Since Indian companies have a far wider global reach now as compared to earlier, the need to converge reporting standards with international standards was felt, which has led to the introduction of Ind AS (Indian Accounting Standard).

These new standards ensure that Indian accounting standards (Ind AS) are in lines with globally accepted standards, IFRS. Therefore, the Ministry of Corporate Affairs (MCA), in 2015, had notified the Companies {Indian Accounting Standards (Ind AS)} Rules 2015, which stipulated the adoption and applicability of Ind AS in a phased manner beginning from the accounting period 2016-17.

These Indian Accounting Standards (Ind AS), as notified under section 133 of the Companies Act 2013, have been formulated keeping the Indian economic & legal environment.Ind AS was made mandatory for companies in phases which is discussed below:

Phase I (FY 16-17 and onwards)

1. Companies (listed or unlisted) having net worth of Rs. 500 crore* or more; and
2. Holding, subsidiary, joint venture or associate companies of companies covered in above point.

*as on 31st March, 2014 or the first audited financial statements after 31^st March 2014

Phase II (FY 17-18 and onwards)

1. Companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India;
2. Unlisted companies having net worth of Rs. 250 crore* or more; and
3. Holding, subsidiary, joint venture or associate companies of companies covered in point (1) and (2) above.

*as on 31st March, 2014 or the first audited financial statements after 31^st March 2014

Ind AS Applicability for NBFC (Non-Banking Financial Companies):

2018-19

1. NBFCs having net worth of Rs.500 crore or more;
2. Holding, subsidiary, joint venture or associate companies of companies covered under point (1) above.

2019-20

1. NBFCs whose equity or debt securities are listed or are in process of listing on any stock exchange in India or outside India and having net worth less than Rs. 500 crore;
2. NBFCs, that are unlisted companies, having net worth of Rs. 250 crore or more but less than Rs. 500 crore; and
3. Holding, subsidiary, joint venture or associate companies of companies covered under point (1) and (2) above.

Ind AS Applicability for Banking & Insurance Companies:

Banking Companies and Insurance Companies shall apply Ind AS as notified by the Reserve Bank of India (RBI) and Insurance Regulatory Development Authority of India (IRDAI) respectively.

Applicable Date

Banking Companies

Ind AS were applicable on banking companies from April 01, 2018.

Reserve Bank of India (RBI) has deferred applicability of Ind AS on commercial banks (except regional rural banks) by one year.

Accordingly, Ind AS for Banking companies would be applicable from April 01, 2019 (instead of April 01, 2018).

Insurance Companies

Ind AS were applicable on insurance companies from April 01, 2018.

Insurance Regulatory and Development Authority of India (IRDAI) deferred implementation of Ind AS in the insurance sector in India for a period of two years on June 28, 2017.

Accordingly, Ind AS for Indian insurance companies would be applicable from April 01, 2020 (instead of April 01, 2018).

However, insurance companies would still be required to submit the proforma Ind AS financial statements to IRDAI on a quarterly basis (effective from December 31, 2016).

Considerable points:

1. Companies meeting specified thresholds given above for the first time shall apply Indian Accounting Standards (Ind AS) from immediate next accounting year. For example: Companies meeting threshold for the first time on March 31, 2017 shall apply Ind AS for the financial year 2017-18 onwards.

2. Overseas subsidiary, associate, joint venture and other similar entities of an Indian company may prepare its standalone financial statements in accordance with the requirements of specific jurisdiction. However, the Indian parent will have to mandatorily prepare its consolidated financial statements in accordance with the Ind AS if it meets the criteria specified above.

3. An Indian company which is a subsidiary, associate, joint venture and other similar entity of a foreign company should prepare its financial statements in accordance with Ind AS if it meets the criteria specified above.

Calculation of Net worth:

Net Worth = Paid-up share Capital + all reserves* out of profit & securities premium account –(accumulated losses + deferred expenditure + miscellaneous expenditure not written off)

*Reserves created out of revaluation of assets and written back depreciation shall not be included in net worth calculation.

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