Bridging the gap: Transitioning from IFRS/Ind AS to US GAAP for Indian finance professionals (Part 2)

Continue your US GAAP journey with practical insights on how to handle inventory, consolidation, financial instruments, taxes, and cash flows. This guide breaks down the differences between US GAAP and Indian accounting standards with straightforward examples for easier understanding.

Introduction

“What do you mean I cannot reverse that inventory write-down? But we just got new valuation data!”

Remember Priya from our first article? Our accounting expert, who felt like a “first-year trainee” when switching from Ind AS to US GAAP? One year into her journey, she’s making progress but still encounters unexpected challenges.

After eight years of flawlessly applying Ind AS, she hit another US GAAP roadblock. What seemed like common-sense accounting had crashed into another technical wall.

“It is not just different rules. It is like navigating a minefield where every step needs checking against some obscure ASC paragraph.” That is what she said when I met her on a weekend

If you have started exploring US GAAP after reading our first article, you’re on a challenging but rewarding path. I have been there myself.

You have likely noticed how its rules-heavy approach differs from the principles-based framework you are used to. I remember feeling completely lost during my first US GAAP implementation project. The shift feels jarring at first, but trust me, it is a valuable step toward becoming more versatile as a finance professional.

In this second installment, I will continue following Priya’s journey as we tackle the practical aspects of US GAAP that create the biggest headaches for Indian finance professionals. These aren’t just academic distinctions – they’re issues that determine whether your financial statements pass muster with US auditors, regulators, and parent companies.

As Priya told me during our follow-up coffee meeting at our usual Khar café: “Understanding the philosophy is important, but knowing exactly how to apply specific standards is what keeps you employed.”

Let us explore the key areas where US GAAP creates significant differences from what you’re used to, with practical guidance you can apply immediately.

Inventory accounting – where your choice of method matters

As Priya, our accounting expert, progressed one year into her US GAAP journey, inventory accounting emerged as a significant challenge. During a team meeting, she expressed frustration: “Our Indian subsidiary uses weighted average cost, but the US parent insists on LIFO. Why does this matter for group reporting?”

The consulting partner explained: “LIFO can reduce taxable income during inflation, a key reason it is used in the US, but it is prohibited under IFRS/Ind AS (IAS 2.6). This creates major reconciliation challenges.”

Inventory accounting highlights stark differences between US GAAP and Ind AS, impacting financial statements and tax strategies. Here is a clear breakdown with practical guidance.

LIFO: the American anomaly

Under Ind AS (IAS 2), inventory is valued using First-In, First-Out (FIFO) or Weighted Average Cost. US GAAP (ASC 330-10-30) adds Last-In, First-Out (LIFO), a method favored in the US for its tax benefits during inflation.

Why LIFO matters

Tax-driven choice: The IRS’s LIFO conformity rule (IRC Section 472) requires companies using LIFO for US tax purposes to also use it in financial statements issued to shareholders or creditors, though other methods (e.g., FIFO) can be used internally or for non-US subsidiaries.
LIFO reserve: The LIFO reserve is the difference between inventory valued at LIFO and FIFO. For example, Priya’s US parent reported a $12 million (₹100 crore) LIFO reserve, reflecting higher cost of goods sold (COGS) under LIFO, deferring taxes by approximately ₹30 crore (assuming a 30% tax rate).
Practical impact: Converting from weighted average to LIFO for group reporting reduces reported inventory, increases COGS, and lowers gross margins. For Priya’s company, a ₹10 crore LIFO adjustment decreased inventory from ₹100 crore (weighted average) to ₹90 crore, reducing gross margin by 2% and affecting working capital ratios.

Inventory write-downs: the one-way street

Under Ind AS (IAS 2.9), inventory is written down to net realisable value (NRV, defined as estimated selling price less costs of completion and sale) when NRV falls below cost, with reversals allowed if NRV later increases (up to original cost). US GAAP (ASC 330-10-35-1B) is stricter:

For non-LIFO inventories, use “lower of cost or net realizable value” (ASU 2015-11).
For LIFO or retail method inventories, use “lower of cost or market,” where market is current replacement cost, constrained between NRV (ceiling) and NRV minus normal profit margin (floor).
No reversals are permitted under US GAAP.

Example: During a demand slump, Priya’s company wrote down ₹0.85 crore (₹85 lakh) of electronic components. When a chip shortage later increased NRV to ₹1 crore, Ind AS allowed a ₹0.70 crore reversal, but US GAAP kept the inventory at the written-down value, reducing reported assets by ₹0.70 crore.

