Applicability of IND AS (Indian Accounting Standards)

The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards (IND AS)) Rules 2015, which stipulates the adoption and applicability of IND AS in a phased manner beginning from the Accounting period 2016-17 and subsequently, issued Amendment Rules 2016 to amend the 2015 rules.

Phase of Adoption

MCA has notified phase-wise convergence to IND AS from current accounting standards. IND AS shall be adopted by specific classes of companies based on their Net worth and listing status. Let’s see the each of the phases in detail below:

Phase I

Mandatory applicability of IND AS from 1st April 2016 to all companies provided:

Phase II
Mandatory applicability of IND AS from 1st April, 2017 provided:

Phase III
Mandatory applicability of IND AS to Bank, NBFC, insurance companies from 1st April 2018 whose:

IRDA shall notify the separate set of IND AS for Bank & Insurance Companies with effect from 1st April 2018. NBFC includes core investment companies, stock brokers, venture capitalists, etc. Net worth shall be checked for 3 years i.e. 31.03.2016, 31.03.2017 & 31.03.2018.

Phase IV

NBFC whose Net worth is more than or equal to INR 250 crores but less than 500 crores shall have mandatorily applicability of IND AS  with effect from 1st April 2019.
Applicable to one, applicable to all other

If IND AS becomes applicable to a company then, IND AS shall be automatically applied to all subsidiaries, holding companies, associated companies and joint ventures irrespective of individual qualification of such companies.

In the case of foreign operations of an Indian Company, the preparation of stand-alone financial statements may continue with its jurisdictional requirements and need not be prepared as per the IND AS.

However, these entities will still have to report their IND AS adjusted numbers for their Indian parent company to prepare consolidated IND AS accounts.

Net Worth Calculation

Net worth will be determined based on the standalone accounts of the company as on 31st March 2014 or the first audited period ending after that date. Net Worth is the total of Paid-up share Capital and all reserves out of profit & securities premium account after deducting accumulated losses, deferred expenditure and miscellaneous expenditure not written off. Only capital Reserve arising out of Promoters Contribution and Govt. Grant Received can be included. Reserves created out of revaluation of assets, write back of depreciation cannot be included.

Voluntary adoption

Companies can voluntarily adopt IND AS for accounting periods beginning on or after April 01, 2015 with comparatives for the period ending 31 March 2015 or thereafter. However, once they have started reporting as per the IND AS, they cannot revert.

SEBI Clarification

For all the issuer companies whose offer document is filed with SEBI on or after 1st April 2016, SEBI has issued a clarification on the applicability of the Indian Accounting Standards or IND AS and disclosure made in the offer documents. Typically, SEBI requires issuer companies to disclose financial information for the previous 5 financial years immediately preceding the filing of the offer document, while following uniform accounting policies for each of the financial years. For those issuer companies filing an offer document –

Up to March 31, 2017, all of the financial statements filed by them can be under Indian GAAP.

Between April 1, 2017, and March 31, 2018, disclosures in the latest previous three financial years will have to be made under the IND AS principles while disclosures for the remaining two financial years may be done under Indian GAAP. However, as far as disclosures for the third latest financial year are concerned, suitable restatement adjustments to the accounting heads from their values as on the date of transition following accounting policies consistent with that used at date of transition to IND AS.
Between April 1, 2018, and March 31, 2019, disclosures in the latest previous three financial years will have to be made under the IND AS principles while disclosures for the remaining two financial years may be done under Indian GAAP.

Between April 1, 2019, and March 31, 2020, disclosures in the latest previous four financial years will have to be made under the IND AS principles while disclosures for the remaining one financial year may be done under Indian GAAP.

On or after April 1, 2020, disclosures in all the previous five financial years will have to be made under the IND AS principles.

SEBI has also provided discretion to issuer companies to present financial statements for all five financial years under IND AS for companies on a voluntary basis. This clarification does not apply to issuer companies coming out with the rights issue.