Indian Accounting Standards

Development of Indian Accounting Standards

The ICAI recognizes the need for a global standard in these global times. Thus, the Government of India along with ICAI decided not to adopt the IFRS the way they are. Instead, it introduced the Indian AS, popularly known as Ind AS. Let us take a look closure look at Indian AS; its history and a few of its main concepts.

Indian AS

The Institute of the Chartered Accountants of India (ICAI) is the body that sets up the Accounting Standards in India. In 2006, ICAI initiated the process of shifting towards the International Financial Reporting Standards (IFRS). International Accounting Standards Board (IASB) issues the IFRS. The purpose of the ICAI to shift towards the IFRS is to increase the acceptability and transparency of the financial statements of the Indian corporates on the global platform.

The government and ICAI first analysed the requirements of IFRS in detail. They then decided to converge it. Accounting Standards Board (ASB) has formulated the Ind AS. It has tried it’s best to keep them in line with the IFRS. Only absolutely essential changes were made.

The Central Government of India issued Indian Accounting Standards in consultation with the National Advisory Committee on Accounting Standards (NACAS). It did this under the supervision and control of the Accounting Standards Board (ASB) of ICAI.

Indian AS (Ind AS) are IFRS converged standards. They are named and numbered in the same way as their corresponding IFRS. National Advisory Committee on Accounting Standards (NACAS) recommended these standards to the Ministry of Corporate Affairs. Ministry of Corporate Affairs (MCA) makes Ind AS applicable on the companies in India. So far 40 Indian AS have been issued.

Indian AS

The significance of Indian Accounting Standards

Ind AS is based on They facilitate the cross-border flow of money, global listing and global comparability of the financial statements. This, in turn, facilitates global investment and benefit to capital market stakeholders. It enhances the investor’s ability to compare the investments on a global basis. This, in turn, reduces the risk of misjudgments. It also eliminates the costly requirements of reinstatement of financial statements.

Applicability of Indian Accounting Standards

The Initial date of implementation of Indian AS was 2011 but due to certain issues, Ministry of Corporate Affairs postponed its implementation date. In July 2014, the Finance Minister announced to apply Ind AS urgently. In February 2015, the Ministry of Corporate Affairs had issued the Companies (Indian Accounting Standards) Rules. It, therefore, revised the roadmap of implementation of Ind AS for companies and excluded the Banking companies, Insurance companies, and NBFC’S from it

As per the notification, from 1st April 2015, Ind AS shall be implemented on a voluntary basis and will be mandatory from 1st April 2016. Later on, it issued the roadmap for implementation on NBFC’s, Banking companies, and Insurance companies.

Phases of Adoption of Indian Accounting Standards

Ministry of Corporate Affairs has notified phase-wise adoption of Ind AS. Specific classes of companies based on their Net worth and listing status helps in this notification.

Phase I   

From 1st April 2016, Indian AS became mandatorily applicable to all companies provided:

  • It is a listed or unlisted company
  • Its Net worth is ≥ ₹ 500 crores

Calculate Net worth using figures for the previous three Financial Years (31.03.2014, 31.03.2015 and 31.03.2016).

Phase II

From 1st April 2017, Indian AS mandatorily applicable to all companies provided:

  • It is a listed company or is in the process.
  • Its Net worth is ≥ ₹ 250 crores but ≤ ₹ 500 crores (on any of the above dates).

Calculate Net worth using figures for the previous four Financial Years (31.03.2014, 31.03.2015, 31.03.2016 and 31.03.2017).

Phase III

Indian AS became mandatorily applicable to all Banks, NBFCs and Insurance companies with effect from 1st April 2018, provided:

  • Net worth is ≥ ₹ 500 crores with effect from 1st April 2018.

IRDA has notified a separate set of Ind AS for Banking and Insurance Companies with effect from 1st April 2018. Core investment companies, stockbrokers, venture capitalists, etc. are all included in NBFCS.

Calculate Net worth using figures for the previous three Financial Years (31.03.2016, 31.03.2017 and 31.03.2018)

Phase IV

From 1st April 2019, Indian AS mandatorily applicable to all NBFCs provided:

  • Net worth is ≥ ₹ 250 crores but ≤ ₹ 500 crores

Companies can follow Ind AS either voluntarily or mandatorily. But, once a company starts following Ind AS, it cannot revert back to its old method of Accounting.

Once Ind AS becomes applicable to a company then, it shall be automatically applied to:

  • all its subsidiaries
  • holding companies
  • associated companies and
  • joint ventures

irrespective of individual qualification of such companies.

  • Net Worth = Total Paid-up share Capital + all reserves out of profits and securities premium – accumulated losses – deferred expenditure and miscellaneous expenditure not written off
  • It should include only capital Reserve arising out of Promoters Contribution and Govt. Grant received. It should not include reserves created out of revaluation of assets, write back of depreciation in Capital Reserves.

Solved Example For You

Q. List the kind of changes made in IFRS while formulating Ind AS?

Ans: ICAI has, while formulating the Ind AS, tried as far as possible to keep them in line with the IFRS and have made changes only where it was absolutely essential. Some of the main changes are:

  • change in terminology to make it consistent with the terminology of law.
  • Some changes considering the economic conditions of our country.
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Rishu Sharma

Is their any similarities between IFRS and Ind AS ?

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Indian Accounting Standards

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