Your action plan for Inventory Accounting

Document valuation methods: Identify whether your US parent uses LIFO (ASC 330-10-30-9) and convert local weighted average or FIFO calculations for group reporting.
Track write-downs: Create a system to flag US GAAP write-downs to prevent erroneous reversals. Priya’s team used an Excel tool to tag affected inventory items.
Calculate dual NRV: For non-LIFO inventories, compute NRV (ASC 330-10-20). For LIFO, calculate the market with ceiling/floor constraints.
Review Industry Rules: Check ASC 330 subtopics for specific guidance (e.g., ASC 330-10-35-16 for retail inventory).

Example reconciliation tool:

Item	Ind AS Value (₹ Crore)	US GAAP Value (₹ Crore)	Adjustment (₹ Crore)	Reason
Inventory	100	90	-10	LIFO vs. Weighted Average
Write-Down	0.15 (reversed)	0.85	-0.70	No reversal allowed (ASC 330-10-35-14)

Priya’s team built a monthly reconciliation tool in Excel, automating LIFO adjustments and flagging write-downs. “Systemizing the process saved us from costly errors,” she noted.

Consolidation and control – when the definition of “control” gets complicated

“I have been consolidating financial statements for five years. This should be straightforward,” Priya thought when approaching her first US GAAP consolidation.

Then she encountered a term that was not in her Ind AS vocabulary: “Variable Interest Entity” (VIE), a concept defined in ASC 810-10-15-14 that creates a fundamentally different approach to determining which entities are consolidated.

Three weeks and countless late nights later, she finally understood why consolidation under US GAAP can be so different. It wasn’t just new terminology – it was an entirely different approach to determining which entities belong in consolidated statements.

The VIE concept: US GAAP’s consolidation game-changer

In the Ind AS world (IFRS 10), consolidation follows a principle-based approach: control equals consolidation. Control exists when an investor has power over an investee, exposure to variable returns, and the ability to use power to affect those returns. US GAAP requires a sequential two-step analysis according to ASC 810:

Step 1: Is the entity a Variable Interest Entity (VIE)?

According to ASC 810-10-15-14, a VIE exists when any of these conditions are met: –

The entity lacks sufficient equity investment at risk to finance activities without additional support
Equity holders as a group lack:

(1) power to direct significant activities,

(2) obligation to absorb expected losses, or

(3) right to receive expected residual returns

Voting rights are not proportional to economic obligations/rights, and substantially all activities involve or are conducted on behalf of an investor with disproportionately few voting rights

Step 2: Who is the primary beneficiary?

As per ASC 810-10-25-38A, the primary beneficiary must have: –

Power to direct activities that most significantly impact the VIE’s economic performance, and
Obligation to absorb losses or right to receive benefits that could potentially be significant to the VIE

“This VIE concept completely changed which entities we consolidated,” Priya explained.

“We had an R&D partnership we never consolidated under Ind AS, but under US GAAP’s VIE model (ASC 810-10-25-38A), we were deemed the primary beneficiary despite owning just 40% because we controlled the research decisions (power criterion) and absorbed most risks (economics criterion)”

Real-world impact: the structured entity challenge

Let me show you how these different approaches impact financial statements with Priya’s experience:

Her company created a Special Purpose Vehicle (SPV) for a major office development in Pune. Under Ind AS (IFRS 10), they assessed control based on power over relevant activities and determined they didn’t have control because decision-making was shared with the financial partner.

Under US GAAP’s VIE model (ASC 810), the analysis focused on: –

Who absorbs losses if the project fails? (Priya’s company guaranteed 70% of the debt)
Who receives residual returns? (Priya’s company is entitled to 60% of the profits)
Who makes decisions about design and construction? (Priya’s company controlled key design decisions)

“We ended up consolidating the entire ₹350 crore development on our US GAAP balance sheet while it remained off-balance-sheet for Ind AS,” Priya recalled. “This increased our US GAAP assets and liabilities by 15%, though there was no change in the underlying business. Explaining this difference to senior management was… challenging.“

Balance Sheet Item	Ind AS (₹ Cr)	US GAAP (₹ Cr)	Change	Reason
Total Assets	2,330	2,680	+350	SPV consolidation
Total Liabilities	1,520	1,770	+250	SPV debt consolidated
Net Assets	810	910	+100	Net impact of consolidation

I have seen this exact situation play out repeatedly across different industries. The accounting can lead to dramatically different financial statements despite no change in the underlying business.

