IND AS: Indian Accounting Standards

The IND AS applicability has been introduced by the MCA, short for Ministry of Corporate Affairs. The MCA has also notified the companies about the Indian Accounting Standards, known as IND AS for short, and its rules in 2015. This started the pathway to adopt and apply the formulation in a planned process starting from the period of accounting of the years 2016 to 2017. For the years 2016, 2017 and 2018 the MCA arranged three amendment rules in order to amend the rules made in 2015.

The Indian Accounting Standards are generally the standards that have been incorporated with the IFRS, short for International Financial Reporting Standards, so that the reports made by the Indian enterprises get more accessible globally. Compared to the earlier times, the Indian companies have achieved a wider universal reach. For this reason, the want to merge the standards of reporting with the internationally accepted standards has been felt. This way, the Indian Accounting Standards got introduced.

H2: The Four Phases of Adoption

From the present accounting standards, the MCA has prescribed a phase based convergence of the Indian Accounting Standards. On the basis of the net worth of their company and their listing status, the Indian companies will adopt IND AS through many phases. Each of the phases has been detailed below.

H3: Phase 1

This phase got started from the April 1, 2016. The compulsory applicability of the IND AS by all the businesses have given the following:

• It can be both the listed or the unlisted company
• The net worth has to be either equal to or greater than Rs 500 crore

The net worth for the three previous financial years has to be checked for the company that is 2013-2014, 2014-2015, and 2015-2016.

H3: Phase 2

This phase got started from the April 1, 2017. The compulsory applicability of the IND AS by all the businesses have given the following:

• It can be a listen company or can be in the way of getting listed (as on 31^st March 2016)
• The net worth has to be within the range of Rs 250 crore to Rs 500 crore for any of the time period as mentioned below.

The net worth for the four previous financial years has to be checked for the company that is 2013-2014, 2014-2015, 2015-2016 and 2016-2017.

H3: Phase 3

This phase got started from the April 1, 2018. The compulsory applicability of the IND AS by all the banks, insurance companies and the NBCFs have given the following:

• The net worth has to be either equal to or more than Rs 500 crore going into effect from the first of April, 2018.

The Insurance Regulatory and Development Authority, known as IRDA for short, of India will notify the different set of the rules of Indian Accounting Standards for the insurance companies and the banks starting effect from the 1^st of April, 2018. The NBCFs mentions venture capitalists, stock brokers, core investment companies and so on. The net worth for the four previous financial years has to be checked for the company that is 2015-2016, 2016-2017 and 2017-2018.

H3: Phase 4

All the NBCFs that has the net worth within the range between Rs 250 crore and Rs 500 crore will be compelled to get the IND AS applicability on them taking effect from the first day of April of the year 2019.

H2: Important Note

Here is an important note related to the IND AS applicability. Indian Accounting Standards will involuntarily be applicable to all the joint ventures of the company, associated companies, holding companies and the subsidiaries irrespective of qualification of any individual of those companies.

In cases of the foreign operations of any Indian Company, the preparations of the financial statements which are stand alone in nature, may progress with the jurisdictional essentials. Moreover, they do not have to be compiled following the IND AS rules. But it is to be noted that these segments are required to make reports about the adjusted numbers of the IND AS for their parent company of Indian origin in order to make the unified accounts of the Indian Accounting Standards.

H2: Calculation of the Net Worth

The net worth will be calculated on the basis of the separately created accounts of the company as on March 31 of the year 2014, or from the first audited time frame ending after the given date. The net worth of the total of the paid up share of the capital and all the other reserves made out of the profit and the securities account (premium in nature), after calculating the compiled losses, the expenditure that is deferred, and the various expenditure are not to be written off. Only the inclusion of the capital reserve that arises out of the Government Grants and the Promoters Contribution that is received has to be done. Furthermore, it has to be noted that the reserves which are made out of the asset revaluation and those written back depreciation will not be included.

H2: Voluntary Adoption

The companies have an option to choose whether or not they want to merge the Indian Accounting Standards in their reports made in the account period that began on April 1, 2015 or after. While making such reports, the companies have to include a comparative narration for the time frames that end on March 31, 2015 or within that. The reports will narrate a comparative perspective detailing the incorporation of the Indian Accounting Standards. But after a company starts to report following the IND AS, it cannot go back to the previous regulations and report that way.

H2: SEBI Clarification

The companies whose offered documents have been filed with the SEBI after or on 1^st April, 2016, has got a notification from the SEBI. According to the notice, SEBI has clarified about the IND AS applicability and made disclosures regarding the offer documents. Generally, SEBI asks the issuer companies to open up about all their financial information mainly for the last five years that preceded that year of making a file of the offer document. They also require to follow uniform and strict policies for each of all those five financial years.

H3: The following criteria are to be kept in mind by the issuer companies when they file an offer document.

• The financial statements that are filed within 31^st March 2017 by them are to follow the Indian GAAP
• Following the IND AS regulations, the disclosures made in the last three years has to be made within the time range of April 1, 2017 to March 31, 2018. The disclosures for the other two financial years are to be made following the Indian GAAP rules.
• Following the IND AS regulations, the disclosures made in the last three years has to be made within the time range of April 1, 2018 to March 31, 2019. The disclosures for the other two financial years are to be made following the Indian GAAP rules.
• Following the Indian Accounting Standards regulations, the disclosures made in the last four years has to be made within the time range of April 1, 2019 to March 31, 2020. The disclosures for the other one financial year are to be made following the Indian GAAP rules.
• Starting from the first day of April, 2020, all the disclosures that were made in the last five years preceding that date will have to be conducted according to the IND AS applicability principles.

SEBI has declared that the issuer companies have to submit their financial statements for all the five years following the IND AS on an optional basis. However, this clarification will not be applicable on the issuer companies who have made rights issue.

H3; The following table contains the major standards.

These are all the details about the IND AS, the Indian Accounting Standards that any company needed to know.