INDIAN ACCOUNTING STANDARDS – Applicability and Effects

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As we all know that the Ministry of Corporate Affairs (MCA) has issued Indian Accounting Standards vide notification dated 16th February 2015. These Ind AS are converged with the IFRS issued by the International Accounting Standards Board (IASB).

 

In accordance with the Rule 4 of Companies (Indian Accounting Standards) Rules 2015, following class of companies shall mandatorily comply with the Indian Accounting Standards:

Sr. No.

Particulars w.e.f 01st April 2016 i.e. F.Y. 2016 – 17 onwards w.e.f 01st April 2017 i.e. F.Y. 2017 – 18 onwards

1

All Companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange

If net worth exceeds Rs.500 Crores or more

 

2

Unlisted Companies

If net worth exceeds Rs.500 Crores or more

If net worth exceeds Rs.250 Crores or more

3

Holding, Subsidiary, Joint Venture or Associate Company of above Companies.

 

Before 01st April 2016, any company, irrespective of its net worth, may voluntarily comply with the Indian Accounting Standards for financial Statements for accounting periods beginning on or after 01st April 2015. Once the option is adopted, it cannot be revoked.

For the purpose of above, the net worth shall be calculated as “Paid up Share Capital +Reserves out of profits +Securities Premium – Accumulated Losses – Deferred Expenditure – Miscellaneous Expenditure not written off” and will be determined on the basis of Standalone financial statements of the company as on the last day of the previous audited year.

 

Presently ICAI has issued 39 Indian Accounting Standards whose applicability will be massively a positive move that will bring the accounting system followed in India substantially closer to the accounting system followed by global companies under IFRS. However, also there are various carve outs from IFRS issued by ICAI which means certain requirements of an accounting standard under IFRS will not be adopted. It is not certain that whether these carve outs will benefit the Indian Companies or not.

 

Conversely, for CA students appearing for final course examination to be held in November 2016, only these carve outs will be applicable instead of Complete Ind AS. Students can go through the following link for the same:

Link – http://www.mca.gov.in/Ministry/pdf/nacas_30jun2011.pdf

 

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