Voting Interest Model: when VIE does not apply

Not every entity is a VIE. For traditional structures, US GAAP uses a more familiar voting interest model. But even here, differences crop up:

Potential voting rights:

Under Ind AS, potential voting rights (like options and convertibles) count toward control if substantive
Under US GAAP, only currently exercisable rights generally count

De facto control:

Ind AS recognises control without majority ownership (de facto control)
US GAAP generally requires legal or contractual evidence

For Priya, this created confusion around a 45%-owned subsidiary. “Under Ind AS, we consolidated it because other ownership was fragmented, and we clearly controlled decision-making. Under US GAAP, we had to deconsolidate it because we couldn’t demonstrate control through legal rights.”

I have personally struggled with this exact issue. During my first US GAAP implementation, we spent weeks analysing our joint ventures under both frameworks, only to arrive at completely different consolidation conclusions.

Your consolidation action plan

If you are managing US GAAP consolidations, here is my advice:

Inventory all entities with which your company has involvement, not just obvious subsidiaries
Analyse each entity twice – once under VIE guidance and once under voting interest model
Document your analysis with specific ASC references (US auditors expect this)
Create a reconciliation between Ind AS and US GAAP consolidated entities
Reassess regularly – changes in contracts or circumstances can flip consolidation conclusions

Priya eventually developed a quarterly consolidation assessment tool: “We created a decision tree with US GAAP-specific questions. Each quarter, we run every entity through the tool to catch any changes that might affect consolidation. It is saved us from several potential restatements.“

The tool helped identify when an amended joint venture agreement unexpectedly triggered consolidation under US GAAP while having no impact under Ind AS.

In my experience, this systematic approach is critical. When I was helping an Indian tech company with their US reporting, we nearly missed a consolidation change triggered by a minor contract amendment. Having a robust process saved us from what could have been a material error.

Financial instruments: navigating the classification maze

The first time I encountered US GAAP’s financial instrument rules, I felt like I had stepped into a parallel universe. After years of working with IFRS classifications, everything suddenly seemed backward. That is exactly what Priya experienced too.

“I feel like I have walked into an accounting time machine,” Priya remarked while reviewing US GAAP’s asset classification rules under ASC 320, 321, and 326, which differ significantly from IFRS 9’s approach to classification and measurement.

Case study: Global Tech Investments Ltd. (HYPOTHETICAL)

One year into her US GAAP implementation, Priya faced her biggest challenge yet – reclassifying the company’s ₹125 crore investment portfolio. What seemed like a simple mapping exercise quickly spiraled into a complex project affecting both balance sheet presentation and income statement volatility.

The problem:

60% of investments (₹75 crore) classified as FVOCI under Ind AS (IFRS 9)
These equity investments required reclassification under US GAAP (ASC 321-10-35-2), which defaults to fair value through earnings for equity securities
Embedded derivatives in convertible instruments needed separate evaluation under ASC 815-15
Impairment methodology required transition from IFRS 9’s expected credit loss (ECL) to US GAAP’s Current Expected Credit Loss (CECL) model under ASC 326

Let me break down the key differences that create these headaches:

CLASSIFICATION COMPARISON

ASPECT	IND AS/IFRS (IFRS 9)	US GAAP (ASC 320/321/326)
Debt Securities – Primary basis	Business model & contractual cash flow characteristics (IFRS 9.4.1.1)	Both contractual cash flows and management intent (ASC 320-10-25)
Debt Securities – Categories	Amortised Cost, FVOCI, FVTPL	Held-to-Maturity (amortized cost), Available-for-Sale (FV-OCI), Trading (FV-NI)
Equity Securities	FVTPL with irrevocable FVOCI option for non-trading (IFRS 9.4.1.4)	FV-NI for all equity securities with readily determinable fair value (ASC 321-10-35-2)
Reclassification	Permitted when business model changes (IFRS 9.4.4.1)	Highly restricted; only in rare circumstances (ASC 320-10-35)
Credit Losses	Expected credit loss (ECL) model with 3 stages (IFRS 9.5.5)	Current Expected Credit Loss (CECL) model with full lifetime losses at inception (ASC 326-20)

“I struggled with this for weeks. Then I realised I needed to stop translating and start thinking natively in US GAAP terms,” Priya told me over a casual WhatsApp chat

For debt securities, she developed a decision tree based on ASC 320:

1. Does management have the positive intent and ability to hold to maturity? → Held-to-Maturity (HTM)

2. Is the security held for trading in the near term? → Trading (FV-NI)

3. If neither of the above → Available-for-Sale (AFS)

For equity securities, she applied ASC 321:

1. Does the equity have a readily determinable fair value? → FV-NI

2. No readily determinable fair value? → Cost method with adjustments for impairment and observable transactions.

Priya created detailed documentation templates to support these classifications with specific criteria aligned with both US GAAP requirements and the company’s treasury policy.

