Indian Accounting Standards

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Last Updated on 21 June, 2022

Introduction to Ind AS:

Ind AS stands for Indian Accounting Standard and are converged standards for IFRS (International Financial Reporting Standards). Ind AS are documents and policies that provide principles for recognition, measurement, treatment, presentation and disclosures of accounting transactions in the Ind AS financial statements.

For example: Ind AS 16 on Property, Plant and Equipment (PPE) will provide principles on the criteria on the basis of which PPE is recognised, what all cost will form part of PPE, how to treat those cost and how to present PPE in the financial statement and relevant disclosures. Ind AS are prepared keeping IFRS in mind, in actual these are IFRS in their converged form.There are 41 Ind AS notified till now.

The objective of Indian Accounting Standards:

Before the introduction of Ind AS, financial statements were prepared on the basis of Accounting Standards (AS) which were not in line with the standards and principles applicable globally (IFRS). Due to this investors were not able to assess and compare the financial position of Indian companies with other global companies. In order to make the financial statements uniform, Ind AS were introduced which are converged form of IFRS (global standards). Moreover, introduction of Ind AS will bring consistency in the accounting practices and principles followed by companies in India and other companies across world, leading to enhanced accessibility and acceptability of financial statements by global investors.

Why Ind AS?

Ind AS have many benefits, some of which are discussed below:

• Wider acceptability:

Since Ind AS are converged form of IFRS which are widely acceptable and will give confidence to the user of financial statements.

• Comparability of Financials:

Financial statements prepared using Ind AS are easily comparable with the financial statements prepared by companies of other countries.

• Changes in standards as per economic situations:

Principles of Ind AS are revised/modified in case there is any major change in economy. Ind AS 29 is ‘Financial Reporting in hyperinflationary Economies’ which deals with situations related to inflation.

• Attracts Foreign Investment:

Adopting Ind AS may attract foreign investors to invest in Indian Companies as that will ensure better comparability with similar companies across the globe.

• Saves financial statement preparation cost:

For multinational companies, it will be beneficial as it will be able to use the same accounting standards in all the markets in which they operate. This will save preparation costs of aligning financial statements of Indian company with other operations.

Indian Accounting Standards Applicability:

Ind AS are applicable to specified category of companies as discussed below:

Mandatory requirement: Companies are required to follow Ind AS from Financial year 2015-2016. For Financial year 2018-19, following is the limit for companies required to follow Ind AS:

1. Companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India;

2. Unlisted companies having net worth of Rs. 250 crore or more; and

3. Holding, subsidiary, joint venture or associate companies of companies covered in point (1) and (2) above.

Non-Banking Financial Companies (NBFCs

2018-19

1. NBFCs having net worth of rupees five hundred crore or more;

2. Holding, subsidiary, joint venture or associate companies of companies covered under point (1) above.

2019-20

1. NBFCs whose equity or debt securities are listed or in the process of listing on any stock exchange in India or outside India and having net worth less than Rs. 500 crore;

2. NBFCs, that are unlisted companies, having net worth of Rs. 250 crore or more but less than Rs. 500 crore; and

3. Holding, subsidiary, joint venture or associate companies of companies covered under point (1) and (2) above.

Voluntary applicability:

Company may voluntarily apply Indian accounting standards (Ind AS).

Requirement to follow AS:

Corporate entities are required to follow standard of accounting (Ind AS where applicable) while preparing its financial statements as per Section 129 of the Companies Act, 2013.

In case of conflict between Act and Indian Accounting standards:

In case there is any conflict between provisions of any applicable Actand Indian Accounting Standard (Ind AS), the provisions of the Act shall prevail to that extent.

Related Articles:

· Income Computation & Disclosure Standards 2018

· IFRS

· Accounting Principles & Concepts

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The statutory material is obtained only from the authorized and reliable sources
All the latest developments in the judicial and legislative fields are covered
Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
Every content published by Taxmann is complete, accurate and lucid
All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
The golden rules of grammar, style and consistency are thoroughly followed
Font and size that's easy to read and remain consistent across all imprint and digital publications are applied

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Introduction to Ind AS:

The objective of Indian Accounting Standards: