revenues and expenses are reported in its functional currency which
means the currency of the place where the entity operates.
• IFRS make it compulsory to adopt component accounting. Under Component accounting,
depreciation is not calculated simply on total value of an asset but on the cost of important parts of
the equipment or asset.
Objectives of IFRS
• To develop a single set of high quality, understandable global
accounting standards
• To bring transparancy and high degree of comparability
International Financial Reporting
Standard(IFRS) - need/importance
• Uniformity- IFRS provides single set of accounting standards that would enable internationally
standardize and assure better quality on a global screen.
• IFRS permit international capital to flow more freely.
• IFRS would be benefical to regulators as the complexity and confusion associated with accounting
and reporting are reduced to minimum.
• Financial statements following IFRS give better and cohesive information to the investor.
• IFRS brings about convergence of National Accounting Standards and international Accounting
Standards
• IFRS benefits Accounting professionals by enabling them to sell their services in different parts of
the world(those countries which follow IFRS).
• IFRS stregthen accountabilty by reducing the information gap between the providers of capital and
the people to whom they have entrusted their money.
• IFRS helps to provide high quality transparent and comparable information in financial statements
to help participants in the worlds capital market to make economic decisions.
International Financial Reporting Standard(IFRS) - Assumptions

Assumption of
Going concern Accrual Measuring unit
constant
Assumption Assumption Assumption
Purchasing power

Value of
Life of the
Transactions are Assets are capital would
business is
recorded as and shown in the be adjusted to
infinite,ie, entity
when they occur. balancesheet at price index at
continue to exist
ie, on accrual current or fair the end of
for an indefinite
basis value. each fiancial
period.
year.
Process of setting IFRS
• IFRS are developed through an international consultation process called “due process”.This involves interested
individuals and organisations from around the world. The due process comprises of six stages:
1. Setting the Agenda of various elements of conceptual framework ..
2. Planning the conceptual framework project.
3. Developing and publishing the discussion paper-various elements of the framework are discussed and the
discussion paper is developed. Then this paper is published and circulated among the public.
4. Developing and publishing the exposure draft.- After getting the opinions and views of the public (including
professional bodies, regulatory agencies)an exposure draft is prepared and published.
5. Developing and publishing the standard.- When IASB is satisfied that it has reached a conclusion on the issues
arising from exposure draft, it drafts the IFRS. A preballot draft is reviewed by an external committee (IFRSIC) .
A near final draft is posted on its limited access website for paying subscibers. Finally after due process is
complete, all outstanding issues are resolved, the IFRS is issued.
6. Procedure after a standard is issued- After IFRS is issued, IASB members and staff hold regular meetings with
interested parties, to help understand unanticipated issues related to practical implementation of IFRS.
IASB carries out a post implementation review of each new IFRS or major amendment. Which is normally carried
out 2 years after the new requirement have become mandatory and been implemented.
Conceptual framework for IFRS
Conceptual framework comprises of the theoretical principles which
provide the basis for the development of accounting standards.
Elements of Conceptual framework

qualitiative
elements of recognition
Objectives characteristics
fiancial and
of accounting
statements measurement
information

measuring units of capital

attributes measure maintenance.
Elements of Conceptual Framework
• Objective- The objective of financial statement is “ to provide information about
the financial position, performance and changes in financial position of an
enterprise which is useful to wide range of users in making economic decisions”
• Users- INvestors, employees, lenders, suppliers and other traders , customers,
government and their agencies, public, management and others.
• Underlying assumptions- Accrual basis and going concern
• Qualitative characteristics- Understandability, relevance, materiality, reliability,
faithful representation, neutrality, completeness, prudence and comparability
• Elements of financial statements- Assets, liabilities, equity, income and expense
• Concept of capital maintenance- both financia and physical concepts of capital
have listed.
Elements in Financial Statements
• Financial statements are built up by five key elements such as
Revenue, Expenses. Assets, Liabilities and Equity.
• Main elements in Income statemare Revenue and expenses .
• Main elements if Balancesheet are Assets, Liabilities and Equity.
Assets and Liabilities
• IASB defines asset as “ the future economic benefits controlled by the
entity as a result of past transactions or other past events”
Liabilities
• IASB defines Liability as “ the future sacrifies of economic benefits
that the entity is presently obliged to make to other entities as a
result of past transactions or other past events”
Equity
• IASB defines equity as “the residence interest in the assets of the
entiy after deduction of its Liabilities.

