[Analysis] Ind AS Applicability for Non-Financial Companies – Net Worth Criteria | Phased Roadmap | Transition Rules

Ind AS applicability for non-financial companies is determined under the Companies (Indian Accounting Standards) Rules, 2015 based primarily on net worth thresholds and listing status. Ind AS became mandatory in phases: Phase I (from 1 April 2016) applied to listed companies and unlisted companies with a net worth of ₹500 crore or more, while Phase II (from 1 April 2017) extended applicability to all listed companies (other than SME exchanges) and unlisted companies with a net worth of ₹250 crore or more. Net worth is assessed based on standalone financial statements as of the prescribed cut-off date and must be reassessed annually until thresholds are met. Once triggered, Ind AS applies company-wide to both Standalone and Consolidated Financial Statements, and applicability continues even if net worth subsequently falls below the threshold. Companies in the process of listing are also required to adopt Ind AS from the financial year in which listing begins.

Table of Contents

1. Introduction
2. Phased Implementation and Key Adoption Issues of Ind AS for Companies
3. Net Worth Criteria for Determining Ind AS Applicability for Companies
4. Conclusion

Taxmann presents Practical Insights on Ind AS and SAs, a weekly series exclusively for Accounts and Audit Module subscribers of Taxmann.com, focusing on the practical application of Ind AS and Standards on Auditing through structured, issue-based analysis.

Each week features a focused topic with real-world illustrations. This week’s edition examines the issues faced by non-financial listed companies in converging to Ind AS.

1. Introduction

Convergence to Ind AS is not merely a change in accounting standards; it represents a structural shift in financial reporting, governance, and group-level coordination. For non-financial listed companies, transition under the Companies (Indian Accounting Standards) Rules, 2015 requires careful evaluation of net worth thresholds, listing status, group relationships, consolidation mechanics, voluntary adoption options, and timing considerations.

This write-up presents a comprehensive, issue-based discussion, supported by practical illustrations that reflect real-life implementation challenges.

2. Phased Implementation and Key Adoption Issues of Ind AS for Companies

Ind AS was implemented in phases to facilitate an orderly transition from Indian GAAP.

Under Phase I, applicable to financial years beginning on or after 1 April 2016, Ind AS became mandatory for listed companies (equity or debt listed, other than SME exchanges) and for unlisted companies with a net worth of ₹500 crore or more.

Under Phase II, applicable to financial years beginning on or after 1 April 2017, Ind AS became mandatory for all listed companies (other than SME exchanges), irrespective of net worth, and for unlisted companies with a net worth of ₹250 crore or more but less than ₹500 crore.

The initial reference date for determining net worth was 31 March 2014. If a company did not meet the prescribed threshold on that date, it was required to reassess its net worth at each subsequent balance sheet date until the applicability criteria were triggered.

2.1 Whether Ind AS Can Be Voluntarily Adopted for A 15-Month Transitional Period Beginning Before 1 April 2015?

In case a company has historically followed the calendar year (1 January to 31 December) as its financial year and, to comply with the requirement under the Companies Act, 2013 to align its financial year to 31 March, prepares financial statements for a transitional period of 15 months from 1 January 2015 to 31 March 2016, a question may arise as to whether it can voluntarily adopt Ind AS for such transitional period.

The applicability of Ind AS, whether mandatory or voluntary, is determined with reference to the beginning of the financial year and not the end date. As per the notified roadmap, voluntary adoption of Ind AS was permitted only for financial years commencing on or after 1 April 2015.

Since the transitional financial year in this case commenced on 1 January 2015, i.e., prior to 1 April 2015, the company would not be permitted to adopt Ind AS for the 15-month period ending 31 March 2016. Ind AS can be adopted only from a financial year that begins on or after the date specified under the roadmap.

2.2 Whether Ind AS Can Be Adopted Only for Consolidated Financial Statements (CFS)?

In case a non-listed non-financial company, which is not mandatorily covered under the Ind AS roadmap, proposes to adopt Ind AS only for the purpose of preparing its Consolidated Financial Statements (CFS), while continuing to prepare its Standalone Financial Statements (SFS) under Accounting Standards, 2006 (AS) in order to avoid tax and revenue-sharing implications, a question arises whether Ind AS can be applied only at the consolidated level.

Ind AS adoption is required at the company level and applies uniformly to both Standalone Financial Statements and Consolidated Financial Statements. Further, Section 129(3) of the Companies Act, 2013 mandates that consolidated financial statements be prepared in the same form and manner as standalone financial statements.

Accordingly, such a company cannot adopt Ind AS only for the preparation of CFS while continuing to follow AS 2006 for SFS. The same accounting framework must be consistently applied to both SFS and CFS.

