- Original Research
- Published: 29 September 2020
Indian GAAPs, IFRS, and Its Comparison: An Empirical Critique
- Neha Puri ORCID: orcid.org/0000-0002-7386-5027 1 &
- Harjit Singh ORCID: orcid.org/0000-0001-5557-2071 1
SN Computer Science volume 1 , Article number: 315 ( 2020 ) Cite this article
Globalization plays a vital role in making the financial markets of the world borderless, and as a result, businesses (including small- and medium-sized enterprises) are competing for equity at the best price everywhere possible. Investors and borrowers seek investment opportunities wherever they can obtain the best returns per the risks involved and assess the risks and returns associated with various investment opportunities that require accurate and credible financial information for investors and borrowers . The present study examines the perception of the accounting professionals towards the comparison of Indian GAAP [Generally Accepted Accounting Principles (GAAPs) are those concepts and conventions on which the accounting system is based. The primary objective of these principles is to bring uniformity and consistency in the preparation and presentation of final statements] with IFRS [To create a common accounting language throughout the world, so that businesses and their financial statements can be consistent and reliable across nations, and International Financial Reporting Standards (IFRS) were created by International Accounting Standards Board (IASB) in the year 2001].
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Puri, N., Singh, H. Indian GAAPs, IFRS, and Its Comparison: An Empirical Critique. SN COMPUT. SCI. 1 , 315 (2020). https://doi.org/10.1007/s42979-020-00327-4
Received : 15 June 2020
Accepted : 10 September 2020
Published : 29 September 2020
DOI : https://doi.org/10.1007/s42979-020-00327-4
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A Study of International Accounting Standard & Indian Accounting Standard
by International Res Jour Managt Socio Human
As time changes development of international accounting standard arises, accounting standard differs in each country. This paper focuses on procedure of issuance of International & Indian Accounting Standard, key difference in presentation of financial statement under International & Indian Accounting Standard. Key benefit in harmonizing accounting standard is common accounting system that is perceived as stable, transparent & fair To investors, shareholders, employees, creditors and public at large finally we submit that the standards set by the ias/ifrs constitute the step forward in the process of harmonization.
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The issue of International Accounting harmonization has been drawing the attention of accountants, academicians and business people since almost the beginning of the present century. Accounting standards are generally issued in conformity with the provisions of the applicable laws of the land, its customs, usages and business environment. The basic idea behind accounting standard setting is that financial disclosures, made through financial statements, are used as a means of discharging corporate accountability to its providers of funds. Over a period of time need arises to develop International Accounting Standards as accounting standards vary from country to country. As a result of this International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) are developed which can be accepted by more than single country. This paper focuses on procedure of issuance of International and Indian Accounting Standard, need of harmonization of global accounting standard and key difference in presentation of financial statement under International & Indian Accounting Standard. Key benefit in harmonizing accounting standards is common accounting system that is perceived as stable, transparent& fair to investors across the world. Cross-border merger &acquisitions will get a boost by making it easier for the parties involved in as per as redrawing the financial statements is concern.
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Accounting is the science of communicating the financial information of the business organization in an organized manner. Before communicating the business information it is necessary to record the actual business results in a scientific manner so as to ensure the true and fair view of the transactions. Financial information disclosed with true and fair state will get absolute confidence from various stakeholders. India is also one of the country which is recognized at the global level by initiating IFRS based accounting standards from the year 2016 onwards by government of India with the help of MCA and ICAI and started to mandate these standards for Indian companies in a phased manner. The implementation of this IFRS based Indian Accounting standards i.e. IND AS had created a great opportunity to academicians, regulatory authorities and business houses to carry the research for the advancement of the financial reporting system in India. So the present study is intended to analyse the role of IND AS in harmonizing accounting standards in Indian scenario.
