Indian Accounting Standards (IND-AS): Whether applicable to your company or not?

Financial management Law & Audit

Indian Accounting Standards (IND-AS): Whether applicable to your company or not?

After a long converging process of Accounting standards(AS) and IFRS, Ministry of corporate affairs has come up with new standards name as Indian Accounting Standards(Ind-AS) which sum of AS and IFRS. Hundred percent adoption of IFRS was not possible in Indian Scenario, hence Necessary changes are made in them to make them applicable in Indian scenario before adoption.

Ministry of Corporate affairs(MCA) has notified “Companies (Indian Accounting Standards) Rules 2015” on date 16-02-2015. These rules are applicable w.e.f 01-04-2015. These rules are the roadmap  for adoption and applicability of 39 Ind-AS to specified companies in a phased manner.Companies which are not required to follow Indian Accounting Standards (Ind AS) shall continue to comply with Accounting Standards as prescribed in Companies (Accounting Standards) Rules, 2006

Rule 4 of Companies (Indian Accounting Standards) Rules 2015, specifies the class of companies which shall comply with Ind-As. It further specifies that specified companies shall comply with Ind-AS while preparing their financial statement and its auditor shall comply with Ind-AS while preparing their audit report.

Non-Applicability of Ind-AS

Ind-As are not applicable to following companies either voluntarily or mandatorily as specified in sub-rule (1) of rule 4:-

  1. Insurance companies (become applicable w.e.f 01.04.2018 as per circular dated 11.02.2016)
  2. Banking companies-other than those covered in MCA circular dated 11.02.2016.
  3. Non-banking financial companies (NBFC) (become applicable to NBFCs with Companies (Indian Accounting standards)(Amendment) Rules 2016)
  4. Companies whose securities are listed or in the process of being listed on SME exchange.
  5. Overseas subsidiaries, associates, JV of Indian companies, but they have to report their IND-AS adjusted figures to their Indian parent company.

Applicability of Ind-AS

Applicability of Ind-AS can be summarized in following manner:-

  • Applicability to Companies other than banking, Insurance and NBFC.
  • Applicability to NBFC.
  • Applicability to Scheduled commercial banks(excl. RRBs) and Insurance Companies.

IND-AS applicability to Companies other than Banking, Insurance and NBFC.

As per rule 4 of Companies (Indian Accounting Standards) Rules 2015, applicability of Ind-AS to companies other than banking, Insurance and NBFC, can be explained in following manner:-

IND-AS Applicability w.e.f 01-04-2015

As per clause (i) of sub-rule (1) of rule 4 of Companies (Indian Accounting Standards) Rules 2015, any company may comply (voluntary) with the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning on or after 1st April, 2015, with the comparatives for the previous periods.

IND-AS Applicability w.e.f 01-04-2016

As per clause (ii) of sub-rule (1) of rule 4 of Companies (Indian Accounting Standards) Rules 2015, the following companies shall comply (mandatory) with the Indian Accounting Standards (Ind AS) for the accounting periods beginning on or after 1st April, 2016, with the comparatives for the previous periods:-

(a) companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange (Except SME exchange) in India or outside India and having net worth of rupees five hundred crore or more.

(b) companies other than those covered in (a) above and having net worth of rupees five hundred crore or more.

(c) holding, subsidiary, joint venture or associate companies of companies in (a) and  (b) above.

IND-AS Applicability w.e.f 01-04-2017

As per clause (iii) of sub-rule (1) of rule 4 of Companies (Indian Accounting Standards) Rules 2015, the following companies shall comply (mandatory) with the Indian Accounting Standards (Ind AS) for the accounting periods beginning on or after 1st April, 2017, with the comparatives for the previous periods:-

(a) companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange (Except SME exchange) in India or outside India and having net worth of less than rupees five hundred crore.

(b) companies other than those covered in (a) above having net worth of rupees two hundred and fifty crore or more but less than rupees five hundred crore.

(c) holding, subsidiary, joint venture or associate companies of companies in (a) and (b) above.

Applicability of Ind-AS to NBFC Companies

Ministry of Corporate Affairs (MCA) issued a circular dated 11 February 2016 as a press release on the roadmap for implementation of Ind AS by banks, non-banking finance companies (NBFCs), and insurance companies. As per above circular Ind-AS is applicable to NBFCs in following manner:-

a) NBFC to comply Ind-AS w.e.f 01-04-2018

The following categories of NBFCs shall be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards with comparatives for the previous periods.

(i) NBFCs having net worth of Rs.500 crores or more.

(ii) Holding, subsidiary, joint venture or associate companies of companies covered (i) above, other than those companies already covered under the corporate roadmap announced by the Ministry of Corporate Affairs (MCA), Government of India (GoI).

b) NBFC to comply Ind-AS w.e.f 01-04-2019

The following categories of NBFCs shall be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2019 onwards with comparatives for the previous periods:-

(i) NBFCs whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth less than Rs.500 crores.

(ii) NBFCs other than those covered in (a)(i) and (b)(i) above, that are unlisted companies, having net worth of Rs.250 crores or more but less than Rs.500 crores.

(iii) Holding, subsidiary, joint venture or associate companies of companies covered under (b) (i) and (b)(ii) above, other than those companies already covered under the corporate roadmap announced by the MCA, GoI.

