Converged IND AS : A Step towards Liberalizing The Indian Accounting System


Among the recent changes in Indian corporate world, the most significant change has ever been done is the convergence of Indian Accounting Standards with IFRS, briefly called IND AS. Earlier to prepare financial statements of organizations, Indian companies needed to follow Indian GAAP but they were not able to display the original picture by which company  could compete globally. Hence Indian Companies were found itself restricted to territorial boundaries. Incompetent to compare across the globe was the obvious consequence. That’s why companies were looking for unique and standardized reporting system which will help them to provide true and fair financial picture of organizations. However different countries follow different Accounting Standards of their countries, and they created confusion among stakeholders and investors. Therefore convergence of Indian Accounting Standards  with IFRS was the only way to cope with these problems. So that stakeholders could get accurate information regarding the financial position of the companies and compare it on international basis. On the other hand transition with IFRS is aimed at helping helping  Indian companies migrate to International Accounting Regime. In India convergence is the need of hour. In Budget 2014 speech the Honorable FM, Mr. Arun Jaitley said, “There is an urgent need to converge the current Indian Accounting Standards with International Financial Reporting Standards.

What does IFRS mean?

IFRS stands for International Financial Reporting Standards. Simply IFRS are taken as Accounting of the world which are globally accepted . These are unique and high quality standards which help to overcome the financial issues across the world. IFRS were established to have a common language in the financial world so that business and accounts can be understood from company to company and country to country. IFRS are approved and issued by International Accounting Standard Board (abbreviated as IASB). Broadly IFRS consist of :

  1. 13 International Financial Reporting Standards(IFRS)
  2. 28 International Accounting Standards(IAS)
  3. 15 International Financial Reporting Interpretation Committee(IFRIC)
  4. 9 Standards Interpretation Committee(SIC)

However Indian Accounting Standards are most similar to IFRS. But there is a gap between them as IFRS are issued on the basis of global environment and Indian Accounting Standards are issued on the basis of Indian environment. Hence few of IFRS are carved out to bridge that gap and to make them suitable for Indian Environment.

Need for IFRS in India

Here the question arises, why does India need IFRS for maintaining accounting records?  The answer for aforesaid question has been described below:

  • IFRS provides stability and transparency throughout the financial world.
  • Apple to apple comparison of financial statements with foreign companies becomes possible.
  • To compete with organizations across the world becomes easy and smooth.
  • IFRS provides new opportunities for Indian Companies to establish their business throughout the world.
  • It will attract Foreign Investment as Investors will feel free to analyze the organizations having a common accounting language.
  • Smoothness in world trade can be achieved.

How IFRS is applicable in India, voluntary or mandatory?

Government wants companies to adopt IND AS converged with IFRS on voluntary basis from F.Y. 2015-16 and on mandatory basis from F.Y. 2016-17 onwards. In the first phase, it was implemented at companies that have a net worth of over Rs. 1000crore. The second phase, from April 1, 2016 and involve both listed and unlisted with a net worth of over Rs. 500crore but less than Rs. 1000crore and applicable to holding, subsidiary, joint venture or associate companies of above companies.

From April 1 2017, there will be mandatory adoption for unlisted companies having net worth of Rs. 250crore or more and applicable to companies with net worth of less than Rs. 500crore whose equity or debt securities are listed in India or outside India.

Roadmap for Implementation of IND AS for SCBs(excluding RRBs), Insurers/Insurance Companies and NBFCs

After consultation with RBI, IRDA and PFRDA, the following roadmap to implement IND AS converged with IFRS for Scheduled Commercial Banks(excluding RRBs), Insurers/Insurance Companies and Non-Banking Financial Companies has been drawn up by Honorable Financial Minister Arun Jaitley:

(a)(i) Scheduled Commercial Banks(excluding Regional Rural Banks), All-India Term Lending Institutions, Insurers/ Insurance Companies and holding , subsidiary, joint venture and associate companies of above mentioned institutions 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 and thereafter

(ii) 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

(b) Non-Banking Financial Companies(NBFCs)

NBFCs would be required to maintain IND AS based financial statements in two phases:

  • Under phase I, NBFCs having net worth of Rs. 500crore or more and the holding, subsidiary, joint venture and associate companies of them shall also be required to prepare financial statements based on IND AS for accounting periods beginning from April 1, 2018 onwards with comparatives for the periods ending March 31, 2018 and thereafter.
  • Under phase II, 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 of less than Rs. 500crore, and NBFCs other than above mentioned that are unlisted companies having net worth of Rs. 250crores or more but less than Rs. 500crores, the holding, subsidiary, joint venture and associate companies of aforesaid financial companies shall be required to prepare financial statements based on IND AS for accounting periods beginning from April 1, 2019 onwards with comparatives for the periods ending March 31, 2019 and thereafter.
  • NBFCs having net worth below Rs. 250crores and not covered under provisions (b)(i)&(ii) shall continue to apply Accounting Standards specified in Annexure to Companies Rules(Accounting Standards), 2006

(c)  IND AS would be applicable to both Consolidated and Individual financial statements.

(d)  Scheduled Commercial Banks(excluding RRBs)/ NBFCs/ Insurers/ Insurance Companies shall apply Indian Accounting Standards converged with IFRS(IND AS) only if they meet special criteria, they shall not be allowed to voluntarily adoption of IND AS.

About the Author

 Tabassum Saifi
Commerce Lecturer
Sri Krishna Institute of Management and Science
[email protected]


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