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The purpose of the paper is to evaluate the benefits of convergence of Indian Accounting Standards with International Financial Reporting Standards. The scope of this paper is to (1) evaluate and summarize the major differences between the International standards and Indian’s standards and comparison of the differences, and (2) to determine if those differences are significant enough to conclude whether India as a country would benefit or be negatively impacted by the implementation of them. The research methodology is based on secondary data found in journals, periodicals, magazines, books, and websites. The Findings show that convergence of Indian standards with IFRs has both positive and negative benefits, but the positive benefits are greater than the negatives. The Conclusion and Recommendations of this research are that despite social, cultural, and political barriers that exist, India would benefit financially and economically from implementing international reporting standards. Recommendations for further study include (1) determining the effectiveness of India’s implementation of the standards, and (2) evaluate the importance of implementing the international standards, and the benefits to experience by allowing proper comparison of financial statements with other entities.
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Accounting has no meaning without standards due to professionalism. The use and application of standards in accounting gets so importance that it will not go wrong if it is termed as a legal discipline. By the time, the world has given accounting the certification of international discipline. So, it is apt to say that as an international discipline, accounting should have a single set of standards for all for harmonizing the practice in a global scenario. But the reality is that we still have various streams of accounting standards like US GAAP, UK GAAP, IAS, and so on. These different streams are the threat for accounting against its harmonization of practices. Though the world has witnessed a lot of initiatives taken to reduce the streams into one in recent years, still we cannot ensure the final sophistication in this regard. The paper focuses on the convergence issue, its current status, challenges with special reference to Indian perspective.
The story of the inception of business and commerce helps to provide a historical account of the evolution of accounting. The concept of accounting has gone from different transformational stages at domestic as well as international level. Complex interaction of various environmental variables like rapid expansion of international business, predominance of MNC's, internationalization of capital markets and establishment of autonomous accounting bodies and institutions has lead to diversity and development of accounting rules, regulations , policies , procedures and framework at international level. Many recognized and esteemed accounting institutions at international level already have realized the complexities and diversity in context to international financial reporting practices in different countries. They have accepted the fact that different countries that are rich in accounting policies and practices are indifferent to the international dimensions of accounting and financial reporting practices in light with IFRS due to the complex interaction of different environmental variables like economic factors, political factors, socio-cultural factors and technological factors etc. In globalization era, the concept of international financial reporting practices is a well established era of specialization. The present paper laid emphasis on factors affecting international financial reporting practices in selected nations like India, U.S and U.K which are advance and rich in accounting system as well as it concentrate upon measuring the differences between the their preparation and presentation of financial statements. In other words, the present paper will also study the fact that how local GAAP of selected countries differs from IFRS on executing, recognition, measurement, and disclosure rules with regard to various accounting items like inventory valuation, revaluation of fixed assets, treatment of pre-operating expenses , amortization of intangible assets , consolidated statements , cash flow statements and foreign currency translations etc.
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This paper assesses whether the mandatory implementation of IndAS (IFRS converged Indian accounting standards) will result in higher financial reporting quality. Particularly, it studies the effect...
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The multinational companies pay enormous money for making and auditing their accounting reports according to the different national regulations. For these multinational companies the aspects of maximizing the profit is significantly more important than the aspects of national interest or the geographical position. Because of this there is a demand for creating such accounting systems which are evaluating the holder‟s economic results equally. Meanwhile the interpretation and adaptation of the financial information based on the different accounting methods are also expensive for the users of these reports. Therefore an authentic and standardized international account reporting system could form that business language, which would allow the comparison of the accounting information of each country. According to the business practice it is obvious that the usage of international accounting principles leads to a reduction of the information asymmetry between the owners and the managers. ...
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The Ministry of Corporate Affairs of India, vide its notification G.S.R 111(E) dated 16 February 2015, requires compliance of IFRS converged Ind AS in preparation of financial statements and audit by Indian listed companies for the accounting periods beginning on or after 1 April 2016. However, few internationally listed companies were voluntarily reporting their financial statements as per IFRS along with the financial statements prepared as per Indian Generally Accepted Accounting Principles (IGAAP) before 1 April 2016. This paper examined the effect of IFRS and IFRS converged Ind AS on the financial reporting of selected listed Indian companies for which financial reporting under the three set of standards for the same period was available. It was also analysed whether value relevance of financial information provided under IFRS and Ind AS was higher than that provided in financial statements prepared as per previous IGAAP, for the investors when they have to make decisions in the capital markets. The result of the research revealed a significant quantitative impact of IFRS and Ind AS on some of the selected accounting figures and ratios. It was also observed that IFRS and Ind AS had a positive effect on the relevance of financial reporting.
