Financial reporting standards

📘 Financial Reporting Standards – A Complete Overview

Financial Reporting Standards are formal guidelines that ensure companies report financial information consistently, transparently, and comparably. They improve trust in financial statements among investors, regulators, and other stakeholders.

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🌍 1. Major Global Standards

Standard	Full Form	Used In	Overseen By
IFRS	International Financial Reporting Standards	140+ countries (Europe, Asia, etc.)	IFRS Foundation & IASB
GAAP (US)	Generally Accepted Accounting Principles	United States	Financial Accounting Standards Board (FASB)
Ind AS	Indian Accounting Standards	India	ICAI & Ministry of Corporate Affairs (MCA)
AS (Old India)	Accounting Standards	SMEs & legacy companies in India	ICAI

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🧾 2. Key Objectives of Financial Reporting Standards

• 📖 Transparency: Clear view of a company’s financial position

• 🔄 Consistency: Uniform reporting across time and companies

• 📊 Comparability: Easier to compare companies internationally

• 🧠 Accountability: Ensures responsible financial behavior

• 🛡️ Investor Protection: Reliable data helps in decision-making

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🧩 3. Key Components Covered in Standards

Area	What’s Standardized
Presentation of Financial Statements	Format, headings, disclosures
Revenue Recognition	When and how to recognize income
Asset Valuation	Inventory, fixed assets, impairments
Lease Accounting	Classification and reporting of leases
Financial Instruments	Treatment of derivatives, bonds, etc.
Consolidated Financials	Subsidiary and parent company integration
Fair Value Measurement	Consistent definition and valuation

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🔄 4. IFRS vs. GAAP – Key Differences

Feature	IFRS	US GAAP
Principles vs Rules	Principles-based	Rules-based
Inventory method	FIFO & Weighted Avg.	FIFO, LIFO allowed
R&D Expenses	Expensed or capitalized	Mostly expensed
Development Costs	Capitalized (if criteria met)	Expensed

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📘 5. Indian Context – Ind AS

India has converged (not adopted) IFRS through Ind AS. Key points:

• Applicable to listed & large unlisted companies

• Notified by Ministry of Corporate Affairs

• Aimed at improving global comparability

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🧠 6. Importance of Compliance

• ✅ Required for auditing and investor confidence

• ✅ Necessary for IPO, M&A, credit rating

• ❌ Non-compliance may lead to penalties, legal action, or delisting

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📊 7. Financial Reports Prepared Under Standards

• Balance Sheet (Statement of Financial Position)

• Income Statement (Profit & Loss A/c)

• Cash Flow Statement

• Statement of Changes in Equity

• Notes to Financial Statements

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📎 Summary Table

Standard	Scope	Overseen By	Key Users
IFRS	Global	IASB	MNCs, foreign-listed firms
GAAP (US)	USA only	FASB	US-based companies
Ind AS	India (IFRS-converged)	ICAI/MCA	Large Indian companies
AS	India (old version)	ICAI	SMEs, unlisted firms