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USGAAP, IFRS, IGAAP ASSOCHAM September 30, 2005

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USGAAP, IFRS, IGAAP ASSOCHAM September 30, 2005

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    1. USGAAP, IFRS, IGAAP ASSOCHAM September 30, 2005

    2. Accounting Principles & Policies Imagine that you are a business owner and you take copies of your financial records (‘books’) to four different accountants. You ask each one to calculate your profit for the year. A fortnight later they provide you with their answers.

    3. “.. based on cash in your bank at end December compared to prior year, you pretty much break even in 2005.” Accounting Principles & Policies

    4. Accounting vs Cooking

    5. Most Dreaded Accounting Document

    6. The Balance sheet

    7. THE CORPORATE BIKINI

    8. Accounting “Accounting is an art of recording, classifying, and summarising in a significant manner and in terms of money, transactions and events, which are in part at least of a financial character and interpreting the results thereof”. American institute of CPA The process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information. AAA The function of accounting is to provide quantifiable information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions. Accounting Principles Board of AICPA

    9. Basic Accounting Concepts Business entity concept Money measurement concept Historical cost concept Revenue realisation concept. Accounting period Matching Going concern Accrual Conservativeness

    10. Methods of Accounting Accruals or mercantile basis Cash basis Hybrid system

    11. Level of “judgement”. Consistency between time periods. Comparability between companies. Reliability of financial information. Risk of financial controls/ surprises. Need for Accounting Standards ISSUES

    12. Accounting Standards “Accounting standards codify the generally accepted accounting principles. They lay down the norms of accounting policies and practices by way of codes or guidelines to direct as to how the items appearing in the financial statements should be dealt with in the books of accounts and shown in the annual reports. They present the general principles to be put to application using professional judgement. They bring about uniformity of assumptions, rules and policies adopted in financial reporting and thus ensure consistency and comparability.

    13. Plethora of GAAPs US GAAP IFRS/ UK GAAP Indian GAAP Country specific accounting standards

    14. BURNING ISSUE HARMONISATION OF ACCOUNTING STANDARDS OF VARIOUS COUNTRIES/ ECONOMIC REGIONS

    15. WHY Globalisation – opening of economies/ tariff barriers GLOCAL companies/ MNCs Access to international capital markets Global listings/ overseas operations Need for global accounting fraternity to communicate in one language, without having to acquire newer skill sets

    16. WHAT DO WE DO Understand the prominent GAAPs/ structures Try and draw comparable Accounts Understand the differences; Reason them out Build the Opinion Represent to the Institute Institute to take steps on harmonisation Represent to global bodies wherever we have a point Slow but Global Harmonisation is Possible

    17. STRUCTURE - IGAAP Accounting Standards are issued by the ASB of ICAI 29 Accounting Standards so far – Effective 28 Other governing statutes – Companies Act/ SEBI guidelines/ Govt circulars Broadly – IGAAP is close to IFRS

    18. STRUCTURE - USGAAP FASB – designated body to issue accounting standards (FAS) in the private sector Recognised by SEC/ AICPA Various other bodies/ pronouncements/ hierarchy also exist Separate Accounting Standard Board for Govt. companies (GASB)

    19. STRUCTURE - IFRS International Financial Reporting Standards (IFRS) are issued by IASB from 2001 onwards Uptill 2000 – International Accounting Standards Committee (IASC) would issue IAS. IASB adopted all the 41 IAS from 2001 onwards. EU has made it mandatory for all the listed companies on a European Stock exchange to use IFRS by 2005. Non compliance of IFRS may lead to delisting Various Countries are in the process of aligning their Accounting Standards to IFRS Steps towards harmonisation of USGAAP/ IFRS have been taken.

    20. VISION GLOBAL ACCOUNTING MARKET PLACE

    21. Reason for us to be here

    22. FORECASTING

    23. Forecasting of Sales Forecasting of Costs

    24. Financial Controls

    25. Financial Controls

    26. THE END

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