Tax Planning – Incentives and Export Promotion

  IFRS vs GAAP Aspect IFRS (International Financial Reporting Standards) GAAP (Generally Accepted Accounting Principles - U.S.) Origin Developed by the International Accounting Standards Board (IASB) Developed by the Financial Accounting Standards Board (FASB) Application Used in over 140 countries (e.g., EU countries, Australia, India - via Ind AS) Primarily used in the United States Philosophy Principles-based Rules-based Flexibility More flexible — relies on professional judgment and broad principles More rigid — detailed rules and bright-line tests Inventory Accounting LIFO (Last In, First Out) method is not allowed LIFO is allowed Revenue Recognition Based on a five-step model (similar to GAAP now after ASC 606) Follows detailed guidance under ASC 606 Development Costs Must be capitalized if criteria are met Typically expensed as incurred Fair Value Measurement Emphasis on fair value for more assets and liabilities Fair value used selectively, historical cost still common Wri...

 Introduction  The International Financial Reporting Standards (IFRS) are a set of global accounting standards developed by the International Accounting Standards Board (IASB) to bring consistency, transparency, and comparability to financial statements worldwide.  Recognizing the growing globalization of markets, India decided to converge, rather than adopt fully, IFRS with its own accounting standards, leading to the creation of Indian Accounting Standards (Ind AS).  Evolution of IFRS Globally  1973: Formation of the International Accounting Standards Committee (IASC).  1973–2000: Issuance of International Accounting Standards (IAS).  2001: Establishment of the IASB, replacing the IASC; IFRS began to be issued.  2005: European Union mandated IFRS for listed companies; IFRS adoption gained momentum worldwide.  Evolution of IFRS in India  Pre-2000: India followed its own accounting standards (AS) issued by the Institute of Chartered Acco...