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The Non-Banking Financial Companies (NBFCs) adopted the Indian Accounting Standard (Ind AS) for the first time with the beginning of the accounting year 2018. Where, NBFCs are required to adopt Ind AS implementation road map issued by the Ministry of Corporate Affairs (MCA) on 30 March 2016 in a phased manner from accounting periods beginning on or after 1 April 2018. Let’s discuss more about IND AS guidelines for NBFC for the prepration of financial statement;
Additionally, to maintain convergence with IFRS, each year MCA issues annual amendments to Ind AS by incorporating amendments which are issued by International Accounting Standards Board (IASB). The implementation of amendments is expected to have a pervasive impact on the financial services sector, not only in terms of accounting changes but also on several aspects of their business. The implementation of these financial instrument standards is expected to affect almost all line-items in the financial statements of the NBFCs.
The initial plan of MCA was to implement Ind AS for banks, insurance companies and NBFCs from 1 April 2018 onwards. Earlier in this year, Ind AS implementation date has been deferred for banks by one year for insurance entities by two years. Certain NBFCs are required to implement Ind AS in phase I from 1 April 2018 and others in phase II from 1 April 2019, as mentioned below –
The MCA’s notification covers all NBFCs as defined in clause (f) of Section 45-I of the Reserve Bank of India Act, 1934, and includes
NBFCs would be required to prepare both consolidated and separate financial statements based on Ind AS in two phases.
When NBFCs net worth is below INR 250 crore and is not covered in Phase I or II will continue to comply with the existing accounting standards in the Indian GAAP. In that case, the net worth is to be calculated following the separate financial statements of the NBFC as on 31 March 2016 or the first audited financial statements ending after that date.
NBFCs are required to comply with the Indian Accounting Standards general instructions for preparation of financial statements of NBFCs–
Less than one hundred crore rupees to the nearest hundreds, thousands, lakhs or millions, or decimals thereof.
One hundred crore rupees or more to the nearest, lakhs, millions or crores, or decimals thereof
The impact of IND Accounting Standard is that there is an increase in revenue from operations, finance cost and employee cost under Ind AS in comparison to the erstwhile Indian GAAP while there is a fall in profit after tax. Further, the implementation of these financial instrument standards is expected to affect almost all line-items in the financial statements of the NBFCs.
Also, Read: Applicability of Indian Accounting Standards.
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