Detailed Comparison of Accounting Standards in India and Australia

This report provides a comparative analysis of accounting standards in India and Australia. It begins with an introduction to the concept of accounting standards and their importance in financial reporting, highlighting the variations that exist across different countries. The research objectives are clearly stated, focusing on comparing the accounting standards of India and Australia. The report then delves into the specific accounting standards of both countries, including the Australian Accounting Standard Board (AASB) and the Institute of Chartered Accountants of India (ICAI), as well as the adoption of International Financial Reporting Standards (IFRS). A detailed comparison is presented, outlining key differences in areas such as business combinations, non-current assets held for sale, exploration of mineral resources, financial instrument disclosures, presentation of financial statements, intangible assets, and agriculture. It also contrasts the use of GAAP in India versus IFRS and the implications for financial statements. The report concludes with a summary of the key findings and the significance of understanding these differences for stakeholders involved in international business and financial reporting.

Running Head: COMPARISON OF ACCOUNTING STANDARDS IN INDIA AND AUSTRALIA
COMPARISON OF ACCOUNTING STANDARDS IN INDIA AND AUSTRALIA
Name of the Student
Name of the University
Author Note

1COMPARISON OF ACCOUNTING STANDARDS IN INDIA AND AUSTRALIA
Table of Contents
Introduction...........................................................................................................................................2
Research Objectives..............................................................................................................................3
Accounting Standards of Australia and India.........................................................................................3
Differences of the Accounting Standard between Australia and India..................................................4
Research Question...............................................................................................................................10
Research Methods...............................................................................................................................10
Conclusion...........................................................................................................................................11
References...........................................................................................................................................12

2COMPARISON OF ACCOUNTING STANDARDS IN INDIA AND AUSTRALIA
Introduction
Under this assignment, there is the attempt for reviewing the literature for the accounting
standards in India and Australia. Accounting standards is the set of common standards, principles
and procedures that defines the basis for the financial policies and practices of accounting.
Preparation and presentation of the financial statements have to follow the external standards,
which guides in their preparation. The standards differ by countries to countries (Hoyle, Schaefer &
Doupnik, 2015). These standards vary around the globe, which are overseen due to combination of
professional private accounting in that particular country and the regulators of various governments.
The compliance of accounting standard and harmonization create the one of the important issues as
the company may find it difficult to practice different accounting standard for the same structure of
the business in different countries (Wang, 2014). The study relating to the differences in the
accounting standard is important because it create additional burden on the expenses in the
financial statements (Brown, Preiato & Tarca, 2014).
In the past few years, there has been growing importance of the international accounting
practices for meeting the demands of the economic agent and facilitating the practices of the
international businesses. It is important topic because it is helpful for the regulators of the capital
market, governments, investors and other stakeholders who are dealing with this financial
information of the companies (Chen, Ding & Xu, 2014). Hence, it gives the importance of the
accounting for being essential tool for the agents of the economics. It has the ability of minimizing
the adverse effect of the diversity among different countries of the accounting practices. Hence, the
objective of this paper is to review the research done from various disciples that examines the
measures of performance and evaluating the knowledge in this field (Yu & Wahid, 2014).

3COMPARISON OF ACCOUNTING STANDARDS IN INDIA AND AUSTRALIA
Research Objectives
The aim of this research is to do the comparison between the accounting standards of India
and Australia and review the research done on this in past to answering the raised questions for
evaluating the knowledge in this state of area.
Accounting Standards of Australia and India
In the country Australia, for maintaining the standards and principles of accounting, the
Australian Accounting Standard board is responsible that is applicable to all the sectors. In India, the
Institute of Chartered Accountant of India, which is established by the act of parliament, is similar to
the AASB. ICAI was constituted on 21 April 1977 as the accounting standard board for taking charge
of formulating the accounting standards (Mora & Walker, 2015). From the international accounting
standard, Australia has adopted forty-one accounting standards. Moreover, Australia have also
developed the domestic standards which takes into consideration the social system and economic
condition within the economy such as AASB 1048 Interpretation and application of standards, AASB
1023 general insurance contracts and so on. These standards are specifically designed for the
domestic purposes, hence, this is not considered because their contextual application will make
them different from the accounting standard of Australia (Christensen et al., 2015).
Indian accounting standards has been abbreviated as Ind AS, which are the standards, which
are converged for IFRS that is also known as International Financial Accounting standards. These are
the policies and document, which provide the principles for the measurement, recognitions,
presentations, treatment and disclosures of the transactions of the accounting in the financial
statement of Ind AS (Tawiah & Benjamin, 2015). It has developed the domestic accounting standards
that are similar to that of the international accounting standard that is under the guidelines laid by
Institute of Chartered Accountants of India (Bhasin, 2016). Although, it has been criticized that the
domestic accounting standards used by India is inadequate and there was problems in their use by
the Indian companies in preparation as well as presentation of the financial statements. It created

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unduly long delay in the direct adoption of the international accounting standards. In comparison to
Australia, India does not have domestic standards, which specifically meets the needs of social
system and economic conditions. However, apart from this, India have created certain acts such as
Insurance act and banking act that guides the way for maintaining the books of accounts of the
insurance and banking industries (Camfferman & Zeff, 2015).
Differences of the Accounting Standard between Australia and India
The may be inherent weaknesses in the accounting standards of domestic which issued in
both the country of Australia and India, which makes the challenges of harmonization. The
comparison between the accounting standards of Australia and India is highlighted in following
points:
Australia’s AASB 3 Business combination and India’s AS 14 Accounting for Amalgamation:
According to Australian accounting standard board, business combination is described as
bringing of the businesses and separate entities together into the one reporting entity. The objective
behind formation of this standard was promoting the comparability of the Australian entities among
the financial reports. As per this standard, accounting of the business combination is based on the
method of purchase. On contrary to this, purchase method and pooling of interest are the two
methods used for the business combination (Camfferman & Zeff, 2015).
The treatment of goodwill is another major difference in the business combinations.
Goodwill is not amortized rather is subjected for frequent review for the purpose of impairment.
However, in the case of India, the amortization is done annually based on the usefulness of the life
of business. The period of amortization takes place and must not exceed ten years of the acquisition
and business consolidation and in case of business amalgamation five years is required unless the
justification of longer period (Camfferman & Zeff, 2015).

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Australia’s AASB 5 Non-Current Assets held for sale and discontinued operations & India’s
standard in relation to this is not explicit until now:
The aim of the AASB 5 is to state the presentation and accounting of the discontinued
operations and assets held for sale. However, In India, for such transactions there is no any explicit
accounting standard. It is because of the retirement and disposal of the fixed assets is specified in
the fixed assets accounting standard. Although, in Australia, the fixed assets which are held for sale
is separately disclosed on the balance sheet or in notes (Tawiah & Benjamin, 2015).
Australia’s AASB 6 Exploration for and evaluation of mineral resources and India’s standard in
relation to this does not exist:
The standard of AASB 6 specifies the accounting and financial reporting of the evaluation
and exploration of minerals. This standard requires that the companies who are involved in this
business have to assess such type of assets for the [purpose of impairment and then measuring it in
accordance with the Impairments of Assets AASB 136. However, in case of India, this particular type
of practice is not done for these companies. In this country, preparation and presentation of
financial reporting is done in the way as other business types engaged in exploration and evaluation
of the mineral resources (Tawiah & Benjamin, 2015).
Australia’s AASB 7 Financial Instruments disclosures and India’s standard relating to this is being
developed:
The standard of AASB7 has the objective of ensuring the relevant disclosures in relation to
financial instruments and the risk profile of it are presented properly for the users in the financial
reports. However, in absence of explicit accounting standard’s disclosure in India, the interpretation
on requirement of the disclosure has might be the revelation of material facts that is referred in AS1.
Although, India is developing this standard due to heavy demand from investors (Tawiah &
Benjamin, 2015).

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Australia’s AASB 101 Presentation of financial statements and India’s AS1 Disclosure of the
accounting policies:
AASB 101 of Australia requires requirement of the presentation, guidelines of structure as
well as requirements of the content for the financial reports presentation. This have the objectives
for providing comparison between the company’s financial reports in the different time period as
well as with the other companies in same or different periods. This standard has laid different
principles of accounting that have to be followed by accountant such as principle of accrual basis,
materiality and aggregation, going concern principle and so on (Kraal, Yapa & Joshi, 2015).
In case of India, there is no prescribed format of the presentation of the income statement
and income statement for the accounting standard. There is no accounting, which mentions the
accounting principles. However, AS1 describes the policy of accounting that has to be followed by
the company while the preparation of books of accounts (Bamber & McMeeking, 2016).
Australia’s AASB 138 Intangible assets (R&D) and India’s AS8 accounting for research and
development:
AS6 of India describe that total expenses incurred in the research and development have to
be shown in the income statements for the year. However, deferred expenses on the research and
development are also shown in the balance sheet in the ‘Miscellaneous expenditure’ headings. In
case of Australian accounting standard AASB 138, expenses of research have to be treated as fully
expense and the cost of development have to be capitalized in the financial statements after the
inflow of the revenue (Bamber & McMeeking, 2016).
Australia’s AASB 141 Agriculture and India’s standard in relation to this is being developed:
According to AASB 141, there should be the treatment of accounting, presentation of the
financial statements and disclosures by the companies that is engaged in the activities of agriculture.
However, in case of India, generation of income from agriculture is tax-free.

