Professional Documents
Culture Documents
Generally Accepted Accounting Principles (GAAP) is a term used to refer to the standard framework of guidelines for financial accounting used in any given jurisdiction. Generally known as Accounting Standards. GAAP includes:
standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements
Accounting Principles
CONCEPTS
Business Entity Concept Money Measurement Concept Going Concern Concept
CONVENTIONS
Full Disclosure Consistency Prudence (Conservatism)
Principles derive from tradition. Accounting Period Concept Materiality Our commonly used principles are defined in the Cost Concept following Concept two categories : Dual Aspect
Realization Concept
Limitations
Allows many alternatives for the treatment of same items. Different accounting needs depending on the nature of industry Does not always reflect reality In the era of globalization, trading countries have different accounting systems. Thus, International Accounting Standards came into existence
Class
Subclass
Government, economics
Family
Species
Sweden Japan Germany
Macro-uniform
Continental; government; tax, legal
Law-based
Micro-based
Business economics theory
C L A S S I F I C A T I O N
Netherlands
Accounting Values
Professionalism v/s Statutory control Uniformity v/s Flexibility Conservatism v/s Optimism Secrecy v/s Transparency
STATUTORY CONTROL
Less developed Latin Less Developed Asian
African
UNIFORMITY
Germanic
More developed Latin
Anglo - American
PROFESSIONALISM
SECRECY
Less developed Latin
Germanic
Less Developed Asian
Anglo - American
TRANSPARENCY
Institute of Chartered Accountants of India (ICAI) has announced that IFRS will be mandatory in India for financial statements for the periods beginning on or after 1 April 2011.
This will be done by revising existing accounting standards to make them compatible with IFRS.
Reserve Bank of India has stated that financial statements of banks need to be IFRS-compliant for periods beginning on or after 1 April 2011...
Risk Evaluation:
IFRS will eliminate barriers to cross-border listings and will be beneficial for investors who generally ascribe a risk premium if the underlying financial information is not prepared in accordance with international standards.
Investments:
Foreign investors will be attracted to economies where IFRS-compliant financial statements are the norm.
Presentation of any extraordinary items is prohibited in IFRS IFRS requires disclosure of critical judgements made by management in applying accounting policies.
April 1, 2012
April 1, 2013
Insurance companies
a) Companies with net worth over INR 500 crores b) Banks and NBFCs Listed companies with net worth less than INR 500 crores
April 1, 2014