Convergence of Indian GAAP with the International Financial Reporting Standards (IFRS) has been one of the most discussed topics in recent times. The history of convergence can be traced to 2007 when The Institute of Chartered Accountants of India (ICAI) had issued a concept paper which focused on achieving the convergence with IFRS. Further, a group headed by the then Prime Minister of India, Dr. Manmohan Singh, committed to the convergence with IFRS by April 2011 at the G-20 summit held in 2009. After a number of delays, The Ministry of Corporate Affairs (MCA),in a press release issued on 2 January2015, announced its long-awaited roadmap for implementing the Indian Accounting Standards (Ind-AS). Its revised plan for the adoption of Ind-AS converged with the IFRS issued by the International Accounting Standards Board (IASB) has resolved the uncertainty surrounding the execution timeline of Ind-AS in India. This paper deals with Ind AS, its history, the bottlenecks in its implementa...
Nowadays, an extremely fast developments are faced, in every field. The increase oninternational business activities, investment decisions, and pace of transformation incapital markets which are affected by the technological development, requiresfinancial data to be presented in one common language. Therefore, there has been avast increase in the effort to adopt financial accounting and reporting standarts, in allover the world. In establishing standarts for accounting and financial reporting,besides the aim for adoptation in world scale, a concern for higher quality has takenpart. Setting standards increases the quality of the financial information which is thecontent of financial reporting. There is a worldwide tendency towards a single globalset in accounting. With this objective, International Accounting Standards (IAS) andInternational Financial Reporting Standarts (IFRS) has been published byInternational Accounting Standards Board (IASB). In order to adopt to these set ofstan...
2000, SSRN Electronic Journal
madhu Bala sharma
2019, International Journal of Recent Technology and Engineering (IJRTE)
Purpose – The purpose of this paper is to explore the various implementation issues on the Ind AS converged with IFRS in India and measures to address the issues. Design/Methodology/approach – A detailed published literature reviewed in this context and found the scope of the research. A structured questionnaire on 5 points Likert-Scale has been used for the survey. Survey conducted on accounting professionals belongs to Delhi-NCR, India. Findings – The empirical research find the various areas of challenges faced by entities in converged IFRS implementation and suitable means for effective implementation of converged IFRS in India. Originality/value – One of the contributions to this study is to examine perceptions of Indian Accounting Professionals towards convergence and implementation of a single set of global accounting standards in India. As a result of globalization, many Indian companies initiated their business in other countries and some Multi-national companies also opera...
Current Indian economy is result of number of reforms, resulting in a more market-oriented economy. Out of which Liberalization, Privatization and globalization can be considered as a key reform, and as a result the size of Indian corporate is becoming much bigger across the borders and accordingly the expectations of various stakeholders have also increased, which can be achieved by good Corporate Governance. In order to satisfy stake holders, Indian companies are required to make more and more intricate disclosures than have been making hitherto, for which they are also required to adhere to the uniform and proper accounting standards, as the standards reduce discretion, discrepancy and improves the utility of the disclosure. Due to growth in international capital markets and cross border mergers and acquisitions, harmonization of accounting standards became essential in order to achieve confidence of global investors. As accounting is "the language of business." And so the language of financial reporting which is key driving force for making investment decisions must be comparable. This leads to adoption and implementation of International Financial Reporting Standards (IFRS) in Indian accounting environment. As a result India made a commitment towards the convergence of Indian accounting standards with IFRS at the G20 summit in 2009. In that process the Ministry of Corporate Affairs, Government of India (MCA) previously issued a roadmap for implementation of Indian Accounting Standards (Ind AS) converged with International Financial Reporting Standards (IFRS) beginning April 2011. However, this plan was suspended due to unresolved tax and other issues. In the presentation of the Union Budget 2014–15, the Honourable Minister for Finance, Corporate Affairs and Information and Broadcasting proposed the adoption of Ind AS. Ind AS is not intact adoption of IFRS. It is a separate accounting framework based on IFRS as created by the MCA with certain alterations according to Indian business requirements. The present study aims to identify and evaluate impact of IND AS adoption on corporate governance.
