IND AS workings as per applicability

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Understanding Ind AS (Indian Accounting Standards)

Ind AS refers to the set of accounting standards adopted by India, which are aligned with the International Financial Reporting Standards (IFRS). These standards provide a comprehensive framework for financial reporting, ensuring consistency, transparency, and comparability in the financial statements of companies operating in India.

Applicability of Ind AS

Ind AS applies to various types of companies in India, depending on certain factors such as their size, nature of operations, and whether they are publicly traded. The applicability is determined based on the following criteria:

1. Applicability Based on Company Size and Listing Status

  • Listed Companies (Publicly traded):

    • All listed companies, whether on the Bombay Stock Exchange (BSE), National Stock Exchange (NSE), or any other stock exchange, are required to follow Ind AS.
    • This applies to companies listed in India or abroad.

  • Unlisted Companies:

    • Unlisted companies that meet certain thresholds for revenue or net worth are also required to adopt Ind AS.
    • Generally, unlisted companies with a net worth of ₹250 crores or more are expected to follow Ind AS.

2. Transition Timelines for Ind AS Implementation

The government of India has set phased implementation timelines for Ind AS:

  • For Large Listed Companies:

    • Ind AS was made mandatory starting April 1, 2016 for the listed companies with a net worth of ₹500 crores or more.

  • For Other Companies:

    • Smaller listed companies and unlisted public companies with a net worth of ₹250 crores to ₹500 crores are required to adopt Ind AS by April 1, 2017.

  • Private Companies:

    • Ind AS becomes applicable to private companies with a net worth of ₹250 crores or more from April 1, 2017.

3. Special Applicability for Banks, Insurance Companies, and NBFCs

  • Banks: Banks and financial institutions are required to implement Ind AS starting April 1, 2018, regardless of their net worth. However, certain exclusions may apply based on specific regulations.

  • Insurance Companies: Insurance companies were required to adopt Ind AS starting April 1, 2020. This applies to both public and private sector insurance companies.

  • Non-Banking Financial Companies (NBFCs):

    • For NBFCs, the applicability of Ind AS depends on their asset size. Companies with assets of ₹500 crore or more were required to comply with Ind AS from April 1, 2018.

4. Early Adoption of Ind AS

  • Companies with Net Worth Less Than ₹250 Crores:
    • Companies with a net worth of less than ₹250 crores are not required to apply Ind AS. However, they can choose to adopt it voluntarily if they wish to.
  • Private Companies:
    • Private companies may also adopt Ind AS on a voluntary basis even if their net worth is below the prescribed threshold.

Key Features of Ind AS

  1. Alignment with IFRS: Ind AS closely mirrors the International Financial Reporting Standards (IFRS), making financial statements more consistent with global practices.

  2. Fair Value Measurement: Ind AS introduces a greater emphasis on fair value accounting, especially for financial instruments, which provides a more accurate representation of assets and liabilities.

  3. Revenue Recognition: Ind AS follows a more detailed and principles-based approach to revenue recognition, as per the Ind AS 115 (Revenue from Contracts with Customers).

  4. Financial Instruments: The standards for financial instruments (Ind AS 109) provide detailed guidance on recognition, classification, measurement, and disclosure of financial assets and liabilities.

  5. Lease Accounting: Ind AS 116 introduces a new approach to lease accounting, recognizing most leases on the balance sheet (bringing both operating and finance leases into scope).

Ind AS vs. Indian GAAP

While Ind AS aligns closely with IFRS, Indian GAAP was the older accounting standard in India before Ind AS was introduced. Some of the key differences include:

  • Measurement of Assets and Liabilities: Ind AS places more emphasis on fair value measurement, whereas Indian GAAP was more focused on historical cost.
  • Financial Statement Presentation: The presentation and disclosures required under Ind AS are more detailed than those required under Indian GAAP.
  • Revenue Recognition: Under Ind AS, revenue recognition standards are more in line with the global standards of IFRS.