Difference between USGAAP, IAS and AS

Rule based vs Principle based

'Rule-based': governed by a large number of detailed rules that are supplemented or amended on an ongoing basis.

'Principle-based': with some scope for interpretation and different options in the treatment of detailed issues.

Same as IAS

Accent

The accent of these standards is on disclosure and transparency.

The accent of these standards is on reporting.

Same as IAS

Historical Background

In the US, greater importance has been placed on capital market financing.

In Europe, greater importance has been placed on financing through loans.

In India, too, greater importance has been placed historically on financing through loans.

Emphasis

Concept of investor protection (geared towards investors).

Concept of creditor protection and capital preservation.

Concept of creditor protection and capital preservation.

Basis of Valuation

Valuation criteria are based on Fair Value (market value).

Principle of prudence is applied while determining value. However, fair value concept is increasingly being considered.

Principle of prudence is applied while determining value. However, fair value concept is increasingly being considered.

Guidance

More detailed application of guidance.

Limited applicability of Guidance.

Limited applicability of guidance

Flexibility

Relatively little ability to make choices.

Relatively greater ability to make choices.

Relatively greater ability to make choices.

Area coverage

Standards are localized and applicable to companies listed in the US stock exchange and Nasdaq.

Standards are more globalised and acceptable in European Union, Australia, Russia etc.

Standards are national and localized and applicable to Indian Companies.                                              

Business combinations

Business combinations must be accounted only under the purchase method.

Business combinations can be accounted for by purchase method and pooling of interest method. Pooling method is allowed if the acquirer cannot be identified.

Both purchase method and pooling of interest method of accounting are allowed. The pooling method is allowed on fulfillment of certain criteria.

Goodwill

Goodwill is generally not amortized, but is subjected to the asset impairment test.

Goodwill is amortized over a period of 20 years and also is subjected to the asset impairment test.

Goodwill arising on amalgamation is amortized over a period of 5 years.

Asset impairment

Asset impairment is recognized only if the future cash flows (not discounted) are below the asset's book value.

Asset impairment is recognized if the discounted present value of future cash flows is below the asset's book value.

Asset impairment is recognized if the discounted future cash flows is below the asset's carrying amount.

Provision for liabilities of uncertain timing and amount

No general standard in effect. Some provisions are not discounted.

IAS -37, a comprehensive standard exists, discounting is required.

AS-29 is a comprehensive standard. This standard does not require discounting.

Issuance of convertible debt

The proceeds are recorded entirely as a liability.

The proceeds from issuance are divided between liability and equity.

The proceeds of issuance are recorded entirely as a liability.

Hyperinflation

Re-measure of subsidiary using parent's functional currency.

General price-level adjustment of subsidiary's financial statements is required and gain or loss of net monetary position is recorded in net income.

Presently no standard exists in this area.

Capitalization of interest on constructed assets

Capitalization required.

In IAS 23, the requirement to capitalize is optional.

AS-16 requires the capitalization of borrowing costs on construction assets.

Direct initial costs for lessors

Recognized as an expense.

Amortize or expense over the term of the lease.

The initial direct costs in the hands of lessor are either amortized or expensed over the term of the lease.

Foreign exchange differences on monetary transactions

Always recorded in net income.

Sometimes added to the cost basis of the asset.

Sometimes added to the cost of fixed asset.

Segment reporting

Segments are components for which information is reported to management and can use whatever GAAP is used for internal purposes. No segment definition.

Business segments are lines of business and geographical areas. Must report using consolidated GAAP. Segment definition is there.

Business segments are lines of business and geographical areas. Must report using consolidated GAAP. Segment definition is there.

Property, plant and equipment

Revaluation is  prohibited.

Revaluation allowed.

Revaluation of Fixed assets is allowed.

Investment in property

Only cost model is allowed.

Can use either fair value or cost model.

Investment property is classified as long-term investments and are carried at cost.

Financial statement formats

SEC regulations require specific formats, but the FASB does not.

Specific line items are required.

Schedule VI of Companies Act prescribes format of financial statements that companies have to follow.

Comprehensive income

Reporting required.

Reporting not required

Reporting not required

Construction contracts for which the percentage of completion cannot be determined

Completed contract method.

Cost recovery method

AS-7 (revised) requires that revenue should be recognised only to the extent of contract costs incurred of which recovery is probable.

Investment in joint ventures - incorporated

Equity method.

In accordance with IAS-31, Equity method or proportionate consolidation method.

Investment in Joint ventures (AS-27) is accounted for by proportionate consolidation method.

Preferred shares - mandatory redemption

Partly recorded as a liability and partly as equity.

Recorded only as liability.

Recorded only as a liability.