Indian Accounting Standards
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- Last Updated on 21 June, 2022
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Introduction to Ind AS:
The objective of Indian Accounting Standards:
Before the introduction of Ind AS, financial statements were prepared on the basis of Accounting Standards (AS) which were not in line with the standards and principles applicable globally (IFRS). Due to this investors were not able to assess and compare the financial position of Indian companies with other global companies. In order to make the financial statements uniform, Ind AS were introduced which are converged form of IFRS (global standards). Moreover, introduction of Ind AS will bring consistency in the accounting practices and principles followed by companies in India and other companies across world, leading to enhanced accessibility and acceptability of financial statements by global investors.
Why Ind AS?
• Wider acceptability:
Since Ind AS are converged form of IFRS which are widely acceptable and will give confidence to the user of financial statements.
• Comparability of Financials:
• Changes in standards as per economic situations:
Principles of Ind AS are revised/modified in case there is any major change in economy. Ind AS 29 is ‘Financial Reporting in hyperinflationary Economies’ which deals with situations related to inflation.
• Attracts Foreign Investment:
Adopting Ind AS may attract foreign investors to invest in Indian Companies as that will ensure better comparability with similar companies across the globe.
• Saves financial statement preparation cost:
For multinational companies, it will be beneficial as it will be able to use the same accounting standards in all the markets in which they operate. This will save preparation costs of aligning financial statements of Indian company with other operations.
Indian Accounting Standards Applicability:
Ind AS are applicable to specified category of companies as discussed below:
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Mandatory requirement: Companies are required to follow Ind AS from Financial year 2015-2016. For Financial year 2018-19, following is the limit for companies required to follow Ind AS:
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1. Companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India; 2. Unlisted companies having net worth of Rs. 250 crore or more; and 3. Holding, subsidiary, joint venture or associate companies of companies covered in point (1) and (2) above.
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Non-Banking Financial Companies (NBFCs
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2018-19 |
1. NBFCs having net worth of rupees five hundred crore or more; 2. Holding, subsidiary, joint venture or associate companies of companies covered under point (1) above.
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2019-20 |
1. NBFCs whose equity or debt securities are listed or in the process of listing on any stock exchange in India or outside India and having net worth less than Rs. 500 crore; 2. NBFCs, that are unlisted companies, having net worth of Rs. 250 crore or more but less than Rs. 500 crore; and 3. Holding, subsidiary, joint venture or associate companies of companies covered under point (1) and (2) above.
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Voluntary applicability:
Company may voluntarily apply Indian accounting standards (Ind AS).
Requirement to follow AS:
Corporate entities are required to follow standard of accounting (Ind AS where applicable) while preparing its financial statements as per Section 129 of the Companies Act, 2013.
In case of conflict between Act and Indian Accounting standards:
In case there is any conflict between provisions of any applicable Actand Indian Accounting Standard (Ind AS), the provisions of the Act shall prevail to that extent.
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