Principle vs Rule |
Principle based. Economic substance |
Generally rule based. Companies act |
based standards |
of the transaction is the prime |
and rules dominate and guide as to |
evaluation factor. |
how a transaction is recorded. |
Standards vs |
Accounting standards take |
Local regulations usually take |
Local laws |
precedence over local laws. |
precedence while preparing financial statements. Whenever there is a conflict between law and standard, the law prevails. |
Presentation of |
Primarily, no prescribed format. |
Companies Act and other industry |
financial statements |
Assets and liabilities need to be |
regulations have defined prescribed |
divided into current and non-current. |
formats. |
Depreciation on |
Depreciation is an annual charge on |
Minimum depreciation rates have |
fixed assets |
basis of estimated life of assets. |
been prescribed in Schedule XIV of |
the Indian Company ' s Act. |
Cash flow |
Mandatory. Any of the direct |
Mandatory for some. Direct method |
statements |
or indirect method can be used. |
for insurance companies and indirect |
method for other listed companies. |
Change in accounting |
Comparatives are restated unless |
The effect of change is included in |
policy and estimates |
specifically exempted, where the |
current year income statement. The |
effect of period( s) not presented |
impact of the change is disclosed. |
|
is adjusted against opening retained earnings. |
Valuations |
Provides specific guidance and |
Positions taken under IAS are |
standards to deal with mergers, |
debatable. |
|
acquisitions, take over, amalgamations etc specifically as regards to valuation related issues. |
Adoption |
IFRS 1 spells out the methodology |
More traditional and insulated from |
methodology` |
and systems to be adopted for first |
changing economic scenario. A more |
time adoption of IFRS. |
historical perspective. |
|
IFRS specifies the financial reporting in hyper inflationary economies. Also has a specific standard for retirement benefit plans, agriculture, insurance contracts and disclosure of financial instruments. |