7COMPARISON OF ACCOUNTING STANDARDS IN INDIA AND AUSTRALIA
Another difference between Australia and India’s accounting standards are described as:
IFRS is prepared and updated by International Accounting Standards board (IASB), which is
independent and non-profit organization that is recognized as one of the most popular and favored
accounting standards around the world. However, in case of India, GAAP is designed specifically in
the context of India (Kamath & Desai, 2014). It is followed by most of the Indian companies. When
the company is following GAAP, it is not necessary to mandatory for disclosing of the statements,
whereas in case of IFRS, disclosing is necessary and mandatory in the form of notes. Whenever, the
company asks for following GAAP, it is being assumed that the company is complying with Indian
GAAP for portraying the fair and true view of their affairs of finance (Jorissen et al., 2014). The
financial statements prepared under the Indian GAAP are profit & loss accounts, balance sheet and
balance sheet) (Wang, 2014). However, under IFRS financial statements that are prepared are
balance sheet, which is also known as statements of financial position as well as statement off
comprehensive income that is the income statement. In case of IFRS, the liabilities and assets in the
balance sheet are transmuted by exchange rates when presentation of the financial statements is
not in currency. However, in case of Indian context for GAAP, exchange rate is not required. For the
first time adoption of IFRSA, clear instructions have been provided by IFRS. However, Indian GAAP
does not give any type of clear instructions regarding the adoption of it for the first time (Mishra &
Mohanty, 2014).
The accounting of India follows Generally Accepted Accounting Principles (GAAP). However,
the accounting of US follows the accounting of International financial reporting standards (IFRS).
Ministry of corporate affairs is the GAAP’s legal authority. Historical cost is used in GAAP but
Equipment’s, property and plants are revalued to Fair value (Quraishi, 2016). However, in case of
IFRS, they use historical cost but the assets that are intangible such as equipment’s, plants and
property are revalued by the fair value. The application of GAAP is only in India. However, IFRS is
used in US as well as other countries (Sharma, Joshi & Kansal, 2017). There is the exemption of cash
flows in case of medium and small enterprises in case of GAAP, but in case of IFRS, there is no

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exemption. In case of depreciation, process of GAAP is based on the higher the useful life, however,
in case of IFRS is based on the useful life. In case of revenue, GAAP uses the measurement at the fair
value of received or receivable consideration. However, revenue in IFRS is measured in terms of
charges, which is made to the clients and customers for the goods and services provided (Shukla,
2015).
According to Bhagwan Das, there is no meaning of accounting without the standards
because of professionalism. The importance of application and uses of accounting standards will not
go wrong in case of its legal discipline. Hence, accounting of international discipline should have
standards of single set for all in harmonizing in practice in the global scenario. However, in reality,
there exist various streams in the standards of accounting. These are threats against the
harmonization of accounting standards (Biondi & Lapsley, 2014).
According to Fredrick D.S. Choi, the problem of international reporting arises whenever
investors are removed from the local area, they have to read as well as interpret the prepared
financial statements in accordance with the localized norms of accountings. Moreover, there arises
the problem of message distortions and comparability that is caused by the differences in the
measurement and reporting of accounting, which leads to the decisions relating to poor investments
that reduces the efficiency of the capital market and ultimately affects the societal welfare. Common
set of the international accounting standards are becoming very much important because of now-a-
days investors are pouring money all across the world into the securities of foreign (Biondi & Lapsley,
2014).
According to P.L. Joshi, the liberalization of the economy of India have changed the needs of
the information of the Indian companies and increased the pressure of the international
competition. Their findings revealed that the rate of the adoption in India for the traditional
accounting practices is higher than the techniques developed recently has been slow rather. It is
because higher benefits are derived from traditional techniques. It has been find that despite of the

