Introduction: Explore the evolution from Accounting Standards (AS) to Indian Accounting Standards (IND AS) driven by the need for global compatibility. Discover how IND AS addresses shortcomings in AS, ensuring fair financial presentation worldwide. The transition, effective since April 1, 2015, impacts various entities, from companies to banks and insurance companies.
Before talking about IND AS we have to know about why there is a need to introduce IND AS while we have AS. So Basically ICAI has issued various AS time to time for better preparation and presentation of the financial statements of the entity for the Purpose of providing better understanding to the users of financial statements through which they can plan there strategy for the investment in such entity or not. But there is a problem in the AS that it is very conventional in compare of the Global method of presentation provided by the international financial reporting standards(IFRS). Because there is very difference in the presentation manner that’s why the foreign investors are not interested in making investment in our country because they can’t find it very understandable. In AS there are many transactions which didn’t find place in the financials or no proper guidance is provided how to present that kind of transactions. Initially AS prescribed that the Assets shall be valued at cost and shown in books at cost over the period but there is a factor that is inflation which is not considered in the valuation due to this whenever the asset sold there is seems that huge profit but in actual it is not huge profit because the asset is not valued properly.
To deal with such kind of problems there is a need to issue such kind of AS which can meet the fair presentation over the world. Here IND AS comes in role formally known as Indian Accounting Standards on 1st April ,2015.
Applicability of IND AS on Companies, Banks, Insurance companies, and NBFC:
FOR Companies –
IND AS is applicable voluntary and as well as mandatory basis.
Companies can follow the provisions on voluntary basis from 1st April,2015.
But in mandatory basis there is two phases :
Phase -I All listed and unlisted companies having Net worth 500 Crores or more is required to present there financials as per IND AS from 1st April,2016 onwards.
Phase-II All listed companies irrespective of Net Wroth criteria.
All unlisted companies having Net worth 250 Crores or more is required to present there financials as per IND AS from 1st April,2017 onwards.
So there is question arising what is the cut off date for checking the net worth limit and what is net worth means here?
The cut off date for checking Net worth limit is 31st mar 2014 and thereafter.
Net worth :- Paid -up share capital + Reserves created out profits +securities premium reserves -accumulated losses – deferred expenditures -misc. expanse not written off .
But these items are ignored while calculation reserves created out of revaluation, amalgamation reserves and depreciation write back .
Note:
1. IND AS once applicable is always applicable.
2. If companies are not meeting this criteria they have to reassess the applicability of IND AS at the end of every FY.
3. If IND AS is applicable to a company then automatically it will be applicable on its parent , subsidiary ,associates and joint ventures but not applicable on fellow subsidiary.
4. if IND AS is applicable on Parent company then standalone as well as consolidated financial statements shall be as per IND AS.
5. Comparatives data are also be in the format of IND AS .
6. All which are not fall in this criteria they should follow AS.
FOR BANKS , INSURANCE COMPANIES AND NBFC:-
There is no provisions issued for the applicability on banks and insurance companies till date. But there is the provisions for NBFC.
In case of NBFC they is only mandatory basis and it also includes two phases:
Phase-I All listed and unlisted companies having net worth 500 crores or more shall required to prepare their financials as per IND AS from 1st April, 2018.
Phase-II All listed companies irrespective of Net worth.
All unlisted companies having Net worth 250 crores or more is required from 1st April, 2019.
Note:
1. There is restriction on voluntary adoption.
2. Urban commercial banks and Regional Rural banks are not required to present financial as per IND AS .
3. The cut off date for net worth is 31st mar,2016 and thereafter.
4. Companies listed on SME shall out of the preview of this.
Recently A guidance notes and circulars are issued for the applicability of IND AS on Mutual funds from 1st April,2023 by ICAI.
So this is the basic guidance about the applicability of IND AS on different kind of entities.
Conclusion: Navigating the applicability of IND AS involves phased implementation for companies based on net worth. Recognize the significance of IND AS adoption, ensuring accurate financial representation and alignment with international standards. Stay informed about recent updates, such as the guidance notes and circulars for Mutual Funds, emphasizing the ongoing evolution and importance of IND AS in the financial landscape.
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