Study Notes

Accounting Standards
(AS) and Indian
Accounting Standards (Ind
AS)
AS and Ind AS

Introduction

 Over the years various accounting standards have been developed, both at international
and national levels.
 Accounting standards are used by organizations to:
o Properly organize their financial information into accounting records;
o Summarize the accounting records into financial statements; and
o Disclose certain supporting information.
 Accounting Standards provide framework and standard accounting policies for treatment
of transactions and events so that the financial statements of different enterprises
become comparable
 Internationally, two main set of accounting standards have been used - Generally
Accepted Accounting Principles or GAAP and International Financial Reporting
Standards (IFRS). While, IFRS is more widely used around the globe, GAAP is used
mostly in the USA.

 In India, the Accounting standards (AS) had been prevalent up until now. The new set of
accounting standards by name of Indian Accounting Standards (Ind AS) were notified
by the Ministry of Corporate Affairs (MCA) on February 16, 2015.
 In FY15, the adoption of Ind-AS was voluntary and thereafter it was made mandatory in
a phase manner over 4 years from April 2016 to April 2019.
 The Ind-AS are basically standards that have been harmonised with the IFRS to make
reporting by Indian companies more globally accessible.
 Since the global reach of Indian companies has grown over time, the need to converge
reporting standards with international standards was felt, which led to the introduction of
Ind-AS.

Box 1: Accounting standard Bodies

 IFRS are issued by International Accounting Standards Board (IASB). IASB is an

independent not-for-profit organization founded on April 01, 2001 as the successor to
the International Accounting Standards Committee. It is headquartered in London, UK.
 In India, the accounting standards were developed by the Accounting Standards Board
of Institute of the Chartered Accountants of India (ICAI) which are then notified by the
government.
 As per Section 133 of Companies Act, 2013, the Central Government may prescribe
the standards of accounting or any addendum thereto, as recommended by ICAI,
constituted under section 3 of the Chartered Accountants Act, 1949, in consultation
with and after examination of the recommendations made by the National Financial
Reporting Authority (NFRA).

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AS and Ind AS

Objective and Benefits of Accounting standards

The accounting standards deal with the issues of -

 recognition of events and transactions in the financial statements;

 measurement of these transactions and events;
 presentation of these transactions and events in the financial statements in a manner
that is meaningful and understandable to the reader; and
 the disclosure requirements which should be there to enable the public at large and the
stakeholders and the potential investors in particular, to get an insight into what these
financial statements are trying to reflect and thereby facilitating them to take prudent and
informed business decisions

Accounting standards help in:

 standradising the accounting treatment of events/transactions, thereby eliminating

alternate accounting policies and ways of preparing financial statements or possibility of
fraudulent or misleading accounting treatments.
 given the standardized accounting treatments, it facilitates the comparison of financial
statements of various companies

Ind-AS and IFRS

International Financial Reporting Standards (IFRSs) are considered a "principles-based" set of

standards. ICAI, way back in 2006, initiated the process of moving towards the IFRS with a view
to enhance acceptability and transparency of the financial information communicated by the
Indian corporates through their financial statements. This move towards IFRS was subsequently
accepted by the Government of India.

The Government of India in consultation with the ICAI decided to converge and not to adopt
IFRSs issued by the IASB. Accordingly, while formulating IFRS converged Indian Accounting
Standards (Ind AS), efforts have been made to keep these Standards, as far as possible, in line
with the corresponding IFRS and departures have been made where considered absolutely
essential.

The Ind AS are named and numbered in the same way as the corresponding IFRS. Officially
notified on February 16, 2015, the Ind AS were to be implemented on voluntary basis from 1st
April, 2015 and mandatory from 1st April, 2016. Later on, in 2016 MCA notified roadmap for
implementation of Ind AS by banks, NBFCs and insurance companies.

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 AS and Ind AS

Phases of implementation of Ind-AS

Applicability of adoption of Ind-AS by companies in India was based on the listing status and
net worth of a company as follows:

1. For companies other than NBFCs, Banks and insurance companies

 Phase 1 - from 1st April 2016
o Listed company with Net worth is greater than or equal to Rs.500 crore
o Unlisted company with Net worth is greater than or equal to Rs.500 crore
 Phase 2 - from 1st April 2017
o All listed companies (or is in the process of being listed), irrespective of networth
o Unlisted companies whose Net worth is greater than or equal to Rs.250 crore but
less than Rs.500 crore

Note –

 If Ind-AS become applicable to any company, then Ind-AS shall automatically be made
applicable to the following, irrespective of individual qualification of such companies:
o all the subsidiaries of that company
o all the holding companies of that company
o all the associated companies of that company
o and joint ventures of that company
 Companies listed on SME exchange are not required to apply Ind AS
 Once Ind AS are applicable, an entity shall be required to follow the Ind AS for all
subsequent financial statements

Box 2: Meaning of Net-worth

 Net Worth is the total of:

o Paid-up share Capital,
o all reserves out of profit and
o securities premium account,
o less accumulated losses,
o less deferred expenditure,
o less miscellaneous expenditure not written off.
 Also note, only capital Reserve arising out of Promoters Contribution and Government
Grants received can be included.
 Reserves created out of revaluation of assets and written back depreciation cannot be
included.

