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Application chasm of Accounting Standards in India |
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Since
accounting involving the wide range of economic activity laid towards the
importance of accounting standards and value for it. The practices of
accounting techniques and accounting standards having gaps in application
i.e. wrong interpretation of words, based on non Indian environment,
without consideration of Human Resource Accounting methods etc. The 10
standards out of 15 issued before 12 years and that time open market
situation & economically global environment having its importance.
After Globalization/1991 era creates wider approach among the accounting
practices. It should require reviewing all accounting standards and
requires high as per new era of globalization practices.
Key Words:
International Accounting Standards Committee, Institute of
Chartered Accountants of India, interpretation of words, HRA
Availability of Data:
Quoted data and information are available from public
sources, which are mentioned in references.
Introduction:
Since accounting involving the wide range of economic
activity laid towards the importance of accounting standards and value for
it. At global level there are 45 accounting standards established by the
International Accounting Standards Committee [IASC] when in India,
Institute of Chartered Accountants of India [ICAI] published 15 accounting
standards. The practices of accounting techniques and accounting standards
having gaps in application i.e. wrong interpretation of words, based on
non Indian environment, without consideration of Human Resource Accounting
methods etc. After globalization process it should requires high attention
among accounting standards otherwise irrelevant practices creates more
wide gaps among accounting practices. It requires harmonization with
social environment and tradition of culture as well as government fiscal
policy i.e. income tax structure, uniformity with global to national level
accounting standards because growth of multinational corporations,
management, production and marketing extended over more than one country
as in the case with General Motors, Ford Motors, Uniliver, Philips etc.
Application chasm of Accounting Standards:
At global level IASC issued 45 accounting standards when
national level ICAI issued only 15 accounting standards and therefore
uniformity is very essential, because Z multinational firm adopted Y
accounting standards but it may not included in the Indian level of
accounting standards therefore it creates problem for assessment. The 10
standards out of 15 issued before 12 years and that time open market
situation & economically global environment having its importance.
Another gap is wrong interpretation of words i.e. Revenue,
Income, Profit, Interest etc. Average revenue concept applied e.g. if
total revenue is Rs. 1000 and the number of units of output is 100, then
average revenue is Rs. 10 but wrong interpretation of number of units
suppose 50 then average revenue indicates Rs. 20 Thus it showed different
in average revenue from Rs. 10 to Rs. 20.
Thirdly in India accounting standards is not based on the
Indian culture and environment. It might be adopted as per western
[USA/Europe] accounting standards and those might be relevant in
respective countries. Indian accounting standards committee requires
making some provision of cultural things in the accounting standards while
review of all accounting standards.
Fourth gap is current accounting standard not consider
Human Resource Accounting [HRA] methods. HRA would perhaps be the
effective key to initiate charges to face the challenges. HRA put remarks
exceed the cost to be incurred for any viable decision.
The pioneers in the field of HRA have advocated the
different models. Some of them are cost based on following historical
replacement or opportunity cost principle. Some are based on economic
principles of value while other is based on psychosocial measures of
organizational HR. Indian Accounting Standards not consider the HRA
practices and therefore above provisions of HRA not serve for the purpose.
It should requires involvement of HRA in tune with the retirement schedule
of employee, provisions for likely exit due to death, usual increment in
wages overtime, future wage revision etc.
Conclusion:
Application chasm of accounting standards in India becomes
wider after adopting new global phenomena. Current practices of accounting
standard gaps, indifference between actual and application i.e. wrong
interpretation of words, not based on Indian environment, not consider HRA
methods etc. After globalization process it should requires high attention
among them other wise irreverence practice creates more wide gaps among
accounting practices.
References:
[1] S. K. Bhattacharya and John Dearden, "Accounting
for Management", Vikas Publishing House Pvt. Ltd., Mumbai
[2] James C. Van Horne," Fundamentals of Financial
Management", Prentice Hall International Inc., London, 1977
[3] M. K. Kolay, "Measuring the Value of
Organizational Human resources", The Chartered Accountant, February,
1996 Page No. 16-29
[4] Brummet R. L., E. G. Flamholtz and W. C. Pyle,
"Human Resource Measurement – A Challenge for Accountant", the
Accounting Review, April 1968, Page No. 217-230
[5] S. L. Porwal & H. S. Porwal, "Need for Review
of Accounting Standards", Indian Journal of Accounting, Volume No.
21, December 1994, Page No. 43-51 |
