Understanding Indian Accounting Standard: How it impacts our Economy?
Reserve Bank of India (RBI) has again postponed the implementation of India Accounting Standards. There is a need to implement the legislative amendments in the new accounting standards which are still into consideration by the government.
“Accordingly it has been decided to delay the implementation of the rules until further notice”, the RBI added in the statement on its website.
What is the Indian Accounting Standards? How is it applicable?
Here is all that you need to know about the accounting standards adopted by the companies of India. Constituted as a body in the year 1977, Indian Accounting Standard (Ind-AS) is issued under the supervision of the Accounting Standards Board (ASB). Representatives of ASB which is a committee under the Institute of Chartered Accountants of India (ICAI) are from government departments, academicians, and other professional bodies.
Applicability
Either voluntarily or mandatorily, the companies of India have to follow the Ind-AS. Once they start following the standards there is no way in which they can revert to the old method of accounting.
What’s in the news?
Reserve Bank of India, last year, delayed the implementation of the new standards by few days into the start of new fiscal year, due to the need for the legal changes and more preparatory work which has to be done by the country’s bank.
The new accounting methods want the banks of the country not to wait for the borrower to start missing the payments but to make the provision when they judge the loan is likely to sour.
GAAP
Generally Accepted Accounting Principles (GAAP) is a common accounting language for the companies to record accounting and financial information. The basic objective of it is to make the financial results and reports transparent and to easily transfer it with external parties.
Principles of GAAP
1.Own single identity
According to the GAAP, a business or a company has its own single identity. It can exist even if the owner is no longer associated with it
2.Full disclosure
There should be full disclosure of the company’s financial position. There should be transparency.
3.Recognition
All the companies are required to reveal the incomes and expenditures of a financial year.
Conclusion
Governed by the Ministry of Corporate Affairs, the Indian GAAP is applicable throughout the country. As per the recent mandates, all the companies with the net worth of 5 billion INR is required to follow Indian AS.
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