2. For NBFCs,
 NBFC- Phase 1 – 1st April 2018
o All NBFCs whose Net worth is more than or equal to INR 500 crore.
 NBFC- Phase 2 – 1st April 2019

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 AS and Ind AS

o All listed NBFCs

o all NBFCs whose networth is equal to or more than Rs.250 crore and up to
Rs.500 crore.

Note - a NBFC with net-worth less than Rs.250 crore shall not apply Ind AS, even on voluntary
basis

Note:

The implementation
of Ind-AS by banks
(which was to be
implemented from
April 01, 2018) has
been deferred by RBI
till further notice (as
per circular dt March
22, 2019)
Source: kapadiaglobal.com

3. For Banks,
 The Ind AS was to be implemented by scheduled commercial banks. The
implementation of Ind AS for banks was deferred by RBI until further notice.
 The Ind AS will not be applicable to Regional Rural Banks (RRBs) and Urban
Cooperative Banks (UCBs).

4. For Insurance companies

 In January 2020, Indian Insurance regulator IRDAI decided to postpone the
implementation of Ind-AS (which was supposed to start in 2020-21), indefinitely for the
domestic insurance sector.
 it was noted that the International Accounting Standards Board (IASB) has taken a
considered view to amend IFRS 17: Insurance Contracts, due to the concerns raised
around accounting treatments, operational complexity and implementation challenges
raised by various stakeholders. As such, the effective date of implementation of Ind AS
for insurance companies shall be decided after the finalisation of IFRS 17 by IASB.

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 AS and Ind AS

Benefits of Ind-AS

 facilitate the cross-border flow of money, global listing and global comparability of the
financial statements
 enhances the investor’s ability to compare the investments on a global basis
 reduces the risk of misjudgments
 eliminates the costly requirements of reinstatement of financial statements by many
companies who have global operations

SEBI - Disclosure of Financial information in offer documents according to Ind-AS

To align the disclosure requirements for financial information in the offer document as specified
under SEBI (ICDR) Regulations, 2018 with the requirements of Ind AS, SEBI specified the
following manner:

Note:

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

Source: www.sebi.com

 For issuer companies to which Ind AS is applicable in Phase 2 of MCA Roadmap

(beginning from FY 2017-18), the above timelines w.r.t. filing of offer documents shall be
followed with time lag of one year.
 SEBI has also provided discretion to issuer companies to present financial statements
for all five financial years under IND AS on a voluntary basis. This clarification does
not apply to issuer companies making rights issue.
 The issuer company should clearly disclose the fact that the financial information has
been disclosed in accordance with Ind-AS while suitably explaining the difference
between Ind-AS and the previously applicable accounting standards, and the impact of
transition to Ind-AS

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AS and Ind AS

Major Accounting standards (AS)

Initially there were 29 AS that were issued, of which two were withdrawn:

 AS 6 on ‘Depreciation accounting’ withdrawn on revision of AS 10 – Property, Plant and

Equipment
 AS 8 on ‘Accounting for Research and Development’ withdrawn on revision of AS 26 on
Intangible Assets

The list of the 27 AS is as follows:

Accounting Standard (AS) Title of the Accounting Standard

AS 1 Disclosure of Accounting Policies
AS 2 (Revised) Valuation of Inventories
AS 3 (Revised) Cash Flow Statements
Contingencies and Events Occurring after the Balance
AS 4 (Revised)
Sheet Date
Net Profit or Loss for the Period, Prior Period Items and
AS 5 (Revised)
Changes in Accounting Policies
AS 6 (withdrawn pursuant
to issuance of AS 10 on Property, Depreciation Accounting
Plant and Equipment 2016)
AS 7 (Revised) Accounting for Construction Contracts
AS 8 (withdrawn pursuant to AS 26
Accounting for Research and Development
becoming mandatory)
AS 9 Revenue Recognition
AS 10 Property, Plant and Equipment
AS 11 (Revised) The Effects of Changes in Foreign Exchange Rates
AS 12 Accounting for Government Grants
AS 13 Accounting for Investments
AS 14 Accounting for Amalgamations
AS 15 (Revised) Employee Benefits
AS 16 Borrowing Costs
AS 17 Segment Reporting
AS 18 Related Party Disclosures
AS 19 Leases
AS 20 Earnings Per Share
AS 21 Consolidated Financial Statements
AS 22 Accounting for Taxes on Income
Accounting for Investments in Associates in Consolidated
AS 23
Financial Statements
AS 24 Discontinuing Operations
AS 25 Interim Financial Reporting
AS 26 Intangible Assets
AS 27 Financial Reporting of Interests in Joint Ventures
AS 28 Impairment of Assets
AS 29 Provisions, Contingent Liabilities & Contingent Assets

