1. Geographical Location
2. Demographic Profile
3. Languages of India
4. Religion
5. Colonialism and Independence
6. Government of India
7. Culture
8. Future Prospects
9. Australian-Indian Business Links
10. Environmental Influences
11. Accounting Environment in India
12. Accounting Standards
13. Indian Accountants
14. Other Influences
15. Accounting Issues
16. Appendix 1: Australian Perceptions
17. Appendix 2: Foreign Accounting Firms
18. Bibliography

ndia forms the most substantial part of what is termed the "subcontinent", tucked away at the foot of the great Himalayas in the northern end and bordered by Arabian Sea on the south west side, the south east by the Bay of Bengal and its southernmost tip, Kanya Kumari (Cape Cameron), by the Indian Ocean.

India shares its political borders with Pakistan and Afghanistan on the west, Bangladesh and Burma in the east, Nepal, China, Tibet and Bhutan in the north.

Area: 3,287,263 sq. km

Capital: New Delhi

India is the second most populous country in the world after China.

Population (1995): 984,003,683

Urban Population (1994): 26%.

Population Density: 273 persons per sq km

Literacy Rate: 52.11% (Male: 64.13% Female: 39.29%)

Birth Rate: 28.7 per 1000 population.

Death Rate: 9.3 per 1000 population.

The national language is Hindi.

English is the language used for business in India

The major religions are Hinduism (82%) and Islam. Other minor religions include Sikhism, Christianity and Buddhism. The religious differences in the North of India have catalysed many conflicts between predominantly Islamic Pakistan and India.

uring the era of pervasive colonialism of the 16^th-18^th Centuries, Britain colonised the subcontinent allowing the East India Company to flourish as a result, eventually gaining substantial trade control of the region. Under colonisation, the region was united that had been divided before by religion, race, caste and language.

At Independence India, the leaders of the nation embraced democracy as a way of managing India's heterogeneous society and strengthening the ideal of national unity. The new India was declared as a democratic, socialist, secular, republic country.

The current Prime Minister is Mr Vajpayee:

India is heavily influenced by its class system called the caste system. Like other societies, there are barriers in achieving cross-cultural, cross-racial or cross-class system marriages. The caste system is expected to be brought under increasing pressure with the liberalising of the Indian market.

With China, India offers the other twin of market opportunity to multinationals thanks to the engineered trade liberalisation process started by the BJP (current government in power as well) in 1991.

As the fastest growing market in terms of the middle-class (250 million and increasing exponentially), population and indeed, a suppliers' market, it has been prudent for years to ask whether multinationals can afford not to invest in this market.

ustralia and India share some history in terms of the same-colonisation by Britain. Relations have been termed "sound" but lack "substance". Moreover, this is still true to now though major investments by some Australian companies such as Telstra; ANZ-Grindlays and a host of other small-medium enterprises will give that "substance."

Australia shares legal and language similarities, democratic and secular values with India.

[See also Appendix 1]

Australia also has an active Indian population of some 160,000. Indian born immigrants are the most highly educated in the Australian population with 33% holding post-secondary qualifications. Australian-Indians forms part of the influential Non-Residential Indians (NRI) in home country policy.

However, the divergent foreign policies of both countries have delayed feasible bilateral links. A setback such as last year's subcontinental nuclear-testing is indicative of the sluggish progress for a substantial foreign trade policy with Australia following other Western nations by suspending aid to the country. For this follower approach, Australia is in danger of being tainted for future trade prospects.

here are many environmental factors that influence the accounting and financial reporting in India such as the laws of the country, taxation, stock exchange, the profession and the universities.

Accounting and financial reporting practices are largely based on the United Kingdom. However, there are several differences between the two countries. The Gandhi influence saw India use five - year economic plans inspired by USSR towards a socialist (non- - communist) economy. The former USSR and India were trading partners with the former providing aid to help create a heavy industrial base in the public sector.

Nationalised industry is still an important sector of the Indian economy. Approximately 30 percent of industry are state owned and the largest public enterprise is the Indian Oil Corporation. Additionally, the agricultural sector is of vital importance to the economy.

Public enterprises and the reliance on the agricultural sector are the two major issues facing the Indian economy policymakers today.

Registered companies in India are governed by the Companies Act 1956. There are some remaining public sector services (such as electricity) as well as a few remaining business sectors (such as insurance) which are governed by separate and specific acts, but these are few and limited.

The actions of accountants are regulated by the Chartered Accountants Act 1949, and the Cost and Works Accountants Act 1959. Most companies in India are required to employ Company Secretaries (Company Secretaries Act 1980) who are regulated by their own governing Institute.