• Equity = Assets -liabilities

Revenues
• IASB defines revenue as “ increase in the economic benefits during
teh acounting period in the form of inflows or enhancements of
assets or decrease of liabilities that result in increase in equity,other
than those relating to contributions from equity participants.”
Expenses
• IASB defines expenses as
• “ decresed in economic benefits during the accounting period in the
form of outflows or
• depreciation of assets or
• incurred of liabilities that result in decrease in equity
• other than those relating to distribution to equity participants.
Criteria or principles of recognition
• Recognition is the process of recording an item in the financial statements . A transaction can be recorded in
the books only when it is recognised.
Recognition criteria (or principles ) of Assets
• the inflow of economic benefits to entity is probable
• the cost or value can be measured reliably
Recognition criteria (or principles ) of liabilities
• The outflow of resoures embodying economic benfits (such as cash) from the entity is probable
• the cost / value of the obligation can be measured reliably
• Recognition criteria (or principles ) of Revenue
• Economic benefits increases and there by equity increases .
• Asset increases or liability decreases, resulting in increase in equity.
• Recognition criteria (or principles ) of Expenses
• Economic benefits decrease as a result of decrease in an asset
• Economic benefits decrease as a result of inrease of liability.
 Measurement attributes of Assets
and Liabilities
• Measurement is the process of determing the monetary amounts at
which the elements of the financial statements are to be recognised
and carried in the balancesheet and income statement .
• This involves the selection of particular basis of measurement. They
are 4 measurement attributes for assets and liabilities.
Fair valueis the price that Replacement costs the price
Historical Cost-is the price paid would be received to sell an that would be paid to acquire
to acquire an asset asset or paid to transfer a an assett
liability

settlement amountis the amount at which an

asset would be realised or a liability would be
liquidated.
Measurement of Expenses
•.

Current
Historical Cost- exchange value of
Measurement(Replacement Cost)-
goods and services while they
current price of goods or services
were acquiered by the firm
used or consumed.
principles of presentation
• while presenting the information in the financia statements ,
following principles should be observed....refer notes
COMPONENTS OF IFRS
• IAS
• IFRS
• IFRIC
• SIC
IFRS interpretation Committee
(IFRSIC)
• The IFRS Interpretations Committee (Interpretations Committee) is the
interpretative body of the International Accounting Standards Board (Board). The
Interpretations Committee works with the Board in supporting the application of
IFRS Standards.

• The Interpretations Committee responds to questions about the application of the

Standards and does other work at the request of the Board.

• The Interpretations Committee comprises 14 voting members, appointed by the

Trustees of the IFRS Foundation. The members provide the best available technical
expertise and diversity of international business and market experience relating to
the application of IFRS Standards.
FUNCTIONS OF IFRSIC

Under the IFRS Foundation Constitution, the IFRS Interpretations

Committee(IFRSIC) has the following roles:
interpreting the application of International Accounting Standards and
International Financial Reporting standards , to provide timely guidance on
fiancial reporting issues.
work actively with national standard setters to bring about convergence of
national accounting standards.
Publishing after clearance by the IASB,- draft interpretations for public
comment and consider comments made with in a resonable period before
finalising an interpretation.
report to IASB and obtain its approval from members for final interpretations.
Standard Interpretation Committee
(SIC)
• SIC was a committee established under IFRS inorder to interpret the
Accounting Standards. Interpretations on Accounting standards were
given by SIC till the formation of IASB. But now the Interpretation
function is conducted by International Accounting Standards Board
and IFRS Interpretation Committee (IFRSIC)
Objectives of SIC
• to interpret the application of IAS/IFRS
• to provide timely guidance on financial reporting issues that are not
specifically addressed in IAS/IFRS
• undertake other task at the request of IASB
Convergence of IFRS - INTRODUCTION
• Indian Accounting Standards are formulated by the Accounting Standard Board
(ASB) of the ICAI as notified by the Ministry of Corporate Affair. These standards
are framed keeping in mind the economic environment and practices of India.
They are made to suit the Indian companies and the disclosure requirements of
the Indian government.