2.3 Whether the Selective Adoption of Certain Ind AS is permissible?

In case a company that is not covered under the mandatory Ind AS roadmap does not wish to adopt Ind AS in its entirety but proposes to apply a specific standard, such as Ind AS 109 for fair valuation of investments, while continuing to follow Accounting Standards, 2006 (AS) for all other accounting matters, a question arises whether such partial or selective adoption of Ind AS is permissible.

The notified roadmap requires that a company either adopt Ind AS in its entirety or continue to apply the existing Accounting Standards, 2006 in their entirety. Selective application of individual Ind AS standards is not permitted.

Accordingly, a company cannot apply Ind AS 109 while continuing to follow AS for other accounting areas. However, in situations where AS does not provide specific guidance on a particular matter, reference may be made to the principles laid down in Ind AS, provided such reference does not conflict with the provisions of the notified  AS.

3. Net Worth Criteria for Determining Ind AS Applicability for Companies

For unlisted non-financial companies, net worth is the primary trigger. Net worth is assessed based on standalone financial statements. If a company did not meet the threshold as at 31 March 2014 but later crosses it, Ind AS becomes applicable from the immediately succeeding accounting year.

3.1 Cut-off Date to Decide Ind AS Applicability for Non-Financial Companies – Whether One-Time or Annual Assessment?

A non-financial company is required to determine the applicability of Ind AS based on its net worth as on the prescribed cut-off date under the roadmap.

For companies having a 31 March year-end, net worth as at 31 March 2014 is considered for the initial determination of Ind AS applicability. For companies with a different year-end, the net worth as at the immediately following balance sheet date, for example, 31 December 2014 for December year-end companies, is considered.

Although the roadmap specifically refers to net worth, it is logical to apply the same cut-off date for evaluating other criteria, such as listing status. If a company meets the Ind AS applicability criteria on the relevant cut-off date, it is required to adopt Ind AS from the phase applicable to it.

If a company does not meet the applicability criteria on the first cut-off date, it must reassess applicability at each subsequent balance sheet date. Once any of the applicability criteria is met, Ind AS becomes applicable from the immediately following financial year, as per the relevant phase.

For example, assume a non-listed non-financial company does not meet the Ind AS criteria as at 1 April 2017 and continues to apply AS. If its net worth exceeds INR 250 crores as at 31 March 2019, it becomes covered under Ind AS. Accordingly, the company must adopt Ind AS for financial years beginning 1 April 2019. Comparative information for the year ended 31 March 2019 would also be presented in accordance with Ind AS.

Thus, determining Ind AS applicability is not a one-time exercise. Companies that initially do not meet the criteria must reassess applicability at each balance sheet date.

3.2 Impact of Change in Net Worth on Ind AS Applicability for Non-Financial Companies

Assume a non-listed non-financial company has the following net worth (INR crores):

Scenario	31 March 2014	31 March 2015/2016
I	245	260
II	245	510
III	460	510
IV	510	460
V	510	245
VI	260	245

Under the Ind AS roadmap, a non-financial company having a 31 March year-end should first consider net worth as at 31 March 2014. If the company meets the applicability criteria on this cut-off date, it must apply Ind AS in the relevant phase. If not, it must reassess at each subsequent balance sheet date.

Net worth criteria:

• INR 500 crores or more – Phase 1 (from 1 April 2016)
• INR 250 crores or more – Phase 2 (from 1 April 2017)

Based on these principles, the position in each scenario is as follows:

(a) Scenario I

Net worth increases from INR 245 crores (2014) to INR 260 crores (2015/2016). The company did not meet the threshold as of 31 March 2014. However, it subsequently exceeded INR 250 crores. Therefore, it will be covered under Phase 2 of Ind AS.

It must apply Ind AS from the financial year beginning 1 April 2017, with comparatives for the year ended 31 March 2017. Thus, the transition date in this case will be 1 April 2016.

(b) Scenario II

Net worth increases from INR 245 crores (2014) to INR 510 crores (2015/2016). Since the INR 500 crore threshold is subsequently met, the company will be covered under Phase 1 of Ind AS. It must apply Ind AS from the financial year beginning 1 April 2016, with comparatives for the year ended 31 March 2016. Thus, the transition date in this case will be 1 April 2015.

(c) Scenario III

Net worth increases from INR 460 crores (2014) to INR 510 crores (2015/2016). As at 31 March 2014, the company met the Phase 2 threshold (INR 250 crores but less than 500 crores), so it was already covered under Phase 2. One view is that since it was originally covered under Phase 2, there is no need for reassessment, and it should continue under Phase 2.

