A Change towards Recognition in Accounting Standards At the Global Level

As we progress towards the latter half of the second decade of the twenty-first century, we
inevitably come across a rising spade of International Trade. As an offshoot, International
Accounting is also gaining its prominent position. Simply stated, International Accounting is the
international aspect of accounting encompassing accounting principles and reporting practices
in different countries, foreign currency and exchange and the accounting of multinational
companies and their subsidiaries.
If we compare some of the traditional areas of accounting, we find a lot of changes from one
country to another. These are due to the differences in business environment, culture and the
traditional bookkeeping practices. If we compare the accounting practices of India and the USA,
we find some of the major differences listed below in a tabulated form here:
Table: Accounting Differences in the India and USA
S. No

Basis

India

USA

Preparation of
Financial
Statements

In accordance with the

requirements of Schedule VI of
the Companies Act, 1956.

Not required to be prepared under

any specific pro forma as long as
they comply with the disclosure
requirements of US Generally
Accepted Accounting Standards
(US GAAP).

Earnings Per
Share (EPS)

No disclosures requirements
except those under Schedule VI
of the Companies Act,1956

Data disclosure is mandatory.

Fixed Assets &

Depreciation

Revaluation of assets is allowed.

Depreciation is based on rates set
out in Schedule XIV of the
Companies Act, 1956.

Revaluation of assets is not

allowed. Depreciation is over the
useful economic lives of assets.
Depreciation as well as profit & loss
are based on historical cost.

Disclosure of
Current and Long
Term Components

Mandatory disclosure of current

and long term components is not
needed except for fixed assets,
current assets, secured &
unsecured loans and current
liabilities.

Mandatory disclosures about

current and long-term components
separately are needed. Current
component normally refers to one
year of the period of operating
cycle.

Treatment of
Foreign Exchange
Loss/Gain

Foreign Exchange fluctuations on

liabilities incurred for fixed assets
can be capitalized.

Foreign Exchange gain/loss is taken

in the income statement.

The discussions on overcoming these widespread accounting differences have always been a
topic for debate among accountants across the globe. A major lead in this context has been the
International Accounting Standards Committee (IASC) was founded in June 1973. IASC was
replaced by the International Accounting Standards Board on 1 April 2001. It was responsible for
developing the International Financial Reporting Standards (IFRS) and promoting the use and
application of these standards. The general features in IFRS are its valuable guidelines with
regard to:

Fair presentation and compliance with IFRS.

Going concern concept.
Accrual basis of accounting.
Materiality and aggregation.
Frequency of reporting.
Consistency of presentation.
IFRS has also formulated a timeline for its object of globalization of accounting standards
beginning with:

2008
Establishment of IFRS Taskforce.
2009~2011
Acquisition of authorization to translate IFRS.
Translation, review, and issuance of IFRS.
Analysis of possible IFRS implementation problems, and resolution thereof.
Proposal for modification of the related regulations and supervisory mechanisms.
Enhancement of related publicity and training activities.
2012
IFRS application permitted for Phase I companies.
Study on possible IFRS implementation problems, and resolution thereof.
Completion of amendments to the related regulations and supervisory mechanisms.
Enhancement of the related publicity and training activities.
2013
Application of IFRS required for Phase I companies, and permitted for Phase II companies.
Follow-up analysis of the status of IFRS adoption, and of the impact.
2014
Follow-up analysis of the status of IFRS adoption, and of the impact.
2015
Applications of IFRS required for Phase II companies.

In terms of advantages, IFRS has the following aims:

More efficient formulation of domestic accounting standards and international competitiveness

of our local capital markets;
Better comparability between the financial statements of companies in different countries;
Importantly, it obviates the need for local companies seeking overseas business to redesign
their financial statements for other markets.
Thus, as we move from national markets to global markets and multinational companies, the
initiative for standardized accounting practices will be beneficial to the businesses, clients,
subsidiaries, governments and the general masses. It will set uniform standards which will
ensure greater transparency and usability of accounts and thus promote business expansion at
a much faster pace benefiting all stakeholders of any business.