Credit loss models: a practical comparison

I have helped numerous clients implement both frameworks.

Here is what actually happens in practice:

Ind AS approach (IFRS 9.5.5):

Forward-looking expected credit loss (ECL) model
Three-stage approach: –

Stage 1: 12-month ECL (performing assets)

Stage 2: Lifetime ECL (significant increase in credit risk)

Stage 3: Lifetime ECL (credit-impaired)

Consider the probability of default, the loss given default, and exposure at default
Significant judgment in determining the significant increase in credit risk
Incorporates reasonable and supportable forecasts

US GAAP approach (ASC 326-20, CECL): –

Day 1 recognition of lifetime expected credit losses
Single measurement approach (no staging)
Based on “expected” rather than “incurred” losses
Considers historical experience, current conditions, and reasonable forecasts
Often results in higher provisions due to lifetime measurement
Historical loss data are typically weighted more heavily than forward-looking factors
Requires vintage disclosures for financing receivables

Comparison of key implementation considerations:

Aspect	Ind AS (IFRS 9)	US GAAP (ASC 326)
Initial Recognition	12-month ECL for Stage 1	Lifetime losses from Day 1
Credit Deterioration	Triggers movement between stages	Does not affect the measurement approach
Data Requirements	A mix of historical and future-looking	Heavily weighted to historical patterns
Implementation Complexity	Complex staging assessment	Complex estimation of full lifetime losses

Real world impact: For Priya’s tech company, receivables from the same customer base resulted in:

₹2.8 crore provision under Ind AS
₹5.1 crore provision under US GAAP
No change in actual credit risk

“Explaining this 82% increase in credit provisions to our CFO was a nightmare,” Priya confessed. “How can the same customers suddenly be nearly twice as risky just because we changed accounting frameworks? I had to create a detailed reconciliation showing how the different measurement approaches created this gap.“

Credit Loss Reconciliation example:

Factor	Ind AS Impact (₹ Crore)	US GAAP Impact (₹ Crore)	Difference (₹ Crore)
12-month vs. Lifetime	2.8	4.2	+1.4
Economic Forecast Weighting	0	0.5	+0.5
Different Default Definitions	0	0.4	+0.4
Total Provision	2.8	5.1	+2.3

Your implementation roadmap

Based on my experience implementing dual reporting frameworks across multiple companies, here is the approach that works best:

STEP 1: Document both frameworks independently (Month 1-2)

Create separate decision trees for IFRS 9 and ASC 320/321/326 classification criteria
Develop documentation templates that satisfy both frameworks’ requirements
Do not try to “translate” between systems – think natively in each framework

STEP 2: Build classification documentation templates (Month 2-3)

For US GAAP: Focus on intent and ability documentation (ASC 320-10-25)
For equity securities: Document fair value election decisions (ASC 825-10-25)
Align with treasury policy and investment committee governance
Create an authorisation matrix for classification decisions

STEP 3: Create side-by-side credit loss models (Month 3-5)

Develop separate models for IFRS 9 ECL and ASC 326 CECL calculations
Leverage common data inputs where possible (historical default rates, recovery data)
Document key assumption differences (e.g., staging criteria, forecast periods)
Consider macroeconomic factors and how they’re weighted differently
Perform a sensitivity analysis on key assumptions

STEP 4: Implement data-driven reconciliation tools (Month 5-7)

Create a comprehensive reconciliation template showing all classification differences
Track key differences by instrument type and measurement category
Build reconciliation into the month-end close process with validation controls
Develop standard explanations for recurring differences to use in management reporting

When I implemented this approach at a major financial services firm, we reduced reconciliation time from 15 days to just 3 days per quarter.

My takeaway: Financial instruments represent one of the areas where US GAAP and Ind AS differ most fundamentally. Success requires building parallel processes rather than trying to bridge frameworks that are conceptually distinct. The sooner you embrace these differences, the more effectively you will navigate them.

Income taxes: when “probable” is not what you think it is

I will never forget the look on my CFO’s face when I explained why our effective tax rate jumped 5% under US GAAP reporting. “How can we owe more tax just because we’re using different accounting rules?” he demanded.

The questions only got harder from there.

Priya faced the same interrogation when her CFO spotted the tax rate differences on her first US GAAP reporting package one year into implementation.

“The CFO asked why our effective tax rate was suddenly 5% higher under US GAAP than Ind AS,” Priya explained.