2011, Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis
Two most significant organizations in the field of financial reporting regulation setters in the world – the Financial Accounting Standard Board (FASB) and the International Accounting Standards Board (IASB) have recognized that in order international capital markets to function properly, a single set of high-quality international accounting standards designed especially for listed companies around the world must exist. The effort should be especially aimed at spreading the IFRS around the world and the FASB – IASB Convergence. The most significant difference between the US GAAP and IFRSs is in the area of the general approach. The IFRSs are based on basic accounting principles with limited application guidance, US GAAPs are based especially on rules with specific application guidance. The main objective of this work is to assist in the development of an improved common conceptual framework that provides a sound foundation for developing future accounting standards.The structure of ...
Vijayakumar A B
Accounting is an important tool in the hands of management. It helps the management of an organization to have control over its performance. The success of a business entity depends on the combined effects of four factors-land, labour, capital and management. The contribution of each factor has to be properly measured and then only the resultant performance of the entity can be properly evaluated. Accounting in a broad sense, is a tool adopted to measure the transaction, transformation, events, etc., usually involving money as a medium of exchange. At the end of accounting period financial statements are prepared. This study covers the Accounting Standard 1, 2, 3 practices and applicability in the Rittal India Pvt. Ltd is measured and concluded that the company reporting practices are highly transparent and practicing as per the ICAI guidelines.
Accounting plays an important role in the economic affairs of a country such as the calculation of national and personal income, the administration of taxation and credit facilities, the costing of government expenditures, and the appraisal of investments and financial reporting of corporations to the markets. The quality of accounting information is vital to the functioning of a company, and therefore to efficient resource allocation. Accurate information about the financial performance of the enterprise is essential for planning and control purposes, and it is crucial to every economic decision. Hence, the accounting rules must be properly designed in order to not allow the distortion of financial facts, which would then lead to the misallocation of resources in non productive uses. Nowadays, the world economies are increasingly interlinked. As a result, as McKee and Garner (1992) argue, the accounting services will have to adapt in order to meet the widening needs of the business community. Therefore, the international community has been working toward establishing international accounting standards that would assist in compiling sound, understandable and comparable financial statements of across borders. The efforts for international accounting standards setting started in 1973 when the International Accounting Standards Committee (IASC) was established in London, and they culminated in 2005 when the European Commission (EC) began requiring all European Union (EU) listed companies to prepare their consolidated financial statements according to international accounting standards. Many developing countries are trying to adopt IAS/IFRS (hereinafter, referred to as IFRS) issued by IASB and its predecessor IASC that will help companies to prepare useful accounting information for domestic and foreign investors. However, the adoption of these accounting standards faces many difficulties related to these countries' traditions and characteristics of economic development. Accounting system in developing countries should be considered as part of the necessary infrastructure to achieve economic development. Accounting has a significant role in a country's information system, the magnitude and the strength of which can determine in large part the rate at which the economy will progress. Thus, sound accounting systems need to be established with the ultimate objective of providing reliable information support for the economic development process. This paper analyzes the applicability of the IFRS in developing countries and their role in economic growth. The main topic discussed here is the relationship between accounting and economy in these countries.
