GAAP (Generally Accepted Accounting Principles) refers to the accounting principles, standards, and guidelines that are generally accepted and followed by companies in India for the preparation and presentation of financial statements. These principles are developed and issued by the Institute of Chartered Accountants of India (ICAI) and are based on the historical cost convention. Indian GAAP is considered as the traditional way of accounting in India, where the financial statements are prepared on the basis of the historical cost of assets and liabilities, and the income is recognized on the accrual basis.
Key points about Indian GAAP:
- GAAP includes a set of guidelines for financial statement presentation, the recognition and measurement of transactions, and the disclosure of financial information.
- GAAP is used by companies that are not required to follow the Indian Accounting Standards (Ind AS).
- GAAP is considered as a framework of accounting policies and procedures which are to be followed by the companies preparing their financial statements.
- GAAP is based on the historical cost convention.
- Companies following Indian GAAP are required to comply with the accounting standards issued by the ICAI, the Companies Act, and other regulatory requirements such as the Securities and Exchange Board of India (SEBI) regulations.
- GAAP has been replaced by Indian Accounting Standards (Ind AS) for certain companies.
- GAAP is considered as less comparable and transparent as per the global standard.