“Same business, same tax jurisdiction, completely different numbers.”

This highlights one of those challenging areas where US GAAP (ASC 740) and Ind AS (based on IAS 12) create significant differences that can surprise even experienced finance professionals.

Let me walk you through what is happening behind the numbers.

The recognition threshold trap

The root of the problem lies in how each system handles uncertainty in tax positions:

Under Ind AS/IFRS (IAS 12): –

You recognise and measure uncertain tax positions based on the “probable” standard (>50% likelihood)
You can use expected value (probability-weighted outcomes) for measurement
The IFRIC 23 interpretation provides guidance on uncertain tax treatments
Professional judgment plays a major role in assessment

Under US GAAP (ASC 740-10-25-6): –

The two-step approach to uncertain tax positions (UTPs): –

Step 1: “Recognition”

– use a “more likely than not” threshold (>50%) to determine if tax position should be recognised

Step 2: “Measurement”

use the “cumulative probability” approach (the largest amount with >50% cumulative probability of realisation)

Only the largest amount of benefit with >50% likelihood gets recognised
More prescriptive approach with detailed documentation requirements

Let me translate this into real money with an example from Priya’s company:

They had a tax deduction with a 60% chance of being sustained at ₹10 crore and a 40% chance at ₹15 crore. How would this be recorded? –

Under Ind AS (IAS 12/IFRIC 23): ₹12 crore (probability-weighted: 60% × ₹10 crore + 40% × ₹15 crore) –
Under US GAAP (ASC 740-10-30-7): ₹10 crore only (highest amount with >50% probability)

UTP example table:

Tax Position	Probability	Amount (₹ Crore)	Ind AS (₹ Crore)	US GAAP (₹ Crore)
Scenario 1	60%	10	6	10
Scenario 2	40%	15	6	0
Total Benefit			12	10

“We had to create a complete inventory of every uncertain tax position and reassess them under US GAAP criteria,” Priya told me. “Our tax department needed to implement new documentation procedures and valuation models.”

I have been in those painful meetings with tax teams. They already track these positions for tax authorities—now they need separate analyses for different accounting frameworks.

Valuation allowances: the American safety net

The differences do not stop there.

Another major divergence appears in how each system approaches deferred tax assets (DTAs):

Under Ind AS/IFRS (IAS 12.24, 12.34):

Recognise deferred tax assets when it is “probable” that future taxable profit will be available
Apply judgment to the probability assessment based on available evidence
No separate contra-asset account
assets simply are not recognised if not probable
Recognition threshold is typically considered to be 50-75% likelihood

Under US GAAP (ASC 740-10-30-17 through 30-25):

Apply a “more likely than not” realisation threshold (>50%)
Create a valuation allowance (a contra-asset account) against DTAs that might not be realised
Require significant positive evidence to avoid a valuation allowance
All DTAs are initially recognised, then reduced by a valuation allowance
Negative evidence generally weighs more heavily than positive evidence

“The valuation allowance concept does not exist in Ind AS,” Priya stated. “We suddenly had to book a ₹40 crore valuation allowance against deferred tax assets that we fully recognised under Ind AS, creating a huge GAAP difference.”

Valuation Allowance example:

Item	Ind AS (₹ Crore)	US GAAP (₹ Crore)	Difference (₹ Crore)	Explanation
Gross DTA – Tax Losses	80	80	0	Same underlying tax losses
Gross DTA – Temporary Differences	20	20	0	Same timing differences
Unrecognised DTA (Ind AS)	(15)	N/A	+15	Not probable under IAS 12
Valuation Allowance (US GAAP)	N/A	(55)	-55	ASC 740-10-30-21 assessment
Net DTA on Balance Sheet	85	45	-40	Significant impact

In my consulting work, this single difference has created some of the largest reconciling items between frameworks. One client’s balance sheet showed deferred tax assets of ₹85 crore under Ind AS but just ₹45 crore under US GAAP—same business, same tax law, different accounting rules.

A tax director’s perspective

I spoke with Rahul, a Tax Director who’s managed multiple US GAAP implementations, to get his insights on handling these differences.

“The key mistake companies make is treating tax accounting as an afterthought,” he told me. “By the time they bring in tax specialists, key decisions have already been made, creating unnecessary complications. US GAAP tax accounting under ASC 740 requires specialised knowledge that goes beyond general accounting expertise.”

His advice?

Form a cross-functional team including tax experts before you start your implementation. Document your assessment methodology up front, including probability thresholds and how you will evaluate positive and negative evidence per ASC 740-10-30-23 through 30-25.

