Slide 1

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 2

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 3

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 4

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 5

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 6

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 7

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 8

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 9

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 10

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 11

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 12

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 13

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 14

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15


Slide 15

Global Convergence
In Financial Reporting

Hemant S. Bahedia
CA / CWA Final Student
[email protected]
October 31, 2015

HEMANT S. BAHEDIA

1

Agenda
1. Background
2. Rationale for Formulating AS

3. Need for Convergence of AS
4. Current Global Scenario of Convergence

5. Indian Scenario of Convergence

October 31, 2015

HEMANT S. BAHEDIA

2

Accounting Standards
• Cross-border capital flows in today’s liberalized
economic conditions demand fairly high
standards of accounting information in corporate
financial reporting.
• Transparency and adequate disclosure of
financial statements has enhanced decisionmaking and efficiency of resource allocation in
the economy.
• In recent times, companies are increasingly
raising capital and attracting major investors
from outside their home countries.
October 31, 2015

HEMANT S. BAHEDIA

3

Accounting Standards (Cont.)
• The International Accounting Standards Board
(IASB) is issuing accounting standards named
as international Financial Reporting Standards
(IFRS), which are permitted by the International
Accounting Standards Committee Foundation
(IASC) Foundation Trustees.
• With the emergence of the global market due to
the massive liberalization drive adopted by
majority of the countries, varied standards of
accounting in different geographical zones need
harmonization.

Rationale for Formulating Accounting Standards

• Elimination of diversity in accounting practices
is necessary through the formulation and use of
accounting standards so that the accounts and
financial statements of business organizations
based on these standards will reveal the true
and fair view of their operations.
• Financial reports prepared using accounting
standards possess values in terms of content,
uniformity and comparison.

October 31, 2015

HEMANT S. BAHEDIA

5

Need for Convergence of AS
• Financial statements prepared in one country are often
not accepted in other countries. The reason is that the
accounting standards are derived from the process
that involves legal, economic, social and cultural
considerations.

• Business practices, legal and fiscal framework, and
economic and social conditions differ in different
countries and these differences are reflected in the
national accounting standards.
• Thus, differences in accounting standards followed by
individual countries create difficulties for the operation
of today’s international business that is growing at a
fast pace.
October 31, 2015

HEMANT S. BAHEDIA

6

Need for Convergence of AS (Cont.)
• The World Investment Report - 2005 reveals that
70,000 Transnational Corporations (TNCs) with
their 6.90 lacs affiliates were operating in the world
in 2005. Sales by these 6.90 lacs affiliates alone
accounted for $19 tn in 2004.
• Hence, a TNC operating in several countries has
to prepare accounts as per the accounting
standards prevalent in each of these countries
thus preparing varying types of financial
statements is somewhat cumbersome, expensive
and time consuming.
October 31, 2015

HEMANT S. BAHEDIA

7

Need for Convergence of AS (Cont.)
•

•

Hence,
harmonization
of
national
accounting standards is necessary to save
costs and to enhance the quality and
comparability of such standards.
Important reasons attributed to the need for
convergence
of
national
accounting
standards:
–

–

For creation of easy and faster access to
investment opportunities for all kinds of
investors around the glob
For facilitating conduct of international business

October 31, 2015

HEMANT S. BAHEDIA

8

Need for Convergence of AS (Cont.)
– Globalization of trade and commerce
– To have uniform reporting from
subsidiaries across the globe by MNCs

the

– The practice of following harmonized
accounting standards would standardize the
accounting procedures in accordance with
political and trade harmonization among
countries

October 31, 2015

HEMANT S. BAHEDIA

9

Current Global Scenario
• It has convinced many that the US GAAP would be
the de facto standards and the IFRS or IAS would
be the sound set of principles to base national
GAAP.
• The European Commission has been harmonizing
accounting standards in order to promote free flow
of capital among European countries.
• The most notable development is the European
Commission’s endorsement of IFRS and its agreed
road map with the SEC is to remove the requirement
for foreign private issuers to reconcile financial
statements prepared under IFRS to the US GAAP
by 2009.
October 31, 2015

HEMANT S. BAHEDIA

10

Current Global Scenario (Cont.)
• The next logical goal for the IASB would be to
converge US GAAP with IFRS.
• The Canadian Accounting Standards Board
announced that it would implement IFRS within
five years.
• The convergence effort between IASB and the
Accounting Standards Board of Japan has
already been on.

• China has also been using accounting standards
since 1993, which were prepared more in the
light of International Accounting Standards.
October 31, 2015

HEMANT S. BAHEDIA

11

Indian Scenario of Convergence
• Indian Accounting Standards (AS) issued

by ICAI by and large are based on IAS.
• The

close analysis of the foregoing
statistical figures indicates that in India,
the ICAI has been continuing its efforts for
bringing harmonization between Indian
accounting standards and international
accounting standards.

October 31, 2015

HEMANT S. BAHEDIA

12

Indian Scenario of Convergence (Cont.)
• The Securities and Exchange Board of India

(SEBI) has also set up a Standing Committee
on Accounting Standards to monitor the
existence of relevant accounting Standards
and their harmonization with corresponding
International Accounting Standards.
• The Companies Amendment Act 1999 has

made compliance with accounting standards
mandatory in India.
October 31, 2015

HEMANT S. BAHEDIA

13

Key Differences between Indian GAAP
and US GAAP
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
October 31, 2015

Revaluation of fixed asset
Change of accounting policy
Inventory valuation
Revenue recognition
Cost of fixed asset
Balance sheet classification
Cash Flow Statement
Deferred income tax
Debt issue expenses
Employee benefits
Consolidation of subsidies
HEMANT S. BAHEDIA

14

THANK YOU ..!
&
BEST LUCK FOR YOUR
BRIGHT PROFESSIONAL
FUTURE..!
October 31, 2015

HEMANT S. BAHEDIA

15