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similarities of the certain practices of India as well as Australia companies, there were the
differences in respect of the benefits, adoption rates as well as focus on the future emphasis.
Management of India generally conservative, less innovative and try to avoid risk in the adoption of
the new techniques of management accounting. India has the long history of cultural heritage and it
has taken longer time for changing their societal practices and values which is generally true in case
of adoption of the new accounting practices (Biondi & Lapsley, 2014).
According to Mahesh Joshi, it has been find that current accounting standards, the
presentation of the intellectual capital is minor in the financial statements. They have studied on the
investigation and comparison of the voluntary reporting of the intellectual capital by the top 20
companies of the sector of software and technology in the developed country Australia and
developing country India. It has been find that the report disclosure by the Indian companies is on
higher than the Australian companies have. However, the voluntary disclosure of the intellectual
capital is low for both the country and it is declarative in nature (Gray & Kang, 2014).
According to Lawrence S, Speidelland Vinod B. Bavishi, the accounting standards across the
countries differ. However, these differences can provide opportunities for those who would like to
makes an effort for understanding and adjusting for them.
According to Thomas Jeanjean, it has been find the effect of the mandatory introducing of
the standards of IFRS on the quality of earnings and its management. Their findings have been
confirmed that, with the introduction of IFRS, the earnings management’s pensiveness has not
declined. It has confirmed that sharing of the rules is not sufficient in creating the common business
languages as well as national institutional factors and management incentives play the important
role in framing the characteristics of the financial reporting (Newberry, 2015).
According to William F. Miller, the world is moving towards the unification of the set of
standards of accounting. However, the countries who are adopting IFRS, faces many hurdles as well
as overcoming of the suspicions in the quality of the generated information’s under the new

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standards which gives up the control over the setting of standards and ensuring that the accounting
standards supports in comparison to disrupting the economic activities such as investing and lending
(Carnegie & O’Connell, 2014).
According to Nikhil Chandra Shil, the accountant all across the world feels to shorten the gap
for different fields of practices of accounting through the process of harmonization. This
harmonization process enables the single entity of the global community. Today it does not matter
from the diversity of the stockholdings if the accounting standard generates the general purposes. In
the era of globalization, the size of the investors is increasing and there is great need for the
awareness of capital markets by the investors. Hence, there is great need for the harmonization of
the accounting standards globally for keeping in paces with the changing environment and faster the
process of economic decision making process (Bryce, Ali & Mather, 2015).
Research Question
The research development can be done with the help of the aim of answering the following
questions:
1. What are the major differences between IFRS and GAAP?
2. How to overcome the differences between the accounting standards adopted between the
India and Australia?
3. Is the harmonization possible between the accounting standards of India and Australia?
Research Methods
The methods used for the fulfillment of the objectives of the research are the qualitative
analysis. In addition to this, secondary research has been done with the help of various journal and
articles. In designing the research, previous researches have been analyzed. The result of the
previous researches is combined with the outlined research questions in order to reach at the
conclusion.

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Conclusion
The growth in the activities of the international capital market and global trading has
prompted the requirement for the organizations for understanding the differences in the accounting
standards as well as practices in the countries where they have interest. These differences of
international accounting rules have also imposed challenges to the investors as well as interested
parties for making comparisons of cross-border corporations. In the economy of the developed
country, standard setting company and regulators are attempting for ensuring that the prepared
financial information by the corporate for their stakeholders and the users are comparable,
consistent as well as transparent. For overcoming the diversity of accounting, harmonization of
accounting standard of the company plays important role in offering the solution. Although, many
more things have to be achieved in this particular area.
In this paper, accounting standards and its differences between Australia and India has been
highlighted. The study has identified that the differences in the Indian disclosure is on the high scale
than the Australian companies. These differences and lack of consistency in the reporting practices
makes the comparison difficult in the reporting practices. This has emphasized for the need for the
consistent and uniformed framework for the reporting of financial statements. However, India is not
having some of the standards, which are equivalent to some accounting standards of Australia.
Although, while comparing to other developing countries, the diversity between Australia and India
is not significant. In spite of these differences and diversity, Australian Accounting Standard Board
and Institute of Chartered accountant are both committed in maintaining the framework of
accounting sound and geared towards the development of the standards at the international levels.
The embracement of the accounting standards internationally will require time because the
standards at the domestic level will go through process of revision, adjustments and developments.