US GAAP vs Ind AS: Key Differences for Indian CPA Candidates
By SimplyCPA · 11 October 2026
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- Inventory: US GAAP allows LIFO and prohibits reversing write-downs; Ind AS 2 prohibits LIFO and requires reversals when value recovers.
- Fixed assets: Ind AS 16 allows the revaluation model; US GAAP requires historical cost.
- Impairment: Ind AS 36 reverses impairment losses (except goodwill) when recoverable amount increases; US GAAP prohibits reversals for assets held and used.
- Leases: US GAAP (ASC 842) keeps finance and operating leases for lessees; Ind AS 116 uses a single on-balance-sheet model.
- Provisions: "Probable" means likely to occur under US GAAP, but more likely than not under Ind AS 37 — so US GAAP recognises fewer contingent liabilities.
Why this matters
Indian Accounting Standards (Ind AS), notified by the Ministry of Corporate Affairs under section 133 of the Companies Act, 2013, are converged with International Financial Reporting Standards (IFRS). US GAAP is a separate body of rules set by the Financial Accounting Standards Board (FASB). Most of the concepts overlap — which is exactly why the differences are dangerous in FAR. Your instincts will be right 80% of the time and confidently wrong the rest.
The differences that matter most
| Area | US GAAP | Ind AS |
|---|---|---|
| Inventory cost formula | FIFO, weighted average and LIFO allowed | LIFO prohibited (Ind AS 2) |
| Inventory write-down reversal | Prohibited | Required if value recovers |
| Property, plant and equipment | Cost model only | Cost or revaluation model (Ind AS 16) |
| Component depreciation | Permitted, not required | Required for significant components |
| Impairment test | Two-step for assets held and used: recoverability using undiscounted cash flows, then fair value | One step: carrying amount vs recoverable amount (higher of fair value less costs of disposal and value in use) |
| Impairment reversal | Prohibited for assets held and used | Required (except goodwill) when recoverable amount increases |
| Development costs | Generally expensed (software has specific rules) | Capitalised when Ind AS 38 criteria are met |
| Lessee accounting | Dual model: finance and operating leases (ASC 842) | Single model: almost all leases are financed (Ind AS 116) |
| Contingent liabilities | Accrue if probable (likely to occur) and estimable; use the minimum of a range if no best estimate | Provide if probable (more likely than not); use the midpoint of an equally likely range |
| Extraordinary items | Not permitted | Not permitted |
Example: A machine was impaired by ₹10 lakh in 2025. In 2026 its recoverable amount rises above the reduced carrying amount. Under Ind AS 36 you reverse the loss (up to the carrying amount net of depreciation had no impairment been recognised). Under US GAAP you do nothing — the written-down amount is the new cost basis.
Exam habits to build
- When a question mentions revaluation surplus, impairment reversal or a single lessee model, pause — the answer is usually that US GAAP doesn't allow it.
- Remember that "probable" sets a higher bar under US GAAP.
- Learn the US-only topics from scratch: governmental and not-for-profit accounting, and SEC reporting.
Build your US GAAP base in FAR, starting with inventory, property, plant and equipment and leases.