GNDU B.Com (Bachelor of Commerce)

Chapter 3: Accounting Standards in India and Convergence with IFRSSemester 1 — summary, notes, extra questions & MCQ quiz

Summary

Accounting Standards (AS) are written policy documents issued by a recognised authority that prescribe how particular transactions and events should be recognised, measured, presented and disclosed in financial statements. In India they are issued by the Institute of Chartered Accountants of India (ICAI) through its Accounting Standards Board, and many are notified under the Companies Act, giving them statutory backing. Their purpose is to remove the variations in accounting treatment that would otherwise make statements incomparable, to improve reliability, and to reduce the scope for manipulation. Standards apply across enterprises but with relaxations for small and medium-sized entities, so applicability depends on the size and class of the enterprise. A major modern development is convergence with International Financial Reporting Standards (IFRS), the global standards issued by the International Accounting Standards Board. India has adopted converged standards known as Ind AS, which are aligned with IFRS while retaining a few carve-outs to suit local conditions. Convergence improves the comparability of Indian financial statements with those of other countries, helps attract foreign investment and reduces the cost of preparing multiple sets of accounts for global firms. The difference between adoption and convergence is that convergence aligns national standards with international ones rather than importing them wholesale, allowing necessary local modifications.

Key terms

Extra questions & answers

Explore interactively