Applicability of Indian Accounting Standards (Ind AS) MCA 1st April 2016

Published On - June 19, 2016

admin ICAI, Indian Accounting Standards

The world is going to be a village. So it’s time to standardize the business practices all over the world. Uniform Accounting standards & practices, all over the world is demand of the time. Indian accounting standards are also converged accordingly. Hence “Applicability of Indian Accounting Standards (Ind AS)” is very important issue for Indian companies, which is discussed in this article.
Accounting Standards in India are issued by Institute of Chartered Accountants of India (ICAI). Now these standards are aligned with International Financial Review Standards (IFRS). Accordingly, New Indian AS are introduced by Central Government.
The Central Government has made new rules in this regard which is called as Companies (Indian Accounting Standards) Rules, 2015. These rules are in force from 1st April 2015.
Applicability of Indian Accounting Standards (Ind AS)
Voluntary compliance
Any company may comply with Indian AS for Financial statements beginning with period on or after 1st April 2015, with the comparatives of period ending on 31stMarch, 2015, or thereafter;
Mandatory Compliance
It is mandatory for the following companies to comply with Indian AS for financial statements beginning with period on or after 1st April 2016, with the comparatives of period ending on 31st March, 2016, or thereafter.

  • Companies whose securities are listed or are in process of listing in any stock exchange in India or outside India and having net worth of Rs. 500 crore or more;
  • Companies other than above and having net worth of Rs. 500 Crore or more;
  • Holding, subsidiaries, joint venture or associates of above companies.

It is also mandatory for the following companies to comply with Indian AS for financial statements beginning with period on or after 1st April 2017, with the comparatives of period ending on 31st March, 2016, or thereafter.

  • Companies whose securities are listed or are in process of listing in any stock exchange in India or outside India and having net worth of less than Rs. 500 crore or more;
  • Companies other than above and having net worth of Rs. 250 Crore but less than Rs. 500 Crore or more;
  • Holding, subsidiaries, joint venture or associates of above companies.

Note:

  • Securities listed or in process of listed in SME Exchange are not included in above companies.
  • The net worth is calculated based on stand alone financial statements of company as on 31st March 2014 or first audited financial statements after this date.
  • The companies which were not in existence or exiting companies falling under above rules of applicability of AS, the net worth is calculated based on the first audited financial statements ending after that date. If these companies are meeting the netwoth limit for first time at the end of financial year, then they shall follow the Indian AS from next accounting year. For example if the companies meet the networth limit as on 31st march 2017 then the Ind AS will be applicable from financial year 2017-18.
  • Ind AS will be applied to both stand alone financial statements and consolidated financial statements.
  • Overseas subsidiaries, associates, joint ventures and other similar entities of an Indian company may prepare its standalone financials statements in accordance to requirement of specific jurisdiction.
  • Once any Indian company applies Ind AS voluntarily or mandatory, then it must follow them consistently for future years.

Exemptions:
The insurance companies, banking companies and non-banking finance companies shall not be required to apply Indian Accounting Standards (Ind AS) for preparation of their financial statements either voluntarily or mandatory as specified in sub-rule (1) of rule 4.
General Instruction for application of Ind As as per Rule 3
(1) Indian AS are intended to be in conformity with the provisions of laws. However, if due to amendments in the law, a particular Indian AS is found to be not in conformity with such law, the provisions of the said law shall prevail and the financial statements shall be prepared in conformity with such law.
(2) Indian AS are intended to apply only to items which are material.
(3) The Indian AS having paragraphs in bold italic type and plain type, have equal authority. Paragraphs in bold italic type just indicate the main principles of the particular AS.