Note: NBFCs having net worth below Rs. 250 Crores and not covered under the above provisions shall continue to apply Accounting Standards specified in Annexure to Companies (Accounting Standards) Rules, 2006. 

Applicability of Ind-AS to Banking and Insurance companies 

Ministry of Corporate Affairs (MCA) issued a circular dated 11 February 2016 as a press release on the roadmap for implementation of Ind AS by banks, non-banking finance companies (NBFCs), and insurance companies. As per above circular Ind-AS is applicable to Scheduled commercial banks (excuding RRBs) and Insurance  Companies in following manner:-

(a) Scheduled commercial banks (excluding Regional Rural Banks (RRBs), All-India Term-lending Refinancing Institutions (i.e. Exim Bank, NABARD, NHB and SIDBI) and Insurers/Insurance companies would be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 or thereafter. Ind AS would be applicable to both consolidated and individual financial statements.

(b) Notwithstanding the roadmap for companies, the holding, subsidiary, joint venture or associate companies of Scheduled commercial banks (excluding RRBs) would be required to prepare Ind AS based financial statements for accounting periods beginning from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 or thereafter.

Note: Urban Cooperative Banks (UCBs) and Regional Rural Banks (RRBs) shall not be required to apply Ind AS and shall continue to comply with the existing Accounting Standards, for the present.

How to calculate Net Worth to check Ind-AS Applicability

As per Rule 2(1)(f), “net worth” shall have the meaning assigned to it in clause (57) of section 2 Companies Act, 2013. Net worth shall be calculated on the basis of stand alone financial statement as on 31st march 2014 or first audited financial statement for the accounting period which ends after 31st march 2014, as applicable.

Net Worth means: [Paid up share Capital + all reserves created from out of profit* & securities premium account – accumulated losses, deferred expenditure and miscellaneous expenditure not written off]

* Capital Reserve shall not be included in calculation of Net Worth.

List of Ind-AS

List of 39 Ind-AS as notified by MCA is given below. To visit to MCA notification and know more above Ind-AS click on the link given below-

Notifications     Description
G.S.R 111(E) dated 16 Feb 2015     The Companies (Indian Accounting Standards) Rules, 2015.
Indian Accounting Standard (Ind AS) 101     First-time Adoption of Indian Accounting Standards
Indian Accounting Standard (Ind AS) 102     Share-based Payment
Indian Accounting Standard (Ind AS) 103     Business Combinations
Indian Accounting Standard (Ind AS) 104     Insurance Contracts
Indian Accounting Standard (Ind AS) 105     Non-current Assets Held for Sale and Discontinued Operations
Indian Accounting Standard (Ind AS) 106     Exploration for and Evaluation of Mineral Resources
Indian Accounting Standard (Ind AS) 107     Financial Instruments: Disclosures
Indian Accounting Standard (Ind AS) 108     Operating Segments
Indian Accounting Standard (Ind AS) 109     Financial Instruments
Indian Accounting Standard (Ind AS) 110     Consolidated Financial Statements
Indian Accounting Standard (Ind AS) 111     Joint Arrangements
Indian Accounting Standard (Ind AS) 112     Disclosure of Interests in Other Entities
Indian Accounting Standard (Ind AS) 113     Fair Value Measurement
Indian Accounting Standard (Ind AS) 114     Regulatory Deferral Accounts
Indian Accounting Standard (Ind AS) 115     Revenue from Contracts with Customers
Indian Accounting Standard (Ind AS) 1     Presentation of Financial Statements
Indian Accounting Standard (Ind AS) 2     Inventories
Indian Accounting Standard (Ind AS) 7     Statement of Cash Flows
Indian Accounting Standard (Ind AS) 8     Accounting Policies, Changes in Accounting Estimates and Errors
Indian Accounting Standard (Ind AS) 10     Events after the Reporting Period
Indian Accounting Standard (Ind AS) 12     Income Taxes
Indian Accounting Standard (Ind AS) 16     Property, Plant and Equipment
Indian Accounting Standard (Ind AS) 17     Leases
Indian Accounting Standard (Ind AS) 19     Employee Benefits
Indian Accounting Standard (Ind AS) 20     Accounting for Government Grants and Disclosure of Government Assistance
Indian Accounting Standard (Ind AS) 21     The Effects of Changes in Foreign Exchange Rates
Indian Accounting Standard (Ind AS) 23     Borrowing Costs
Indian Accounting Standard (Ind AS) 24     Related Party Disclosures
Indian Accounting Standard (Ind AS) 27     Separate Financial Statements
Indian Accounting Standard (Ind AS) 28     Investments in Associates and Joint Ventures
Indian Accounting Standard (Ind AS) 29     Financial Reporting in Hyperinflationary Economies
Indian Accounting Standard (Ind AS) 32     Financial Instruments: Presentation
Indian Accounting Standard (Ind AS) 33     Earnings per Share
Indian Accounting Standard (Ind AS) 34     Interim Financial Reporting
Indian Accounting Standard (Ind AS) 36     Impairment of Assets
Indian Accounting Standard (Ind AS) 37     Provisions, Contingent Liabilities and Contingent Assets
Indian Accounting Standard (Ind AS) 38     Intangible Assets
Indian Accounting Standard (Ind AS) 40     Investment Property
Indian Accounting Standard (Ind AS) 41     Agriculture

 

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