Compare the company’s profitability using company GAAP and U.S. GAAP

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Accounting

Compare the company’s profitability using company GAAP and U.S.GAAP

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Some of these major differences between US GAAP and Indian GAAP which gives rise to differences in profit are highlighted hereunder 1 Underlying assumptions Under GAAP Financial statements are prepared in accordance with the principle of conservatism which basically means Anticipate no profits and provide for all possible losses Under US GAAP conservatism is not considered if it leads to deliberate and consistent understatements 2 Cash flow statement Under GAAP inclusion of Cash Flow statement in financial statements is mandatory only forcompanies whose share are listed on recognized stock exchanges and Certain enterpriseswhose turnover for the accounting period exceeds Rs 50 crore Thus unlisted companies escape the burden of providingcash flow statements as part of their financial statements On the other hand US GAAP SFAS 95 mandates furnishing of cash flow statements for 3years current year and 2immediate preceding years irrespective of whether the company is listed or not 3 Investments Under GAAP Investments are classified as Current and Long term These are to be further classified Government or Trust securities Shares debentures or bonds Investment properties Othersspecifying nature Investments classified as current investments are tobe carried in the financial statements at the lower of cost and fair value determined either on an individual investment basis or by category of investment but not on an overall or global basis Investments classified as long term See Answer

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