Your tax accounting roadmap

Based on my experience helping companies navigate this complexity, here is what works:

1. Create a comprehensive uncertain tax position inventory (ASC 740-10-55-3) with documented positions, probabilities, and outcomes

2. Document your valuation allowance assessment with specific positive and negative evidence categories per ASC 740-10-30-21 through 30-25

3. Develop a quarterly tax rate reconciliation between Ind AS and US GAAP tax expense and effective tax rates

4. Involve tax specialists early in the US GAAP implementation process

5. Implement tax provision software that can handle both frameworks simultaneously

Priya eventually developed a systematic approach: “We created a decision tree specifically for tax positions. Every significant tax position now goes through both Ind AS and US GAAP analysis, with detailed documentation of the differences.“

The next time her CFO questioned the tax rate differences, Priya had a comprehensive explanation ready that satisfied both management and auditors. And more importantly, she avoided what could have been material errors in their financial reporting.

Statement of cash flows – same data, different classifications

After tackling the complexity of tax accounting, I thought Priya would get a break with the statement of cash flows.

It is just tracking money moving in and out, right?

When I called to check on her progress one year into implementation, I could hear the frustration in her voice.

“I thought cash flows would be my safe harbor in this US GAAP storm,” she told me. “I was wrong. Even how we classify basic items like interest and dividends is completely different under ASC 230 compared to IAS 7.”

This is a common misconception I have seen with many clients.

They focus so much on complex areas like financial instruments and taxes that they overlook seemingly straightforward statements, only to be blindsided at the last minute.

Key classification differences

The Statement of Cash Flows reveals another example of how US GAAP’s rules-based approach creates practical differences:

Cash Flow classification comparison:

Item	Ind AS (IAS 7)	US GAAP (ASC 230)
Interest Received	Operating or Investing (choice)	Operating (required)
Dividends Received	Operating or Investing (choice)	Operating (generally), but investing if consistent application (ASC 230-10-45-12A)
Interest Paid	Operating or Financing (choice)	Operating (required)
Dividends Paid	Operating or Financing (choice)	Financing (required)
Income Taxes	Operating, unless specific identification	Operating, unless specific identification
Restricted Cash	Excluded from cash equivalents	Included in cash and cash equivalents (ASU 2016-18)

Practical impact: For Priya’s tech company with significant investments, cash flow classification differences changed their operating cash flow by over ₹20 crore, dramatically altering key performance indicators tracked by management.

Bank overdrafts and restricted cash

Two other differences created reconciliation challenges:

Bank overdrafts: Typically shown as financing activities under Ind AS but offset against cash under specific conditions in US GAAP
Restricted cash: Handled more prescriptively under US GAAP, with specific presentation requirements

“We had to reconfigure our entire cash flow waterfall calculation,” Priya explained. “What seemed like a formatting exercise became a significant reclassification project.“

Quick fix

Priya’s solution was elegant.

“We implemented a multi-GAAP cash flow tool with three key components:

1. Classification matrix: Added ‘Ind AS Classification’ (IAS 7) and ‘US GAAP Classification’ (ASC 230) columns to our cash flow worksheet.

2. Rule documentation: For each major cash flow item, we documented the specific classification rules with standard references.

3. Automatic reconciliation: Built a reconciliation report showing the impact of each reclassification.

This systematic approach eliminated errors and allowed our team to prepare both versions efficiently, reducing preparation time by 60%.

I have recommended this exact approach to several clients since then. Sometimes the simplest solutions are the most effective, especially when dealing with fundamental classification differences between accounting frameworks.

Common transition adjustments: bridging the GAAP

Every US GAAP implementation I have led has its own unique challenges, but certain patterns emerge across companies and industries.

One year into her journey, Priya had developed a comprehensive approach that reminded me of my own learning curve.

During our follow-up coffee meeting in May 2025, she shared her most valuable insight: “The key is not just knowing individual standards—it is understanding how they interact to create systematic differences between Ind AS and US GAAP.”

I couldn’t agree more.

When I was first implementing US GAAP for an Indian manufacturing client, we focused too narrowly on individual standards rather than their combined impact. The result? Endless reconciliation loops that could have been avoided with a more holistic approach.

Top reconciling items for Indian companies

Based on Priya’s experience and what I have observed across dozens of implementations, here are the most significant adjustments you will likely encounter:

1. Revenue recognition timing differences

While ASC 606 and IFRS 15 are largely converged standards, practical differences still arise: –

Contract modifications treated with subtle differences (ASC 606-10-25-12 vs. IFRS 15.20)
Variable consideration constraints are more stringently applied under US GAAP (ASC 606-10-32-11)
Different thresholds for identifying distinct performance obligations – Industry-specific guidance in US GAAP not present in IFRS

I worked with an IT services company that had to defer an additional ₹15 crore of revenue under US GAAP due solely to differences in how contract modifications were treated. Same contracts, same services, different accounting outcomes.

