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All You Need to Know About Indian Accounting Standard

Introduction

Indian Accounting Standard (abbreviated as Ind-AS) is the accounting standard adopted by companies in India and issued under the supervision of Accounting Standards Board (ASB) which was constituted as a body in the year 1977. ASB is a committee under Institute of Chartered Accountants of India (ICAI) which consists of representatives from government department, academicians, other professional bodies’ viz. ICAI, representatives from ASSOCHAM, CII, FICCI, etc.

History

  • India was following accounting standards from Indian Generally Acceptable Accounting Principle (IGAAP) prior to adoption of the Ind-AS.
  • The Ind AS are named and numbered in the same way as the International Financial Reporting Standards (IFRS). National Advisory Committee on Accounting Standards (NACAS) recommends these standards to the Ministry of Corporate Affairs (MCA).
  • MCA has to spell out the accounting standards applicable for companies in India.
  • As on date MCA has notified 41 Ind AS.

Voluntary adoption

Companies can voluntarily adopt Ind AS for accounting periods beginning on or after 1 April 2015 with comparatives for period ending 31 March 2015 or thereafter. However, once they have chosen this path, they cannot switch back.

Mandatory applicability

  • Phase I

Ind AS will be mandatorily applicable to the following companies for periods beginning on or after 1 April 2016, with comparatives for the period ending 31 March 2016 or thereafter:

  1. Companies whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth of 500 crore INR or more.
  2. Companies having net worth of 500 crore INR or more other than those covered above.
  3. Holding, subsidiary, joint venture or associate companies of companies covered above.
  •  Phase II

Ind AS will be mandatorily applicable to the following companies for periods beginning on or after 1st April 2017, with comparatives for the period ending 31 March 2017 or thereafter:

  1. Companies whose equity and/or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of less than rupees 500 Crore.
  2. Unlisted companies other than those covered in Phase I and Phase II whose net worth are more than 250 crore INR but less than 500 crores.
  3. Holding, subsidiary, joint venture or associate companies of above companies.
  •  Phase III

Ind AS will be mandatorily applicable to Banks, NBFC, Insurance Companies from for periods beginning on or after 1 April 2018, with comparatives for the period ending 31 March 2018 or thereafter:

  1. IRDA shall notify the separate set of IND AS for Banks & Insurance Companies with effect from 1st April 2018.
  •  Phase IV

NBFC whose Net worth is more than or equal to INR 250 crores, but less than 500 crores shall have mandatorily applicability of IND AS with effect from 1st April 2019.

Points to be noted

  • Although IND AS has been introduced, it has not completely replaced the existing standards. For class of companies not covered in the notification, existing Accounting Standards will continue to apply.
  • The intention of the Government presently is not to replace the existing standards with IND AS immediately but gradually move towards the same to cover all the companies.
  • Foreign investors prefer their entities in India to follow the IND AS as it brings in better comparability with similar companies across the globe.
  • If entities are planning for future foreign investments it may be a good idea to adopt IND AS on a voluntary basis, to enable the Investors to understand the financial statements and also improve their valuation.