Purpose: The purpose of this paper is to study and analyse the possible impact of International Financial Reporting Standards on the level of earnings management. The paper includes a review of all such studies from around the world. Design/Methodology: Existing studies available on the topic are systematically reviewed. Different journals, periodicals and websites were used to gather the information. Time period considered for the study is from 2005 to 2019. Although most of the papers relate to foreign countries as not much research is available in the Indian context. Overall, 60 papers were considered, but out of them only 40 were found to be suitable for the present study. The review has been segregated into 3 parts. 30% of the paper focus on the meaning and determinants of earnings management, 20% of the studies relate to IFRS adoption around the world. Remaining research tries to analyse the connection between adoption of international standards and level of earnings management. Findings: The adoption of IFRS standards has no significant impact on the level of earnings management of any country. In fact, the level has increased in some countries after the compulsory adoption. However, if certain other factors are taken into account along with IFRS like audit quality, corporate governance practices, board management, R&D disclosure, enforcement mechanism, investor protection regime etc., the combined effect have yielded different results for different countries. Research Limitations and Implications: The study focuses only on one major area related to IFRS i.e., its impact on earnings management of a firm. Although there are many other determinants of earnings management and also IFRS had its impact on various other areas. But due to certain research limitations those are not considered Purpose: The purpose of this paper is to study and analyse the possible impact of International Financial Reporting Standards on the level of earnings management. The paper includes a review of all such studies from around the world. Design/Methodology: Existing studies available on the topic are systematically reviewed. Different journals, periodicals and websites were used to gather the information. Time period considered for the study is from 2005 to 2019. Although most of the papers relate to foreign countries as not much research is available in the Indian context. Overall, 60 papers were considered, but out of them only 40 were found to be suitable for the present study. The review has been segregated into 3 parts. 30% of the paper focus on the meaning and determinants of earnings management, 20% of the studies relate to IFRS adoption around the world. Remaining research tries to analyse the connection between adoption of international standards and level of earnings management. Findings: The adoption of IFRS standards has no significant impact on the level of earnings management of any country. In fact, the level has increased in some countries after the compulsory adoption. However, if certain other factors are taken into account along with IFRS like audit quality, corporate governance practices, board management, R&D disclosure, enforcement mechanism, investor protection regime etc., the combined effect have yielded different results for different countries. Research Limitations and Implications: The study focuses only on one major area related to IFRS i.e., its impact on earnings management of a firm. Although there are many other determinants of earnings management and also IFRS had its impact on various other areas. But due to certain research limitations those are not considered
The existence of particular accounting and reporting systems for companies operating in different countries creates a difficulty in making comparisons among these companies. One of the most important attempts to fix this problem is the enforcement of IFRS as a single standard in all countries. The aim of this research is to identify the current situation of G20 countries regarding the adoption of IFRS as a global standard. To this end, the current status of IFRS and the process of its adoption in G20 countries is examined in order to determine the extent of IFRS's adoption as a global accounting standard. For this purpose, certain criteria are determined by analyzing the reports prepared by IASB on the IFRS applications in 143 countries and then content analysis of the country reports of the G20 countries are provided based on these criteria. According to the findings of the study, although it is possible to observe that all G20 countries except USA accept IFRS as the global accounting standard, this does not lead to the adoption of IFRS at the national level. Most G20 countries either adopted IFRS or making preparations for its adoption. However, the facts that IFRS is not applied in the world's two biggest economies, USA and China, as well as in Indonesia and India and its only partial application in Saudi Arabia and its status of optional application in Japan are striking. As a result it is possible to claim that even though IFRS has expanded largely, there is still room for progress to become the single global accounting language. Current literature on IFRS usually focuses on single countries or comparisons of few countries. This study will provide a contribution to the field by presenting the current situation in the entire G20 countries.
Donna Street , Sidney Gray
1999, The International Journal of Accounting
The present paper involves the study of the conversion of the corporate reporting from the National accepted GAAP principles to IFRS standards as to what changes it makes on the earning management system that is the financial statement of the companies and how does it affect the companies economically and what significant change has the reporting resulted in before and after adoption. Basically, the IFRSs were made to create a common business language amongst different countries and had introduced harmonization so that the investors could invest money cross-borders without much complication on contemplating of the reporting standards. So, with this view the companies would have to comply with certain global principles but, changing the way of reporting demands the change in the entire accounting procedures from the accountants, who would prepare the financial statements to auditors to give assurance to investors whose economic decisions will be affected. So, such a huge change would demand personnel proficiency update which would have impact on the company economically and the impact of IFRS adoption on the retained earnings and difference that arise known as the “GAAP GAP” on the equity management before and after adoption.
Prof Javaid Akhter
2015, Nitte Management Review
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