2. Financial instrument classifications

Equity investments: FVOCI option under Ind AS (IFRS 9.5.7.5) vs. mandatory FV-NI under US GAAP (ASC 321-10-35-2)

Debt securities: Business model approach under Ind AS (IFRS 9.4.1.1) vs. intent-based approach under US GAAP (ASC 320-10-25)
Expected credit loss calculations are typically 40-60% larger under the US GAAP CECL model (ASC 326) vs. the three-stage approach (IFRS 9.5.5)
Embedded derivative assessments are more detailed under US GAAP (ASC 815-15)

One pharmaceutical client discovered that a seemingly simple supply agreement contained embedded derivatives requiring separate accounting under US GAAP – an issue completely missed in their Ind AS assessment.

3. Leasing differences

Lease classification: Single model under Ind AS (IFRS 16) vs. dual model with operating and finance leases under US GAAP (ASC 842)
Discount rates: Lessee’s incremental borrowing rate is typically used under both, but practical applications differ
Sale-leaseback accounting: Different transfer of control criteria (ASC 842-40 vs. IFRS 16.99-103)
Low-value lease exemption exists in IFRS 16 but not in ASC 842

These differences resulted in a logistics company showing significantly different debt levels between frameworks, affecting all their leverage ratios and nearly triggering debt covenant violations.

4. Acquisition accounting

Goodwill impairment testing: Annual impairment test under US GAAP (ASC 350-20) vs. impairment indicators approach under Ind AS (IAS 36)
In-process R&D treatment: Capitalised under Ind AS (IFRS 3.B37) vs. expensed in many cases under US GAAP (ASC 805-50-30-3)
Contingent consideration measurement: Fair value under both, but subsequent changes treated differently (ASC 805-30-35-1 vs. IFRS 3.58)
Step acquisitions: Full remeasurement under Ind AS vs. partial under US GAAP

After an acquisition, a tech company I advised had to immediately expense ₹7 crore of in-process R&D under US GAAP that was capitalised under Ind AS, creating a substantial one-time hit to earnings.

Form 20-F: the reconciliation document

For Indian companies with US listings or planning to list, Form 20-F requires a formal reconciliation between your primary GAAP and US GAAP.

The SEC expects: –

Quantification of each material difference with detailed calculations
Clear explanation of adjustment reasoning with specific standard references
Disclosure of accounting policies under both frameworks – Roll-forward of each significant reconciling item.

Sample reconciliation format

Item	Ind AS (₹ Crore)	Adjustment (₹ Crore)	US GAAP (₹ Crore)	Adjustment reason	Standard reference
Net Income	250	-35	215	Sum of the below
Revenue Recognition		-12		Variable consideration constraints	ASC 606-10-32-11
Leases		-8		Operating lease classification	ASC 842-10-25-2
Financial Instruments		-10		CECL impairment model	ASC 326-20
Taxes		-5		Valuation allowance	ASC 740-10-30-21

“Even if you are not listed,” Priya advised, “using the 20-F format as a template for your internal reconciliations creates discipline and ensures regulatory compliance if you eventually pursue a US listing.“

This resonated with me.

I have used this approach with several clients who later pursued US listings and found themselves miles ahead in the preparation process because they’d already built their reconciliation infrastructure.

A controller’s perspective

I spoke with Vikram, a Controller who has managed US GAAP reporting for five years at a major Indian technology firm.

“The first year is brutal,” he acknowledged. “You are discovering differences while simultaneously trying to report them. But by year two, we had identified our top 15 recurring differences and built them into our monthly close process with standardised documentation and controls.”

His advice mirrors what I tell all my clients: “Document everything with specific ASC references. The same issue will recur quarterly, and comprehensive documentation prevents rework and inconsistent treatments. We maintain a ‘US GAAP Adjustments Handbook’ that is updated quarterly with any new interpretations or adjustments.”

Resources for your US GAAP journey – where to turn for help

Throughout my career implementing US GAAP, I have built a collection of go-to resources that save me hours of frustration. Priya did the same thing as she became more comfortable with the framework.

“Google searches only get you so far,” she told me during our last meeting, showing me her bookmarked resources. “I wasted days early on trying to piece together answers from random online sources before I found reliable references.“

I have seen this pattern repeatedly with professionals transitioning to US GAAP. They spend too much time hunting for answers in the wrong places.

