Brief History Accounting Standards

Accounting is a general practice to record the financial transactions of a business or individual entities to represent the financial situation can be analyzed and evaluated by a third party. Because these practices are highly standardized and are often used by the third person, it is extremely important that everyone applies the same standard approach to avoid any further complications and ease of comparison and evaluation.

Each country has its own set of accounting standards and principles. These standards are generally referred to as generally accepted accounting principle (GAAP). In India, the accounting standards are issued and monitored by the Institute of Chartered Accountants of India (ICA). These standards include several guidelines on various aspects of accounting, such as the disclosure of accounting policies, inventory valuation, and the statements of cash flows, the financial instrument presentation and segment information. While the United States, these guidelines are set by the Financial Accounting Standards Board (FASB).

This leads to many variations between the two standards. Same procedures described for the formation of assessments differ in India and the United States. India, accounting standards do not define prescribe or define the format for the presentation of financial items, whereas under U.S. GAAP, entities are usually presented as a balance sheet classified or unclassified. The presentation and training guidelines for other financial statements, including income statements and cash flow statements are also different.

There are also many differences observed between the recordings of other items as well. For example, extraordinary items are defined as rare and unusual in US GAAP standards, but the same elements are recorded as events or transactions and are often not very frequent or regular in nature. Indian standards give no specific indication for the presentation of the special purpose entity, whereas in the United States, the variable interest entities are consolidated due to the presence of a variable interest entity on. According to the FASB, companies need to make full and detailed information on assets and liabilities of associates’ significant business. However, in India, it is not a mandatory requirement. The U.S. guidelines even prohibit the union of interests’ method, but the same practice is necessary for several mergers in India.

Thus we see that the standards set by the entities concerned are very different in India and the United States. Apart from these two countries, there is another group of guidelines; they are called the International Accounting Standards (IAS) issued by the International Accounting Standards Board. All these guidelines are quite similar in nature and methodologies, which makes it extremely easy and understandable to people all over the world.

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