The regulatory body is the Institute of Chartered Accountants of India, which issues guidelines and procedures to its members, but has no statutory force. In 1977, the ICAI set up the Accounting Standards Board, whose guidelines are given statutory power by the government. In 1995, however, the government decided to issue "accounting standards" for tax reporting, because ICAI standards were regarded as too flexible.
(Narayanaswamy 1997)

One interesting point to note is that public sector companies in India also publish "Social Financial Reports" (Hedge et al 1997) which disclose the impact that the company has on its environment and its employees. Items from "Recreational and Cultural Activities", to "Increase in cost of living in the vicinity of Steel Plants", are listed in the Social Reports which are an indicative of the strong socialist sentiment still prevalent within the business community stemming from the philosophies of Gandhi's term in power.

These are not entirely an accurate measure of the social impact a firm may or may not have. They only list the positive, not the negative environmental impacts the firm has, but they are still an aspect of Indian accounting which could be an interesting addition to the future of international accounting, making firms accountable for the impact that they have on their surroundings, both environmentally and socially.

ACCOUNTING STANDARDS

The Accounting Standards Board and the ICAI have many influencing bodies. The Department of Company Affairs, the Securities Exchange Board, (SEBI), the Reserve Bank of India, the Income Tax Department, and the International Accounting Standards Committee.

The SEBI has actually issued directives to companies regarding income tax reporting and also reporting to shareholders, so although there are many influences on accounting practices, the main issuing and regulatory body is the ICAI, and its ASB.

Accounting practices in India are unmistakably British in form and structure. As members of the IASC and responding to pressures from the increase in global trade, particularly with the US, accounting practices in India are starting to undergo a massive process of reform.

The case of Infosys Technologies in 1995 illustrates a salient point. Infosys, a software company, gained more than 70% of its revenue from trade with the US, and in 1995, it voluntarily published its financial statements in accordance with US GAAP. This is willingness on the part of many companies to reform Indian accounting standards to facilitate both international trade and investment.

INDIAN ACCOUNTANTS

The universities and colleges of India have an important role in influencing accounting developments. The universities teach accounting practices and relevant legislation. Financial, cost and management accounting, auditing and taxation are all covered.

ransnational accounting issues are plenty and varied. For the purpose of this report, the main points are listed as follows:

• Foreign currency transactions and translations: There is no distinction between foreign operations and foreign entities, which is not with IAS. Monetary items in foreign currency generally translated at closing rate. Non-monetary items other than fixed assets translated at exchange rates at transaction date.
• Lease accounting. Lessee does not capitalise finance leases. Operating lease rentals as well as finance lease rentals expensed over lease term as become payable. Rental payments expensed based on time pattern of user's benefit. Asset is amortised over shorter of lease term or useful life of lessee's other fixed assets.
• Income taxes: current income tax payable recorded on an accrual basis though deferred income tax is not recognised on timing differences.
• Pensions: past service cost is recognised immediately or allocated to future periods in which services are rendered. Prior service cost is recognised over an average of participating employee's expected remaining working lives.
• Assets: Fixed assets are recorded at historical cost. Straight-line, written-down value or other methods. Revaluation of fixed assets recognised and revaluation surplus taken to revaluation reserve, not available for payments of dividends or issues of bonus shares. Depreciation on revalued assets are related to historical cost though with IAS, the assets are related to the revalued amount.
• Segmental information under the Company's Act requires disclosure - both physical and financial - of production sales, inventories of different classes of goods. Disclosure of profits for industry and geographic segments not required though in IAS, the geographical area is disclosed, information about sales, profits, net assets before tax in respect of each class of business are disclosed.
• Current investments are carried at lower of cost and fair value often equal to market value. Long-term investments are carried at cost. Provision for permanent diminution in value must be made though to be harmonised with IAS requirements, certain investments accounted are as stated in consolidated and equity accounting.
• Cash-flow statements: For listed companies, cash flow statements must be published. This requirement was introduced in the 1995/96 accounting year.
• Earnings per share is as yet not required to be disclosed in the Profit and Loss account. No standard or guidance exists on computation of EPS, which lags behind IAS requirements.

[INSERTS]

1. Leading Accounting Firms in India - Fee Data
2. Leading Accounting Firms in India - Ranked by Staff
3. Leading Accounting Firms in India - Fee Split %

The Accountant: June 1996

Central Intelligence Agency: www.cia.gov

DFAT: India's Economy at the Midnight Hour: Australia's India strategy

Hedge, P et al: Social financial reporting in India: A Case International Journal of Accounting, Illinois 1997

Narayanaswamy, Ramaswami: Indian Accounting aims for the world, 1997

Sidhva, Shiraz: The Elephant Awakens 1997