Question

what are the similarities and the difference of national and international accounting standards of financial reporting standards?

Answer 1

Answer:-

The key difference between IFRS vs Indian GAAP is that IFRS is the international accounting standards that provide guidance on how different transactions should be reported by the company in their financial statements which is used by many countries, whereas, Indian GAAP are the generally accepted accounting principles developed by Ministry of Corporate Affairs (MCA) and followed in India only.

The full form of IFRS is the International Financial Reporting Standards. It was prepared and updated by the IASB (International Accounting Standards Board), a non-profit, independent organization. IFRS is used in 110 countries and it’s one of the most popular accounting standards.

On the other hand, Indian GAAP is a set of accounting standards that are specifically designed for the Indian context. GAAP stands for Generally Accepted Accounting Principles. Most Indian companies follow Indian GAAP while preparing their accounting records.

When a company follows IFRS, it needs to provide disclosure in the form of a note that it is complying with the IFRS. But for Indian GAAP, the disclosure of the statement isn’t mandatory. When a company is said to follow the Indian GAAP, it’s assumed that they’re complying with the Indian GAAP to portray the true and fair view of their financial affairs.

Key Differences

IFRS is a principle of the standard-based approach and is used internationally, while GAAP is a rule-based system compiled in the U.S.

The IASB does not set GAAP, nor does it have any legal authority over GAAP. The IASB can be thought of as a very influential group of people who are involved in debating and making up accounting rules. However, a lot of people actually do listen to what the IASB has to say on matters of accounting.

When the IASB sets a brand new accounting standard, a number of countries tend to adopt the standard, or at least interpret it, and fit it into their individual country's accounting standards. These standards, as set by each particular country's accounting standards board, will in turn influence what becomes GAAP for each particular country. For example, in the United States, the Financial Accounting Standards Board (FASB) makes up the rules and regulations which become GAAP.

Although the majority of the world uses IFRS standards, it is not part of the financial world in the U.S. The SEC continues to review switching to the IFRS but has yet to do so.