Let me share what actually works, as of May 2025.

Essential references

1. FASB Accounting Standards Codification (www.fasb.org)

The official source of US GAAP
Basic view is available for free registration
Professional view subscription recommended for serious practitioners

I remember my first time using the Codification back in 2016. I was overwhelmed by its legal-document structure and endless cross-references. But once I learned to navigate it, everything else made more sense. Start here, not with secondary sources.

Last year, I was helping a client with a complex revenue recognition issue. We spent hours searching through interpretive guidance until someone suggested checking the Codification’s implementation examples. There we found an example nearly identical to our situation, with clear guidance that resolved our question immediately.

2. Big 4 accounting firm publications

EY’s “US GAAP Versus IFRS: The basics – December 2024”
Deloitte “Comparing IFRS Accounting Standards and U.S. GAAP: Bridging the Differences (September 2024)”
KPMG’s “IFRS Compared to US GAAP“
PwC’s “IFRS and US GAAP: similarities and differences”

When I need practical implementation guidance, I turn to these resources first. They translate the technical language of the Codification into practical application steps that actually make sense in the real world.

3. AICPA resources (https://www.aicpa.org)

Technical Q&As for practitioners
Industry audit and accounting guides
Continuing education materials

These are particularly valuable for industry-specific questions that broader guides do not cover. I once spent weeks trying to resolve a software revenue recognition issue for a client until I found the exact answer in an AICPA Tech Q&A. The question addressed precisely the unusual contract structure we were struggling with.

4. Learning communities

The resources that helped me the most weren’t books or websites – they were people. Priya discovered this too:

“The most valuable resource was finding other Indian professionals who had successfully navigated this transition,” she told me. “Their practical advice was worth more than any technical manual.“

When Priya hit a roadblock with consolidation assessments, she reached out to a former colleague now working at an Indian subsidiary of a US company. That 45-minute conversation saved her team weeks of trial and error.

I strongly recommend connecting with:

US-India Professional Accounting Networks on LinkedIn
AICPA International Associate membership for non-US professionals
Industry-specific accounting forums for specialised guidance

When I was struggling with my first VIE analysis for a client with a complex joint venture structure, a 30-minute conversation with someone who’d been through it saved me days of frustration. Don’t underestimate the value of learning from others’ experiences.

One of my clients created an internal “US GAAP Champions Network” – professionals across their organisation who had developed expertise in specific areas. This informal knowledge-sharing group became their most valuable implementation resource.

Conclusion – your successful transition awaits

I still remember the day I felt US GAAP “click” for me. After months of struggling with seemingly disconnected rules, I suddenly saw the system’s internal logic. It wasn’t better or worse than IFRS – just different, with its own consistent approach.

Priya had a similar experience. One year after beginning her US GAAP journey, she led a training session for new team members facing the same transition.

“It is not just about learning different rules,” she told them, drawing on a whiteboard in the conference room. “It is about developing a different mindset—moving from principle-based judgment to rule-based precision.“

This shift doesn’t happen overnight. I have guided dozens of professionals through this transition, and it typically takes 6-12 months of regular practice before it feels natural. But with focused effort and the right approach, you can successfully navigate this path. The journey requires:

Understanding conceptual differences between the systems
Recognising specific standard variations in key areas
Developing systematic reconciliation processes
Building a toolkit of reliable resources

I have seen the career impact this knowledge can have. As more Indian companies engage with US businesses, list on US exchanges, or become subsidiaries of US parents, professionals who master both systems become invaluable. Several of my former colleagues have leveraged this dual expertise into international roles and significant career advancement.

Last month, I ran into Priya at a conference in Mumbai. She was presenting a session on US GAAP implementation lessons for Indian companies. The once-frustrated accountant now confidently fielded complex technical questions from the audience.

“The best advice I can give you,” she told one attendee, “is to stop trying to translate between systems—learn to be bilingual instead. The most successful professionals can switch between Ind AS and US GAAP thinking seamlessly, appreciating each for its distinct approach.“

Your Next Step: Visit the FASB Accounting Standards Codification website at https://asc.fasb.org/ to register for free basic access.

You can also find tutorials on using the Codification on YouTube by searching “FASB Codification tutorial.” Spend 30 minutes exploring how the Codification organises information differently from Ind AS. This first step will begin developing your “US GAAP mindset” and set you on the path to mastery.

The journey is not easy – I have been there myself – but as Priya discovered, the professional growth and opportunities make it worthwhile. Your successful transition to US GAAP fluency begins today.

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