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AS and Ind AS

Major Indian Accounting standards (Ind - AS)

Ind AS Title Corresponding Corresponding AS and Title

IFRS
Ind AS 101 First-time adoption of Ind AS IFRS 1 -
Ind AS 102 Share Based payments IFRS 2 Guidance note on Accounting for
employee share based payments
Ind AS 103 Business Combination IFRS 3 AS 14 – Accounting for
Amalgamations
Ind AS 104 Insurance Contracts IFRS 4 -
Ind AS 105 Non-Current Assets Held for Sale and IFRS 5 AS 24 - Discontinuing Operations
Discontinued Operations
Ind AS 106 Exploration for and Evaluation of IFRS 6 Guidance note on accounting for
Mineral Resources Oil and Gas producing activities
Ind AS 107 Financial Instruments: Disclosures IFRS 7 -
Ind AS 108 Operating Segments IFRS 8 AS 17 – Segment Reporting
Ind AS 109 Financial Instruments IFRS 9 -
Ind AS 110 Consolidated Financial Statements IFRS 10 AS 21 - Consolidated Financial
Statements
Ind AS 111 Joint Arrangements IFRS 11 AS 27 - Financial Reporting of
Interests in Joint Ventures
Ind AS 112 Disclosure of Interests in Other Entities IFRS 12 -
Ind AS 113 Fair Value Measurement IFRS 13 -
Ind AS 114 Regulatory Deferral Accounts IFRS 14 Guidance note on accounting for
rate regulated activities
Ind AS 115 Revenue from Contracts with IFRS 15 AS 7 - Accounting for Construction
Customers Contracts
AS 9 - Revenue Recognition
Ind AS 116 Leases IFRS 16 AS 19 – Leases
(replaces the
Ind AS 17)
Ind AS 1 Presentation of Financial Statements IFRS 1 AS 1 - Disclosure of Accounting
Policies
Ind AS 2 Inventories Accounting IFRS 2 AS 2 - Valuation of Inventories
Ind AS 7 Statement of Cash Flows IFRS 7 AS 3 - Cash Flow Statements
Ind AS 8 Accounting Policies, Changes in IFRS 8 AS 5 - Net Profit or Loss for the
Accounting Estimates and Errors Period, Prior Period Items and
Changesn Accounting Policies
Ind AS 10 Events after Reporting Period IFRS 10 AS 4 - Contingencies and Events
Occurring after the Balance Sheet
Date
Ind AS 11 Construction Contracts IFRS 11
Ind AS 12 Income Taxes IFRS 12 AS 22 - Accounting for Taxes on
Income
Ind AS 16 Property, Plant and Equipment IFRS 16 AS 10 - Property, Plant and
Equipment
Ind AS 18 Revenue IFRS 18 AS 9 - Revenue Recognition
Ind AS 19 Employee Benefits IFRS 19 AS 15 - Employee benefits
Ind AS 20 Accounting for Government Grants IFRS 20 AS 12 - Accounting for
and Disclosure of Government Government Grants

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AS and Ind AS

Ind AS Title Corresponding Corresponding AS and Title

IFRS
Assistance

Ind AS 21 The Effects of Changes in Foreign IFRS 21 AS 11 - The Effects of Changes in

Exchange Rates Foreign Exchange Rates
Ind AS 23 Borrowing Costs IFRS 23 AS 16 - Borrowing Costs
Ind AS 24 Related Party Disclosures IFRS 24 AS 18 - Related Party Disclosures
Ind AS 27 Separate Financial Statements IFRS 27 -
Ind AS 28 Investments in Associates and Joint IFRS 28 AS 23 - Accounting for
Ventures Investments in Associates in
Consolidated Financial
Statements
Ind AS 29 Financial Reporting in IFRS 29 -
Hyperinflationary Economies
Ind AS 32 Financial Instruments: Presentation IFRS 32 -
Ind AS 33 Earnings per Share IFRS 33 AS 20 - Earnings Per Share
Ind AS 34 Interim Financial Reporting IFRS 34 AS 25 - Interim Financial
Reporting
Ind AS 36 Impairment of Assets IFRS 36 AS 28 - Impairment of Assets
Ind AS 37 Provisions, Contingent Liabilities and IFRS 37 AS 29 - Provisions, Contingent
Contingent Assets Liabilities & Contingent Assets
Ind AS 38 Intangible Assets IFRS 38 AS 26 - Intangible Assets
Ind AS 40 Investment Property IFRS 40 AS 13 - Accounting for
Investments
Ind AS 41 Agriculture IFRS 41 -