Indian Accounting Standards - An Overview

Such standards have been developed in India over the period of time. These standards are also referred to as Ind As. Such standards have to be adopted by different form of companies and NBFCs in India, under the supervision and the vigilance of the Accounting Standards Board (ASB). The accounting standards board was developed as a regulatory authority and body in 1977.

The ASB is a professional and autonomous body which is governed under the Institute of Chartered Accountants of India (ICAI). Along with this institute there are other bodies such as the Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce and Industry (FICCI) and Associated Chambers of Commerce and Industry of India (ASSOCHAM) which govern the requirements related to the ASB.

Individuals, professors and academics from the above body bring out different standards related to accounting. Indian Accounting Standards have been developed in order to harmonize standards related to international accounting and reporting. International accounting standards are present under the International Financial Reporting Standards (IFRS). The Indian government body that recommended these standards to the Ministry of Corporate Affairs is the National Advisory Committee on Accounting Standards (NACAS).

Bodies that Govern Applicability of Ind As (Indian Accounting Standards)

The following institutions govern the applicability of Ind As which is required to be applied for all companies in India:

Objectives of Indian Accounting Standards (Ind As)

The following are the objectives of utilising Indian Accounting Standards:

• Ensures that companies in India adopt such standards to carry out international recognised and best practices.
• Ensures that compliance is maintained across the globe.
• Have one framework related to unified accounting system.
• Such standards are developed on the principles of the IFRS. Hence this would be a guide to the applicability of such standards.
• Accounting Systems which are utilised in India can be analysed and understood by global companies.
• Through this financial statements and reports of companies would be transparent.
• Such standards are harmonised in order to ensure that the company is complying with global requirements.
• More coverage can be adopted through these Indian Accounting Standards, as Indian companies have increased their global reach when compared to the past.

Applicability of Ind As

The government of India and the Ministry of Corporate Affairs brought out a notification related to the adoption and applicability of Indian Accounting Standards by all companies in India. This notification was brought through a legislative enactment Companies (Indian Accounting Standards (IND AS)) Rules 2015.

As per the above notification, all companies which receive this notification would be required to adopt the Ind As in a phased manner in the financial year 2016-17. Ever since the above enactment, there have been three amendments in the notification which occurred in 2016, 2017 and 2018.

Benefits of Adopting Indian Accounting Standards

There are different forms of benefits for adopting Indian Accounting Standards:

• Harmonization

  By adopting such standards harmonization of accounting rules can be carried out by the company. Through harmonization, global principles related to accounting can be established by the company.

• International Basis

  Accounting standards have international acceptance, hence if a company wants to expand internationally, then such principles would be accepted.

• World Wide Acceptance

  Having such standards ensure international acceptance amongst all institutions and governmental bodies.

• Compliance

  By adopting such standards, effective compliance can be maintained by the company.

Phases of Adoption of Indian Accounting Standards

The Ministry of Corporate Affairs through such notification brought out the requirement for Indian Companies to adopt Indian Accounting Standards in a phased manner in the accounting year 2016-17. The adoption of such standards would be carried out in a phased wise manner depending on the net worth and the listing status of the company. The MCA divided the applicability and adopting of such accounting standards based on different principles. The system related to voluntary adoption of Indian accounting standards was applicable for companies during the financial year of 2014-15 and 2015-16. Such standards could be either adopted voluntarily and mandatorily. However, the MCA brought out the requirement that such standards are required to be adopted by the company mandatorily over the period of time. The following are the phases of implementation:

Phase I

This phase is classified as the mandatory applicability of the Indian accounting standards as required by the companies. Such phase was implemented from 01 April 2016. Phase I would be applicable to the following companies:

• Listed Companies (Companies that have their securities listed in a recognised stock Exchange).
• Companies that have the net worth value of more than Rs. 500 Crore.

Note- For the net worth application, the previous three years financials of the company would be checked. As these accounting standards were brought about in the year 2016-17, the previous financial years i.e. 2013-14, 2014-15 and 2015-16 would be considered.

Phase II

In this phase all companies would have to adopt Ind AS (Indian Accounting Standards) from 01 April 2017. Hence the next financial year is considered for the applicability of Indian Accounting standards. Phase II would be applicable to the following companies:

• Listed Companies (Companies that have their securities listed in a recognised stock Exchange- as on 31 March 2016.
• Companies that have the net worth value of more than Rs. 250 Crore but lesser than Rs. 500 Crore.

Note- As these accounting standards were brought about in the year 2016-17, the previous financial years i.e. 2013-14, 2014-15 and 2015-16 would be considered.

Phase III

This phase is classified as the mandatory applicability of Ind As by all forms of banks, NBFCs, SEBI regulated entities and Insurance Companies. This phase would be applicable from 01 April 2018. Phase III would be applicable to the following companies:

• Companies that have the net worth value of more than Rs. 500 Crore. Such net worth requirements would only be applicable to such companies from 01 April 2018.
• The Insurance Regulatory and Development Authority of India (IRDAI) through a separate notification would ensure that the insurance company meets the net worth requirement. NBFCs and other financial institutions net worth requirement would be checked by looking into the past three financial years i.e. 2015-16, 2016-17 and 2017-18.

Phase IV

This phase would only be applicable for all NBFCs whose net worth is more than Rs. 250 crore but less than Rs. 500 crore. This Applicability would be considered from the period of 1 April 2019.

Will Indian Accounting Standards be applicable to subsidiary or associate companies?

If the accounting standard is adopted by an Indian company, then it would be applicable to all forms of subsidiaries, sister companies, holding companies and associate companies. No form of individual qualification would be considered for these forms of companies. Hence from the above the applicability of IND as would be automatic. If a company is controlled by a foreign company, then the accounting principles have to be considered as a standalone basis. The implementation of IND As would not be required for those companies.

What services are provided under Indian Accounting Standards?

• Business advisory services related to specific Ind AS & IFRS applicability i.e. Business merger, Consolidation, Financial Instruments, Hedge Accounting, Leases, and Revenue Recognition
• Planning, implementation, and conversion of IND Accounting standard.
• Facilitating in conversion to the new IND AS standards.
• Providing assistance in analyzing the difference between GAAP and Indian Accounting standards.
• Assistance in deciding new policies and procedures required to be implemented under the Indian Accounting standards.
• Assistance in executing the identified changes for meeting Ind Accounting standards
• Imparting training as required to the staff on Ind AS concepts and requirements
• Assistance in the compilation of financial statements under the IND Accounting Standards.

Indian Accounting Standards- Key Factors for Conversion

There are few key factors which have to be taken into consideration for adopting the above standards by Indian Companies:

• Activities that are managed by the company.
• Identifying and Analysing the Different Tax Implications applicable by implementing such standards.
• Redefining and Redrafting Financial Statements to ensure that standards are maintained.
• Identifying and vetting issues related to accounting standards.
• Redrafting Contracts and Entering into Negotiations conducted by various parties.
• Preparation of Financial Reporting as required as per the Indian Accounting Standards.

List of Applicable Indian Accounting Standards

The following table provides a list of the major applicable Ind As:

Enterslice Advantage- Indian Accounting Standards

• Assisting in Adoption of Accounting Standards.
• Providing proper assistance in analyzing the difference between Indian GAAP (Generally accepted accounting principles) and Ind As.
• Assistance in the execution of identified changes for harmonizing to Ind AS.
• Helping the company to impart training to the staff on key Accounting standard concepts and prerequisites.
• Assistance in the collection of financial statements.

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