Applicability of Indian Accounting Standards (Ind AS)

About IND AS

Indian Accounting Standards (IndAS) can be considered as guiding principle or standards for the International Financial Reporting Standards (IFRS) to ascertain that Indian Companies have same understandability and accessibility globally. For certain companies, the application of specified standards was made mandatory.

The objective of IND AS is to ensure that the financial statements and reports of an organization are uniform and to make the same user accessible and transparent.

The ASB (Accounting Standards Board), is the regulatory body supervising IND AS. Before the introduction of IND AS, India's accounting system is based on Indian Generally Acceptable Accounting Principle (IGAAP).

Applicability of IND AS

On February 16, 2015, the Ministry of Corporate Affairs (MCA), notified the converged form of IFRS as the Companies (Indian Accounting Standards) Rules, 2015 to maintain the uniformity and harmonization in Financial Statements and Reports.

Voluntary Applicability

A company can voluntarily choose to follow Ind AS without meeting the mandatory requirement under the law (from financial year beginning on or after April 01, 2015). However, once a company opts to follow Ind AS to report financial statements, it will have to follow Ind AS for all the subsequent Financial Statements as well.

Mandatory Applicability

The compulsory application of Ind AS has been rolled out in phases. Get below the complete understanding of the applicability pronounced at different intervals.

The Ind AS by the provisions of the law is made compulsory for a certain set of organizations satisfying the eligibility criteria.

• Phase-1
  Made effective from the financial year 2016-17 on
  1. Companies, whether listed or unlisted, having the net worth of more than or equal to Rs. 500 crores;
  2. Holding Company, Subsidiary, a Joint venture or Associate companies of companies fulfilling the above condition
• Phase-2
  To be implemented with effect from the financial year 2017-18 by
  1. Companies which are listed or in the process of getting its equity or debt listed in any stock exchanges in or outside India;
  2. Companies, not listed under any stock exchange, but having a net worth of not less than Rs. 250 crores
  3. Holding Company, Subsidiary, a Joint venture or Associate companies of companies fulfilling the above conditions
• Phase-3
  The adoption of phase 3 needs to be made with effect from the financial year 2018-19 by the following
  1. Bank, Insurance companies and Non-Banking Financial Corporation (NBFCs) having a net worth of more than or equal to Rs. 500 crores
  2. Holding Company, Subsidiary, a Joint venture or Associate companies of companies fulfilling the above conditions
  # Note: The implementation date for Banks and Insurance Companies had been deferred by their regulatory authorities. Now, the implementation of Ind AS for Banks as deferred by RBI by one year and is from 1st April 2019. And that of Insurance Companies by two years and is from 1st April 2020.
• Phase- 4
  Phase 4 will me made effective from the financial year 2019-20 on
  1. NBFCs which are listed or in the process of getting its equity or debt listed in any stock exchanges in or outside India and having a net worth of more than Rs. 500 crores;
  2. NBFCs, which are not listed, but have the net worth of more than Rs. 250 crores;
  3. Holding Company, Subsidiary, a Joint venture or Associate companies of companies fulfilling the above conditions
  

Important points to be considered

1. Companies need to prepare the financial statements in the immediate next accounting year in which they first cross the threshold limit as specified by MCA.
2. Calculation of Net worth:

Net worth should be calculated as provided under section 2(57) of Companies Act, 2013 which states: