Regulatory and Economic Environment

In fact, a somewhat ‘hands-on’ approach is used in order to have a say in the economy by the government. The regulatory framework in India is to provide accounting information so that the government can execute planning and managing of corporate behaviors. All companies are expected to be honest about their accounting practices irrespective of how big or small they are.
Types of business organizations: Roberts, Weetman and Gordon stated, "an important economic feature influencing accounting is the type of business organization that dominates the economy. Two features of business organizations are particularly important in helping to explain accounting rules practices:
stated that in India the business can be categorized into very large business houses, medium business organizations and very small businesses. There are many family-owned businesses too. Contrary to the popular belief the family-owned businesses in India are not always small. In fact, the largest business house in this country is a family business. Hence the regulatory framework is based on the size of the business organization. …
In fact the implementation of the International Accounting Standard – IAS 41Agriculture can be attributed to the pressure from agriculturally rich countries like India. India is growing by leaps and bounds in technical sectors and foreign trade and investments. Many multinational companies have opened their doors to India. So accounting regulations are also issued in the interest of foreign currency transactions and translation.
Legal factor: India operates largely on the common law legal system but incorporates religious laws too. According to Institutional Shareholder Services, "India’s Companies Act has been in place since 1956 and sets out the current three-tier system of administration on the national state and regional level" (para.5). The main purpose of common law in this country is to protect the owners of the companies.&nbsp.