There are lots of minor and major differences between IFRS and Indian GAAP. Today, I will explain its part and I will focus on three major parts of differences of IFRS and Indian GAAP. By understanding it, you will get following benefits.
1. Use it
Whether you are accountant or commerce student or doing CA. All will be interested to prepare financial statements. After coming IFRS, international pressure is to adopt. Still, India is using Indian GAAP due to many differences. So, in future, if IFRS will apply on Indian accounting system, it will be easy to you to adopt your accounting system fastly as per IFRS.
2. For Knowledge
Whether you use it or not but to know is better. Because if you are preparing competitive exam. or if anybody ask you question like me "What is the difference between IFRS and Indian GAAP" you will increase your confidence because you have read it and you understand the concept. Otherwise, you will be disappointed to give best answer of this question.
So, come and understand it
1. Difference in Preparation of Balance Sheet under a Specific Format
As per Indian GAAP
As per Indian GAAP, company will make its balance sheet format as per New Indian Company Law 2013 under its section 129. Indian GAAP accepts this very clearly. Every company has to show its all assets and liabilities under given specific format not use as per board management desires.
As per IFRS
As per IFRS, there is not any specific format of company's balance sheet and allow to follow any specific company's law.
2. Difference for showing Preference Share Capital in balance Sheet
As per Indian GAAP
Because Indian GAAP has accepted the format of balance sheet of company. In the company's balance sheet format, we see preference share capital in Share Capital Section. It means, Indian GAAP allows it to show like that .
As per IFRS
IFRS does not allow to show preference share capital in Share capital section of balance sheet.
Logic : As per IFRS, preference share is not capital but fixed loan because there is fixed rate of dividend on bought pref. shares by share holders. So, it will be shown under loan section of balance sheet.
3 Difference of Showing Changing in Equity in Annual Financial Statements
As per Indian GAAP
Indian GAAP does not allow to make a separated changing in equity statement because there is not format as per company law and second all changes will show under balance sheet in Share capital section. All movement of equity share capital will show in Share Capital and Surplus and Reserve Section. So, no need to prepare extra statement. Now, three are main in India as per Indian GAAP. One is balance sheet, second is income statement and third is Cash flow statement.
As per IFRS
As per IFRS, it is compulsory to prepare changing in equity capital in extra statement. This statement will show the movement of equity capital. So, IFRS will allow to prepare four annual financial statements
one is financial position statement, second is income statement, third is cash flow statement and four and final is changing in equity statement. Hope, you have understood it.
Related Resource : Online Accounting Course
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