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What are the major difference between US GAAP & Indian GAAP.?
Where US GAAP is exactly & highly differenciated from Indian
GAAP..?
Your answer will be highly appreciated.
Thanks in advance.
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Answer Posted / sankar
MAJOR DIFFERENCES:
1. Underlying assumptions: Under Indian GAAP, Financial
statements are prepared in accordance with the principle of
conservatism which basically means "Anticipate no profits
and provide for all possible losses". Under US GAAP
conservatism is not considered, if it leads to deliberate
and consistent understatements---revenue recognized when
earned or when it is realized or realizable.
2. Format/ Presentation of financial statements: Under
Indian GAAP, financial statements are prepared in
accordance with the presentation requirements of Schedule
VI to the Companies Act, 1956. On the other hand ,
financial statements prepared as per US GAAP are not
required to be prepared under any specific format as long
as they comply with the disclosure requirements of US GAAP.
3. Cash flow statement: Under Indian GAAP (AS 3) ,
inclusion of Cash Flow statement in financial statements is
mandatory only for companies whose share are listed on
recognized stock exchanges and Certain enterprises whose
turnover for the accounting period exceeds Rs. 50 crore.
Thus , unlisted companies escape the burden of providing
cash flow statements as part of their financial statements.
On the other hand, US GAAP (SFAS 95) mandates furnishing of
cash flow statements for 3 years - current year and 2
immediate preceding years irrespective of whether the
company is listed or not .
4. Depreciation: Under the Indian GAAP, depreciation is
provided based on rates prescribed by the Companies Act,
1956. US GAAP , depreciation has to be provided over the
estimated useful life of the asset,
5. Long term Debts: Under US GAAP , the current portion of
long term debt is classified as current liability, whereas
under the Indian GAAP, there is no such requirement and
hence the interest accrued on such long term debt in not
taken as current liability.
6. Consolidation of subsidiary accounts: Under the Indian
GAAP, consolidation of accounts of subsidiary companies is
not mandatory. Under US GAAP (SFAS 94),Consolidation of
results of Subsidiary Companies is mandatory.
7.Investments: Under Indian GAAP (AS 13), Investments are
classified as current and long term. Investments are
required to be segregated in 3 categories i.e. held to
Maturity Security ( Primarily Debt Security) , Trading
Security and Available for sales Security and should be
further segregated as Current or Non current on Individual
basis.
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