• The IFRS, on the other hand, are made keeping global standards and
environment in mind.
• Convergence would mean bridging the gap between the two, i.e the IFRS and
the India AS. Convergence will involve alignment of the two sets of standards.
The compromise is done by adopting the policies of the IFRS either fully or at
least partially.
Convergence of IFRS
• IFRS Convergence means accounting standards of a country
converged with IFRS, ie, Indian Accounting Standards more or less in
line with IFRS.
• Convergence means to achieve harmony with IFRS
• Indian Accounting Standards Converged with IFRS are known as Ind-
ASs.
Need for IFRS Convergence
The need of IFRS adoption/IFRS convergence has arisen due to the following developments:
• Financial Globalisation: A need for a single set of high quality International accounting
standards arised. It promotes -confidence in the capital markets. uniformity of accounting
standards there by increasing the comparability of the financial statements.
• Multinational Corporations: MNCs will probably be the greatest beneficiaries of IFRS
convergence. The preparation of consolidated financial statements would be greatly
simplified by preparing it on a uniform basis.
• Accounting Profession: Convergence of accounting practices would promote the
internationalisation of the accounting profession.
• Government and revenue Authorities:If the financial reporting and disclosure requirements
are converged, the government would find it easier to understand and control them.
• It helps to assess the global market
• To ensure sound financial reporting structure.
Benefits of Converging IFRS
Benefits to Economy-
• Increase the growth of global business
• Financial statements made under IFRS is accepted by stock exchanges
all over the world- which facilitates international business.
• helps to develop industrial and capital markets in the country
• increase the pace of capital formation there leads to higher economic
growth.
• An economy can attract more foreign capital at lower costs.
Benefits of Converging IFRS-2
Benefit to Investors:
• converging IFRS makes acounting information more reliable, relevant,
timely and comparable.
• develops better understanding of financial statements globally
• develops increased confidence among the investors
• helps in better understand of investment opportunities.
Benefits of Converging IFRS-3

Benefits to industry -
• As financial statements comply with global accounting standards they
will be more transparent and reliable- there by creates confidence
among investors.
• industry will be able to raise capital from markets at lower cost
• cost of preparing financial statements is reduced
• task of maintaing different sets of financial statements is eliminated
• adoption of IFRS reduce risk premium, thereby reduces cost of capital
• improves comparabilty of financial statements
Benefits of Converging IFRS-4

