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Finance & Accounting

Difference between Indian Accounting Standards and International Financial Reporting Standards

Ashish M. Shaji
06 Apr, 2022 06 Apr, 2022
Indian Accounting Standards

Ind AS refer to Indian Accounting Standards which are converged standards for International Financial Reporting Standards. The existence of Indian Accounting Standards sought to meet the requirements of IFRS. The concept of Indian Accounting standards has some general differences with the International Financial Reporting Standards. In this article, we shall discuss the same.

What is IFRS?

International Financial Reporting Standards are a deposit of accounting regulations. This provides for common rules which helps financial statements to be consistent, transparent and comparable around the world. IFRS is issued by the International Accounting Standards Board. They lay down guidelines which helps companies to maintain and report accounts. IFRS was set up to form a common accounting language which helps businesses and their financial statements to be consistent and reliable.

The objective of forming IFRS was to provide for a common language for global business via standardized accounting. In case where a company functions in several nations it publishes only one set of financial statements that meet the statutory requirements of countries where it operates. Further having a global standard makes it easier for users of these financial statements to compare them.  

What is Ind AS or Indian Accounting Standards?

Indian Accounting Standards is the accounting standard followed by companies in India and it is issued under the supervision of the accounting standards board that was constituted as a body in 1977. Accounting standards board is a committee under the Institute of Chartered Accountants of India which comprises of representatives from government department and other professional bodies such as ICAI[1], FICCI etc.

The reason behind adopting Ind AS is that it can be considered as the guiding principle/standard for IFRS and it has been adopted to make the financial statements and reports of the company accessible as well as transparent.

Difference between IFRS and Ind As

The points of difference between IFRS and Ind AS have been laid down in the table made below-

 IFRSInd AS
MeaningIFRS stands for International Financial Reporting Standards. This accounting standard has been globally accepted.Ind AS stands for Indian Accounting Standards which is an Indian specific version of IFRS.
Established byIt was established by international accounting standards boardThis was established by Ministry of Corporate Affairs.
Complied byIt is complied with by 144 countries globally.It is followed only in India.
DisclosureCompanies acting in accordance to IFRS are required to disclose as a note stating that the financial statements comply with IFRS.Disclosure requirements are not necessary for companies complying with Ind AS.
Components of Financial StatementThe components of financial statements comprises of- Statement of financial position;Profit and loss statement;Statement of changes in equity for the period;Cash flow statement for the period.The components of financial statements comprises of- Balance sheet;Profit and loss account;Cash flow statement;Statement of changes in equity;Notes to financial statements;Disclosure of accounting policies.
Format of the balance sheetThe companies that act as per IFRS require specific guidelines for preparing balance sheets with assets and liabilities to be categorised as current and non-current.The companies that act in accordance with the Ind AS don’t require to have such conditions for balance sheet format. However, the specifications are defined for presenting the balance sheet.

Takeaway

The international financial reporting standards set forth some guidelines of financial reporting. This ensures that a company’s financial statements can be reliable, transparent and comparable across other companies around the globe. Before the implementation of IFRS, every country had generally accepted accounting principles for the businesses. However, with increase in globalization, it became difficult to undertake cross border transactions as it was a complex task to understand financial statements that were prepared as per GAAP. Hence to bring harmony in accounting language, International accounting standards was developed. Then a common reporting standards came to be known as the IFRS. However India didn’t adopt IFRS but decided to adopt standards based on IFRS. In India those standards came to be known as the Indian Accounting Standards converged with IFRS. Indian accounting standards has been framed with slight deviations in IFRS.

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