Indian Accounting Standards | Applicability , Objectives, Implementation, and Advantages

What are Indian Accounting Standards (IND AS)?

Indian Accounting Standards (IND AS) are the rules and regulations issued in order to introduce harmony in international accounting and reporting. These standards are to be followed by all the companies and organisations in order to create uniformity in the accounting system. The manner of recording transactions, preparation of financial statements, reporting of figures, etc., are standardised with the help of these IND AS. Following these IND AS while operating the business ensures that all the stakeholders are getting the information in a uniform manner and thus creates a sense of harmonisation. IND AS are to be mandatorily followed by the companies that are registered in India.

The Institute of Chartered Accountants of India (ICAI) and Accounting Standards Board (ASB) issues these standards that need to be followed by the companies and organisations in their accounts in order to introduce harmony in international accounting and reporting. Ministry of Corporate Affairs (MCA) released the Companies Rules in 2015 and instructed the companies to follow the standards from 2016-17 onwards in a phased manner. IND AS stands for Indian Accounting Standards.

Objectives of IND AS

The objectives of IND AS are as follows:

1. Uniform System: It aims to establish a unified accounting system by making all the companies follow the same manner of recording transactions, preparing financial statements, reporting financial statements, etc. It ensures that the accounts of all the companies are uniform in structure.

2. International Standards: It ensures that the accounts of Indian companies are as per international standards.

3. Transparency and Reliability: IND AS, which are the rules to be followed by all the companies, ensure transparency in the financial statements and reliability of the same.

4. Prevention of Frauds: Being the same for all companies and organisations, IND AS ensures that there are no/minimal occurrences of fraud and manipulation of statements.

Various Phases of Implementation of IND AS

MCA has divided the implementation of IND AS applicability into 4 phases according to the net worth and listing status of the companies. The 4 phases of implementation are as follows:

Phase I: IND AS has been made compulsory for all companies from April 1, 2016. This phase applies to all the companies that are listed and also to those that are in the process of being listed. This phase also applies to companies having a net worth of more than or equal to 500 crore.

Phase II: Financial year 2017 marked the beginning of this phase. All the listed companies, companies in the process of being listed, and those companies that were not included in Phase I and present on the Stock Exchange of India were covered in this phase. It also covered the companies with a net worth of 250-500 crore. It must be noted that the net worth of companies considered here will be from the years 2013-16.

Phase III: This phase applied IND AS to all the banks, insurance companies, and NBFCs. This phase was applicable from April 2018. This phase includes companies with net worth of 500 crore and more. The net worth of companies is decided by the Insurance Regulatory and Development Authority of India (IRDAI). For NBFCs, the net worth of FY 2015-16, 2016-17, and 2017-18 will be considered.

Phase IV: This phase covered all the NBFCs with a net worth of 250-500 crore and was applicable from April 2019.

Note: IND AS becomes applicable to all the subsidiaries, joint ventures and holdings of a company if it becomes applicable to that company. IND AS shall not be applicable to foreign operations of an Indian company.

Calculation of Net Worth of a Company

The net worth of a company is estimated using the audited standalone financial statements of the company. Net worth is calculated by adding total paid-up share capital, all the reserves made out of the profit and securities premium account and the value of deferred expenditure, accumulated losses and miscellaneous expenditures subtracted from it. Thus,

Net worth = Total paid-up share capital + All reserves – (deferred expenditure + accumulated losses + miscellaneous expenditure)

List of Major IND AS

IND AS Number	Applicability
1	Presentation of Financial Statements
2	Inventories Accounting
7	Statement of Cash Flows
8	Accounting Policies, Changes in Accounting Estimates and Errors
10	Events after Reporting Period
11	Construction Contracts
12	Income Taxes
16	Property, Plant and Equipment
17	Leases
18	Revenue
19	Employee Benefits
20	Accounting for Government Grants and Disclosure of Government Assistance
21	The Effects of Changes in Foreign Exchange Rates
23	Borrowing Costs
24	Related Party Disclosures
27	Separate Financial Statements
28	Investments in Associates and Joint Ventures
29	Financial Reporting in Hyperinflationary Economies
32	Financial Instruments: Presentation
33	Earnings per Share
34	Interim Financial Reporting
36	Impairment of Assets
37	Provisions, Contingent Liabilities and Contingent Assets
38	Intangible Assets
40	Investment Property
41	Agriculture
101	First-time adoption of Ind AS
102	Share Based payments
103	Business Combination
104	Insurance Contracts
105	Non-Current Assets Held for Sale and Discontinued Operations
106	Exploration for and Evaluation of Mineral Resources
107	Financial Instruments: Disclosures
108	Operating Segments
109	Financial Instruments
110	Consolidated Financial Statements
111	Joint Arrangements
112	Disclosure of Interests in Other Entities
113	Fair Value Measurement
114	Regulatory Deferral Accounts
115	Revenue from Contracts with Customers

Advantages of IND AS

1. Reliability: IND AS being the same for all companies and organisations makes financial statements more reliable. All the stakeholders take information from the financial statements, and IND AS ensures the reliability of financial statements.

2. Uniformity: It aims to establish a unified accounting system by making all the companies follow the same manner of recording transactions, preparing financial statements, reporting financial statements, etc. It ensures that the accounts of all the companies are uniform in structure.

3. Prevention of Frauds: Being the same for all companies and organisations, IND AS ensures that there are no/minimal occurrences of fraud and manipulation of statements.

4. Easy & Simple: IND AS are not very complicated, and one can easily learn how to introduce the standards in their financial statements without making any errors.