However, the more appropriate view is that if net worth increases to INR 500 crores or more before implementation, the company should apply Phase 1. Accordingly, the company will be covered under Phase 1, applying Ind AS from the financial year beginning 1 April 2016, with comparatives for the year ended 31 March 2016.
Thus, the transition date in this case will be 1 April 2015.

(d) Scenario IV

Net worth decreases from INR 510 crores (2014) to INR 460 crores (2015/2016). Since the company met Phase 1 criteria as at 31 March 2014, it is covered under Phase 1, irrespective of subsequent reduction in net worth. It must apply Ind AS from the financial year beginning 1 April 2016.

(e) Scenario V

Net worth decreases from INR 510 crores (2014) to INR 245 crores (2015/2016). Despite the subsequent fall below the threshold, the company had already met Phase 1 criteria as at 31 March 2014. The Ind AS roadmap does not permit discontinuation once applicability is triggered. Therefore, the company remains covered under Phase 1, applying Ind AS from 1 April 2016.

(f) Scenario VI

Net worth decreases from INR 260 crores (2014) to INR 245 crores (2015/2016). As at 31 March 2014, the company met the Phase 2 threshold (above INR 250 crores). Even though net worth later falls below the threshold, once applicability is triggered, it continues to apply. Accordingly, the company will be covered under Phase 2, applying Ind AS from the financial year beginning 1 April 2017, with the transition date being 1 April 2016.

3.3 Applicability of Ind AS to Companies in the Process of Listing

In case a company has a net worth of less than ₹250 crore as on 31 March 2023 and, during the financial year 2023–24, initiates the process of listing its equity securities, a question arises whether it is required to adopt Ind AS for the accounting period in which the listing process has commenced.

As per Rule 4(1)(ii) of the Companies (Indian Accounting Standards) Rules, 2015, 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 are required to comply with Ind AS.

Accordingly, once a company enters the listing process, it is mandatory to adopt Ind AS from the accounting period in which the process begins.

Therefore, in the given case, the company would be required to adopt Ind AS for the financial year 2023–24, along with comparative information for 2022–23, with the transition date being 1 April 2022.

3.4 Date of Transition to Ind AS Where IFRSs Were Previously Adopted

In case a company has prepared its financial statements in accordance with IFRSs for the year 2015–16, with comparatives for 2014–15, and selected 1 April 2014 as its date of transition by preparing an opening balance sheet in accordance with IFRS 1, and is subsequently required to adopt Ind AS under Rule 4(2)(ii) from the accounting year 2016–17, a question arises whether it can adopt Ind AS for the year 2015–16 with a transition date of 1 April 2014.

Adoption of Ind AS must be strictly in accordance with the criteria and timelines prescribed under the Companies (Indian Accounting Standards) Rules, 2015. The applicability of Ind AS is determined based on actual net worth and the specified thresholds under the notified roadmap, and not on prior adoption of IFRSs or on voluntary early application, unless specifically permitted.

Accordingly, the company cannot adopt Ind AS for the financial year 2015–16 unless it satisfies the prescribed criteria for that period. Ind AS should be adopted only in the phase applicable to the company, as per the Rules, based on the company’s actual net worth and the mandated implementation timelines.

3.5 Determination of Ind AS Applicability Based on Actual Net Worth vs Expected Net Worth

In case a company follows April–March as its financial year, and its net worth was ₹300 crore as on 31 March 2014 and ₹480 crore as on 31 March 2015, while the management expects that the net worth will exceed ₹500 crore as on 31 March 2016, a question arises whether the company is required to adopt Ind AS for the accounting period beginning 1 April 2016 (i.e., in the second phase) based on expected net worth.

The applicability of Ind AS is determined based on the actual net worth as per the audited financial statements of the immediately preceding financial year, and not on projected or anticipated net worth.

Accordingly, since the net worth did not exceed ₹500 crore as on 31 March 2015, the company does not meet the threshold for the second phase. Ind AS adoption must therefore be determined based on actual net worth as per the relevant reporting date and not on expected net worth.

4. Conclusion

Ind AS adoption for non-financial listed companies must follow a phased roadmap based on actual net worth, listing status, and prescribed timelines, with applicability determined on a company-wide basis for both Standalone and Consolidated Financial Statements. Voluntary or selective adoption is generally not permitted, and once thresholds are met, even if net worth later declines, the adoption cannot be deferred. Companies in the process of listing must adopt Ind AS from the period listing begins, and prior IFRS adoption or expected net worth does not alter the prescribed transition requirements. Careful planning and adherence to these rules are essential for a smooth and compliant convergence to Ind AS.