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In the previous blog, we have seen what IFRS is and how in India has promised to converge with IFRS. India made a commitment to G20 nations in their summit in 2009 towards convergence to IFRS. Accordingly, India decided to adopt a reporting framework similar to IFRS i.e., Ind AS, Indian Accounting Standards Converged with IFRS. On 16 February 2015, the Ministry of Corporate Affairs (MCA) issued a notification for adoption and implementation of Ind AS for Corporate sector in India in phased manner vide companies (Indian Accounting Standards) Rule, 2015.
Ind AS to be adopted in a phased manner from the financial year 2016-17 with comparatives for the year financial year 2015-16 for certain class of companies. Applicability of Ind AS for corporate sector as well for NBFC is discussed below:
Corporate Roadmap
Mandatory Adoption
- Companies – Phase I (Other than banks, NBFCs and Insurance Companies)
- All Listed Companies or Companies in the process of Listing (debt or equity listed in or outside India) or unlisted Companies having net worth of INR 500 crores or more
- Holding, Subsidiary, Joint venture or Associates of companies covered above
- Companies – Phase II (Other than banks, NBFCs and Insurance Companies)
- All Listed Companies or Companies in the process of Listing (debt or equity listed in or outside India) (Irrespective of net worth)
- All other unlisted Companies having net worth of INR 250 Crores or more
- Holding, Subsidiary, Joint venture or Associates of companies covered above
Voluntary Adoption
- Companies can voluntarily converge with Ind AS. However, NBFC, banks and Insurance companies are not allowed to adopt Ind AS voluntarily.
Key Considerations
- Audited stand-alone financial statements as on 31 March to be considered for the calculation of net worth
- Net worth does not include revaluation reserves, write back of depreciation and amalgamation reserve
Applicable from 1 April 2016 i.e., FY 2016-17 with comparative of 31 March 2016 and opening BS of 1 April 2015
Applicable from 1 April 2017 i.e., FY 2017-18 with comparative of 31 March 2017 and opening BS of 1 April 2016
Once Ind AS is followed, it shall be followed for all subsequent years
NBFC Roadmap
Mandatory Adoption
- NBFCs – Phase I (Other than banks and Insurance Companies)
- All Listed NBFCs or NBFCs in the process of Listing (debt or equity listed in or outside India) or unlisted NBFCs having net worth of INR 500 crores or more.
- Holding, Subsidiary, Joint venture or Associates of NBFCs covered above.
- NBFCs – Phase II (Other than banks and Insurance Companies)
- All Listed NBFCs or NBFCs in the process of Listing (debt or equity listed in or outside India)
- All other unlisted NBFCs having net worth of INR 250 Crores or more
- Holding, Subsidiary, Joint venture or Associates of NBFCs covered above.
Voluntary Adoption
- NBFCs CAN NOT voluntarily converge with Ind AS. Also, banks and Insurance companies are not allowed to adopt Ind AS voluntarily.
Key Considerations
- Audited stand-alone financial statements as on 31 March to be considered for the calculation of net worth.
- Net worth does not include revaluation reserves, write back of depreciation and amalgamation reserve.
Applicable from 1 April 2018 i.e., FY 2018-19 with comparative of 31 March 2018 and opening BS of 1 April 2017
Applicable from 1 April 2019 i.e., FY 2019-20 with comparative of 31 March 2019 and opening BS of 1 April 2018
Once Ind AS is followed, it shall be followed for all subsequent years.
Notes
- The above road maps are not applicable to banks and insurance companies.
- Voluntary adoption of Ind AS is allowed for the Indian companies.
- However, NBFCs, insurance companies and banking companies shall not apply Indian Accounting Standards (Ind AS) voluntarily.
- Ind AS are notified through Rules under Companies Act, 2013. The structure and format for the financial statements under Ind AS is provided by MCA under Schedule III Division II (for Companies) and Division III (for NBFCs). Division I is for non-Ind AS companies.
Key considerations with respect to Ind AS applicability in general:
- Net worth calculation - The net worth shall be calculated in accordance with the stand-alone financial statements (SFS) of the company under Indian GAAP.
- Net worth does not include revaluation reserves, write back of depreciation and amalgamation reserves.
- Foreign companies – Overseas subsidiary, associate, joint venture and other similar entities of an Indian company under Ind AS may not prepare its SFS in accordance with Ind AS fully. However, Indian company shall prepare its consolidated financial statements (CFS) in accordance with Ind AS. i.e., material adjustments for a foreign subsidiary shall be considered under Ind AS.
- Subsequent applicability of Ind AS - Once a company starts following the Ind AS either voluntarily or mandatorily on the basis of criteria, it shall be required to follow the 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 on SFS and CFS – Once Ind AS is applicable based on standalone net worth, it shall be applied both on standalone as well as consolidated financial statements
- Newly formed and other companies - For companies which are newly formed, the net worth shall be calculated on the basis of the first audited financial statements ending after that date in respect of which it meets the thresholds specified.
Examples
- The companies meeting net worth threshold for the first time as on 31 March 2018 shall apply Ind AS for the financial year 2018-19 onwards.
- The companies meeting net worth threshold for the first time as on 31 March 2023 shall apply Ind AS for the financial year 2023-24 onwards with comparatives for the 31 March 2023 and opening balance sheet for 1 April 2022.
At FinPro Consulting, we specialise in delivering training, GAAP Conversion Services and other consulting services related to financial reporting under IFRS, Ind AS and US GAAP. FinPro is also a Registered Learning Partner (RLP) with ACCA, UK and has conducted more than 30 retail training batches for Diploma IFRS course. In the next blog we will deal with frequently asked question related to DipIFR examination and DipIFR training course conducted at FinPro.
Thank you reading the article and stay tuned to our next blog!
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