Benefits to accounting professionals

• convergence of IFRS foster the globalisation of accounting
[Link] accounting professional can provide their
service through out the world.
Benefits of Converging IFRS-5
Benefits to tax authorities and researchers
convergence with IFRS helps in uniformity in reporting to tax
authorities,researchers etc.
Problems and Challenges faced by
IFRS Convergence
• Difference in GAAP and IFRS -the differences are wide and deep routed
• lack of training facilities and academic courses on IFRS will pose challenge in India
• Regulatory and legal requirements in India will pose a challenge unless the same is been
addressed by respective regulatory.
• IFRS convergence affect most of the items in financial statements and consequently tax
liabilty would also undergo a change.
• IFRS uses fair value as a measurement base for valuing most of the items of financial
statements. Use of Fair value accounting bring lot of volatility and subjectivity to financial
statements.
• Re-negotiation of contract to be done because the financial results under IFRS are likely to
be very different from those under Indian GAAP.
• Companies would have to ensure that the existing business reporting model is amended to
suit the reporting requirement of IFRS.
Indian Accounting Standards (Ind-AS)
• Indian accounting standards converged with IFRS are known as Ind-AS.
• Ind- AS is the Indian Version of IFRS.
• 35 Indian Accounting standards converged with IFRS till 2011
• Indian Accounting Standard (Ind-AS) is the Accounting standard adopted by
companies in India and issued under the supervision of Accounting Standards
Board (ASB).
• It gives documents and policies that provide principles for recognition,
measurement, treatment, presentation and disclosures of accounting
transactions in the Ind AS financial statements.
• Ind AS are converged standards for IFRS (International Financial Reporting
Standards).
Objectives of Ind AS
• Standardization in presentation- Ind As brings standardization in presentation of
financial statements
• Facilitate comparison - Standardisation in the presentation of financial
statements facilitate intra-firm and inter-firm comparison
• Uniformity in presentation: The convergence of IFRS in Ind AS makes the
financial statements uniform, so that, the investors can assess and compare the
financial position of Indian companies with other global companies.
• Consistency: Ind AS brings consistency in the accounting practices and principles
followed by companies in India and other companies across the world.
• Enhanced accessibility: The convergence ofIFRS with Ind AS has helped to
enhance accessibility and acceptability of financial statements by global
investors.
Entities required to adopt Ind AS
• All companies listed in stock exchange
• unlisted companies having networth of Rs.250 crore or more
• parent, subsidary , associates and joint ventures of listed or unlisted
companies with networth of Rs.250 crore or more
• Scheduled commercial banks and insurance companies
• Non Banking Financial companies (NBFCs) having networth of Rs.500
crores or more
• NBFCs that are unlisted companies having networth of Rs.250 crores
or more.
Standard setting Process in India
In India, Accounting standards are issued by the ASB of ICAI. The board adopts
the following procedure for formulation of accounting standards:
• Determination of areas of accounting standard
• constitution of study group
• Discussion with various representatives
• Preparation of exposure draft
• Issurance for circulation
• consideration of views and drafting the standard
• modification of proposed standard
• Issurance of Accounting Standard.
Difference between Ind AS and IFRS
Difference between Ind AS and IFRS
Difference between Ind AS and IFRS
Difference between Ind AS and IFRS
IFRS IND AS
IFRS allows the option to present inflows and outflows Inflow and outflow of interest and dividend are
of interest and dividends in the operating activities required to be reported in the investing and financing
section of cash flow statement sections of cash flow statements.
No such provision in IFRS Under IndAS, where any item of income and expenses,
which is otherwise required to be recognised in profit
or loss in accordance with Ind AS, is debited or
credited to securities premium account or other
reserves, the amount will be deducted from profit and
loss from continuing operations for the purpose of
calculating EPS
IFRS gives an option to measure non monetary Ind AS requires the measurement of of such grants
government grants related to assets either at their fair only at their fair value.
value or at nominal value.
Preparation of consolidation statement is required Preparation of consolidation statement is not required
Role of National Financial Reporting
Authority(NFRA)
• National Financial Reporting Authority (NFRA) is an independent
regulator to oversee the auditing profession and accounting standards
in India under Companies Act 2013.
• It came into existence in October 2018.
• The Centre has appointed former IAS officer Rangachari Sridharan as
chairperson of NFRA.
• The establishment of NFRA as an independent regulator for the
auditing profession will improve the transparency and reliability of
financial statements and information presented by listed companies
and large unlisted companies in India
Role of National Financial Reporting
Authority(NFRA)
• According to Section 132 of Companies Act 2013,
• "NFRA is responsible for recommending accounting and auditing
policies and standards in the country,
• undertaking investigations,
• and imposing sanctions against defaulting auditors and audit firms in
the form of monetary penalties and debarment from practice for up
to 10 years.
Financial Accounting Standards
Board (FASB)
• The Financial Accounting Standards Board (FASB) is an independent
nonprofit organization that is responsible for establishing accounting and
financial reporting standards for companies and nonprofit organizations
in the United States, following generally accepted accounting principles
(GAAP).
• FASB is recognised by Securities and Exchange Commission as the
designated accounting standard setter for public companies.

• The FASB was formed in 1973 to succeed the Accounting Principles Board
and carry on its mission.
• It is based in Norwalk, Conn.
Functions of FASB
• establish and improve GAAP with in USA
• provide research findings on issues
• prepare research projects,discussion memoranda, public hearing,
comment letters and proposal drafts.
Role of FASB in developing US GAAP
The FASB has a unique position in the financial reporting process. The FASB develops and
issues Financial Accounting Standards through a transparent and inclusive process intended
to promote financial reporting that provides useful information to investors and others who
use financial reports.
• The Financial Accounting Standard Board (FASB) sets accounting rules for public and
private companies, as well as non-profit organisations, in the United States.
• In recent years, the FASB has been working with the International Accounting Standard
Board to establish compatable standards world wide.
• It provides leadership for public companies in establishing and improving the accounting
method used to prepare financial statements.
• The mission of FASB is to establish and improve financial accounting and reporting
standards to provide decision-useful information to investors and other users of financial
reports.