Finance & Accounting

Applicability of Indian Accounting Standards

Indian Accounting Standards or IND-AS is an Accounting standard that is applicable to be adopted by companies based on the prescribed net owned funds or other factors. It is supervised by the Accounting Standards Board {ASB}. Further, in this blog, we are going to understand its applicability on various types of companies. Also, we are going to see what its importance is and why is it used?

What is the Indian Accounting Standards?

Indian Accounting Standards often referred to as IND-AS is a type of Accounting Standard that is adopted by companies in India under the vigilance of the Accounting Standards Board {ASB}, constituted a government regulatory body in the year 1977.

ABS or Accounting Standards Board is a committee under the Institute of Chartered Accountants of India {ICAI} that consists of the representatives of governmental body, academicians and other professional bodies such as, the Institute of Chartered Accountants of India {ICAI}, Confederation of Indian Industry {CII}, Federation of Indian Chambers of Commerce and Industry {FICCI} and representatives of Associated Chambers of Commerce and Industry of India {ASSOCHAM}, etc.

The naming and numbering standards of IND-AS are mostly the same as that of the International Financial Reporting Standards {IFRS}. The National Advisory Committee on Accounting Standards {NACAS} specifies these standards to the Ministry of Corporate Affairs {MCA}. Then the MCA narrates the applicability of these standards on various companies in India.  

See Also: Income Computation and Disclosure Standards

The MCA gave its latest guidelines in the 41 IND AS. It specifies that it will be applied to companies voluntarily in the Financial Year 2015-16, and mandatorily from the Financial Year 2017-18.

Previously before the adaption of the IND-AS, Indian companies followed the accounting standards given by the Indian Generally Acceptable Accounting Principle {IGAAP}.

The objective of Adopting Indian Accounting Standards

The main objective of adopting IND-AS is for the following reasons;

• It can be considered as the guiding principle/standards for the IFRS
• It is used to ascertain that the understandability and accessibility of the Indian Companies is the same globally
• It ensures the financial statements and reports of any company is uniformed
• It is adopted to make the financial statements and reports of any company accessible and transparent

Applicability of Indian Accounting Standards: Stage Wise Guidelines

According to the MCA guidelines, companies need to follow IND-AS either voluntarily or mandatorily. However, the option for choosing whether to follow these standards is only applicable to some specified group of companies. Also, when a company adopts IND-AS, it cannot revert back to the old method of accounting.

Applicability of Indian Accounting Standards for Companies

The mandatory applicability of the Indian AS for these companies in India from 1^st April 2016 is as follows;

• Listed companies: whose equity or debt securities are listed on any stock exchange outside India or in India having a net worth of Rs. 500 crores or more
• Unlisted Companies holding a net worth of Rs. 500 crores or more
• Holding joint ventures/subsidiary/associated companies of the above-mentioned companies

The mandatory applicability of the Indian AS for these companies in India from 1^st April 2017 is as follows;

• Listed companies: whose equity or debt securities are listed on any stock exchange inside or outside India having a net worth less than Rs. 500 crores
• Unlisted Companies holding net worth between Rs.250 crores and Rs. 500 crores
• Holding joint ventures/subsidiary/associated companies of the above-mentioned companies

 Applicability of Indian Accounting Standards for NBFCs

The list of NBFCs that need to comply with the Indian AS from the accounting period on or after 1^st April 2018 is as follows;

• NBFCs holding net worth more than or equal to Rs. 500 crores
• Holding joint ventures/subsidiary/associated companies of the above-mentioned NBFCs

The list of NBFCs that need to comply with the Indian AS from the accounting period on or after 1^st April 2018 is as follows;

• NBFCs holding net worth less than Rs. 500 crores or is an NBFC whose equity or debt securities are listed on any stock exchange inside or outside India having net worth less than Rs. 500 crores
• NBFC Holding joint ventures/subsidiary/associated companies of the above-mentioned NBFCs
• Unlisted NBFCs having a net worth between Rs.250 crores and Rs.500 crores

Indian Accounting Standards Exemptions

NBFCs whose net worth is less than Rs. 250 crores do not need to adopt IND-AS and can continue to use the Accounting Standards as specified in the Annexure of the Companies {Accounting Standards} Rules, 2006.

Scheduled commercial banks excluding RRBs, insurance companies, and NBFCs need to apply IND AS only if they meet the specified criteria are not allowed to voluntarily adopt the IND AS. This is according to an MCA press release dated 18^th January 2018.

Also, Read: Concept of Cost Audit in India – Why is it Important?

List of Indian Accounting Standards

The list of IND AS is as follows;

• IND AS 101: First-time adoption of Accounting Standard
• IND AS 102: Share-based payment
• IND AS 103: Business Combination
• IND AS 104: Insurance Contract
• IND AS 105: Non-Current Assets Held for sale and discontinued operation
• IND AS 106: Exploration for evaluation of mineral resources
• IND AS 107: Financial instruments: Disclosures
• IND AS 108: Operation Segments
• IND AS 109: Financial instruments
• IND AS 110: Consolidated financial statements
• IND AS 111: Joint arrangements
• IND AS 112: Disclosure of interests in other entities
• IND AS 113: Fair value measures
• IND AS 114: Regulatory deferral accounts
• IND AS 115: Revenue from contracts with customers {Applicable from April 2018}
• IND AS 116: Leases {Applicable from April 2018}
• IND AS 1: Presentation of Financial Statements
• IND AS 2: Inventories Accounting
• IND AS 7: Statement of Cashflow
• IND AS 8: Accounting policies, changes in accounting estimates and errors
• IND AS 10: Events occurring after reporting period
• IND AS 11: Construction Contracts
• IND AS 12: Income taxes
• IND AS 16: Property, plant, and equipment
• IND AS 17: Leases
• IND AS 18: Revenue
• IND AS 19: Employee benefits
• IND AS 20: Accounting for Government grants and disclosure of government
• IND AS 21: The effects of changes in foreign exchange rates
• IND AS 23: Borrowing Costs
• IND AS 24: Related party disclosures
• IND AS 27: Separate Financial Statements
• IND AS 28: Investments in associates and joint ventures
• IND AS 29: Financial reporting in hyperinflationary economies
• IND AS 32: Financial instruments: Presentation
• IND AS 33: Earnings per Share
• IND AS 34: Interim Financial Statements
• IND AS 36: Impairment of Assets
• IND AS 37: Provisions, Contingent Liabilities, and  Contingent Assets
• IND AS 38: Intangible Assets
• IND AS 40: Investment property
• IND AS 41: Agriculture

Conclusion

Accordingly, the Indian companies need to follow the Indian Accounting Standards specified by the MCA in its official notifications. It is mandatory for some specific companies to follow this accounting standard having specific net worth or is holding any subsidiary, joint ventures, etc. However, NBFCs having less than prescribed net worth, etc. is exempted from following the IND AS. Also, insurance companies, commercial banks, NBFCs are not allowed to voluntarily adopt IND AS. Contact Enterslice for more information on Indian Accounting Standards.