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IMPLEMENTATION OF IND AS (IFRS)

by:
CMA. BALWINDER SINGH, FCMA, FCA, AIV, LIII, DISA
Chairman, Cost Accounting Standards Board
Central Council Member, The Institute of Cost Accountants of India

Convergence Roadmap:

The Ministry of Corporate Affairs vide notification dated 16 February 2015 has issued the Companies (Indian Accounting Standards) Rules, 2015 which lay down a roadmap for companies other than insurance companies, banking companies and non-banking finance companies for implementation of Indian Accounting Standards (Ind AS) which are converged with International Financial Reporting Standards (IFRS).
The introduction of these standards is a paradigm shift that introduces several new and complex concepts, and will involve the application of significant judgement and estimates, accompanied by detailed quantitative and qualitative disclosures.

Companies required to follow Indian Accounting Standards converged with IFRS:

Applicability for Financial year 2016-17 and onwards:

(other than insurance companies, banking companies and non-banking finance companies)

Applicability for Financial year 2017-18 and onwards: 

(other than insurance companies, banking companies and non-banking finance companies)

a)       Listed companies (or companies in the process of being listed) having net worth of Rs. 500 crores or more

b)       Unlisted companies having net worth of Rs. 500 crores or more

c)       Holding, subsidiaries, joint ventures, or associates of companies covered in (a) and (b) above

Comparatives of previous year are also required to be reported

a)       All Listed companies

(or companies in the process of being listed)

b)       Unlisted companies having net worth of Rs. 250 crores or more

c)       Holding, subsidiaries, joint ventures, or associates of companies covered in (a) and (b) above

Comparatives of previous year are also required to be reported

Companies whose securities are listed or in the process of listing on the Small and Medium Enterprises (SME) exchanges will not be required to apply Ind AS and can continue to comply with the existing accounting standards unless they choose otherwise.

The net worth shall be calculated in accordance with the stand-alone financial statements of the company. The companies meeting the specified thresholds for the first time at the end of an accounting year shall apply Indian Accounting Standards (Ind AS) from the immediate next accounting year.

Illustration:
The companies meeting threshold for the first time as on 31st March, 2017 shall apply Ind AS for the financial year 2017-18 onwards.
The companies meeting threshold for the first time as on 31st March, 2018 shall apply Ind AS for the financial year 2018-19 onwards and so on

Companies to which Indian Accounting Standards (Ind AS) are applicable shall prepare their first set of financial statements in accordance with the Indian Accounting Standards (Ind AS) effective at the end of its first Indian Accounting Standards (Ind AS) reporting period.

Illustration:
Companies preparing financial statements applying the Indian Accounting Standards (Ind AS) for the accounting period beginning on 1st April, 2016 shall apply the Indian Accounting Standards (Ind AS) effective for the financial year ending on 31st March, 2017.

Indian company having Overseas subsidiary/associate/joint venture

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 the specific jurisdiction.

Further, such Indian company shall prepare its consolidated financial statements in accordance with the Indian Accounting Standards (Ind AS) if it meets the specified criteria.

Indian Company which is subsidiary/associate/joint venture of Foreign Company

Indian company which is a subsidiary, associate, joint venture and other similar entities of a foreign company shall prepare its financial statements in accordance with the Indian Accounting Standards (Ind AS) if it meets specified criteria.

Voluntary application of IFRS

Any company may voluntarily comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning on or after 1st April, 2015 (with comparatives for the previous period)

Any company opting to apply the Indian Accounting Standards (Ind AS) voluntarily shall prepare its financial statements as per the Indian Accounting Standards (Ind AS) consistently.

Once the Indian Accounting Standards (Ind AS) are applied voluntarily, it shall be irrevocable and such companies shall not be required to prepare another set of financial statements in accordance with Accounting Standards specified in the Companies (Accounting Standards) Rules, 2006

Criteria not fulfilled in subsequent years

Once a company starts following the Indian Accounting Standards (Ind AS) either voluntarily or mandatorily on the basis of criteria specified, it shall be required to follow the Indian Accounting Standards (Ind AS) for all the subsequent financial statements even if any of the criteria specified in this rule does not subsequently apply to it.

Applicability of IND AS to Non Banking Finance Companies

The Ministry of Corporate Affairs vide notification dated 30th March, 2016 has made it mandatory for Non Banking Finance Companies (NBFC) fulfilling following criteria to follow IND AS.

Applicability to Non Banking Finance Companies

Financial year 2018-19 and onwards:

Applicability to Non Banking Finance Companies

Financial year 2019-20 and onwards:

a)       Listed NBFCs (or companies in the process of being listed) having net worth of Rs. 500 crores or more

b)       Unlisted NBFCs having net worth of Rs. 500 crores or more

c)       Holding, subsidiaries, joint ventures, or associates of companies covered in (a) & (b) above

Comparatives of previous year are also required to be reported

a)       All Listed NBFCs (or companies in the process of being listed)

b)       Unlisted NBFCs having net worth of Rs. 250 crores or more

c)       Holding, subsidiaries, joint ventures, or associates of companies covered in (a) and (b) above

Comparatives of previous year are also required to be reported


Applicability of IND AS to Banking and Insurance Companies

The Banking Companies and Insurance Companies shall apply IND AS as notified by the Reserve Bank of India and Insurance Regulatory Development Authority respectively. The insurance companies shall provide IND AS compliant financial data for the purposes of preparation of consolidated statements by its parent, investor or venture.