Page 49 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes 20. Loss on extinguishment of debt: Under Indian GAAP, debt extinguishment premiums are
adjusted against Securities Premium Account. Under US GAAP, premiums for early
extinguishment of debt are expensed as incurred.

Self Assessment

Fill in the blanks:
6. .................................. stipulate stringent accounting treatment as well as disclosure norms,
whereas their Indian GAAP in many cases have relaxed requirements.

7. Under .................................. Financial statements are prepared in accordance with the principle
of conservatism which basically means “Anticipate no profits and provide for all possible
losses”.
8. Under US GAAP .................................. is not considered, if it leads to deliberate and consistent
understatements.
9. Under Indian GAAP, financial statements are prepared in accordance with the presentation
requirements of Schedule VI to the Companies Act, ..................................

10. Under Indian GAAP (AS 13), .................................. are classified as current and long term.
3.3 Role of US GAAP in India

In India, the Institute of Chartered Accountants of India (ICAI), being the premier accounting
body in the country, has been formulating Accounting Standards since 1977. The standard setting
followed by Indian GAAP:
1. The ICAI follows a consultative process in the formulation of accounting standards which
ensures participation of all interest groups through Accounting Standards Board (ASB).
2. Following the above process, the ICAI has issued 29 Accounting Standards till date. Out of
these Standards, one Standard, viz., AS 8, has been withdrawn pursuant to AS 26 becoming
mandatory.

Notes The members of the FASB are appointed by a privately-funded foundation, the
Financial Accounting Foundation (FAF).

In US, the legalistic and litigious nature of the business environment has led to a style of
accounting standards and supporting guidance that is rule-driven. The standard setting followed
by US GAAP:
1. A rule for almost every circumstance. Even then the standards written in terms of broad
principles, interpretations are written that have the effect of fencing the principles with
rule.
2. Because of federal character of US Govt. there are multiples accounting and other bodies
making accounting statements and pronouncements.
3. Under such circumstances it becomes difficult to find the accounting pronouncement, can
be called US GAAP.

4. Financial Accounting Standard Board (FASB) is the main body which formulates the US
GAAP.

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