The Ministry of Corporate Affairs (MCA) has issued a notification dated 16th February, 2015 announcing the Companies (Indian Accounting Standards) Rules, 2015 for phase-wise revised roadmap for adoption and applicability of all 39 Indian Accounting Standards (Ind AS) for companies other than Banking companies, Insurance Companies and NBFCs.
The MCA had issued yearly amendment rules in the year 2016, 2017, 2018 and 2019 to amend the Companies (Indian Accounting Standards) Rules, 2015. Note that SEBI requires issuer companies to disclose financial information for the previous 5 financial years immediately preceding the year of filing of the offer document, while following uniform accounting policies for each of the financial years. Thus, on or after April 1, 2020, disclosures in all the previous five financial years will have to be made as per the IND AS principles.
Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 has specified the classes of companies which shall comply with the Ind AS in preparation of their financial statements and auditors of such companies while preparing their audit report. Financial Statements shall have same meaning as defined in clause (40) of Section 2 of the Companies Act, 2013.
The application of Ind AS is mainly based on the listing status and net worth of a company. As per the roadmap for implementation of Ind AS, all listed companies (except companies listed on SME exchanges) and companies having a net worth of ₹250 crore or more shall be required to adopt Ind AS.
Phase-I: Obligation to Comply with Ind AS from 1st April, 2016
In accordance with clause (ii) of sub- rule (1) of Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015, the following companies shall comply with Ind AS w.e.f. April 2016:
(a) Companies listed/in process of listing on Stock Exchanges in India or Outside India having net worth of ₹500 crore or more;
(b) Unlisted Companies having net worth ≥ ₹500 crore;
(c) Holding (Parent), subsidiary, joint venture or associate companies of above.
Therefore, Ind AS will first apply to all companies (Listed or Unlisted) having net worth of ₹500 crore or more for the accounting periods beginning on or after 1st April, 2016. In other words, the companies meeting the above threshold for the first time as on 31st March, 2021 shall apply Ind AS for the financial year 2021-22 onwards.
Phase-II: Mandatory Compliance of Ind AS from 1st April, 2017
Clause (iii) of sub- rule (1) of Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 states that the following companies shall comply with Ind AS for the accounting periods beginning on or after 1st April, 2017:
(a) Companies listed/in process of listing on Stock Exchanges in India or Outside India having net worth of less than ₹500 crore;
(b) Unlisted companies having net worth of ≥ ₹250 crore but < ₹500 crore;
(c) Holding, Subsidiary, Associate and J.V. of Above.
Thus, from April 2017 Ind AS shall apply to all listed companies irrespective of their net worth whereas the unlisted companies shall be required to comply with Ind AS only if their net worth is equal to or exceeding ₹250 crore. In other words, the companies meeting the above threshold for the first time as on 31st March, 2021 shall apply Ind AS for the financial year 2021-22 onwards.
Note that the comparative information i.e. comparative figures for the preceding accounting period is required in both phase for the period ending 31st March 2016/2017 or thereafter. You should also note that the Rule do not mention the net worth criteria for holding, subsidiary, joint venture or associate companies and therefore even smaller companies in this category will be covered for the purpose of applicability of Ind AS.
Roadmap for Implementation of Ind AS by NBFC
MCA has issued Companies (Indian Accounting Standards) (Amendment) Rules, 2016 to amend Companies (Indian Accounting Standards) Rules, 2015.
Roadmap for implementation of Ind AS by Non-Banking Financial Companies:
As per clause (iv) of sub-rule (1) of Rule 4 of the Companies (Indian Accounting Standards) (Amendment) Rules, 2016, Non-Banking Financial Companies (NBFCs) shall comply with the Indian Accounting Standards (Ind ASs) in preparation of their financial statements and audit respectively, in the following manner, namely: –
Comply with Ind AS by NBFC from April 2018
The following NBFCs shall comply with the Indian Accounting Standards (Ind AS) for accounting periods beginning on or after the 1st April, 2018, with comparatives for the periods ending on 31st March, 2018, or thereafter—
(A) NBFCs having net worth of rupees ₹500 Crore or more;
(B) holding, subsidiary, joint venture or associate companies of companies covered under item (A).
Comply with Ind AS by NBFC from April 2019
The following NBFCs shall comply with the Indian Accounting Standards (Ind AS) for accounting periods beginning on or after the 1st April, 2019, with comparatives for the periods ending on 31st March, 2019, or thereafter—
- (A) NBFCs whose equity or debt securities are listed or in the process of listing on any stock exchange in India or outside India and having net worth less than ₹500 Crore;
- (B) NBFCs, that are unlisted companies, having net worth of ₹250 Crore or more but less than ₹500 Crore; and
- (C) holding, subsidiary, joint venture or associate companies of companies covered under item (A) or item (B).
Meaning of NBFC for Ind AS
NBFC means a Non-Banking Financial Company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 and includes:
- Housing Finance Companies;
- Merchant Banking companies;
- Micro Finance Companies;
- Mutual Benefit Companies;
- Venture Capital Fund Companies;
- Stock Broker or Sub-Broker Companies;
- Nidhi Companies;
- Chit Companies;
- Securitisation and Reconstruction Companies;
- Mortgage Guarantee Companies;
- Pension Fund Companies;
- Asset Management Companies; and
- Core Investment Companies.
Net worth of Companies for the purpose of Ind AS
The term Net Worth shall have the meaning assigned to it in clause (57) of Section 2 of the Companies Act, 2013. For the purposes of calculation of net worth of companies, the following principles shall apply, namely:-
(a) The net worth shall be calculated in accordance with
- i) the stand-alone financial statements of the company as on 31st March, 2014; or
- ii) the first audited financial statements for accounting period which ends after 31st March, 2014;
(b) for companies falling under any of thresholds specified in Phase I and II above for the first time after 31st March, 2021, 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.
Companies not covered in the Rule for application of Ind AS
The following companies are not required to prepare their financial statements in accordance with Ind AS:
i) The Insurance Companies, Banking Companies and Non-Banking Finance Companies.
ii) Companies whose securities are listed or are in the process of being listed on SME exchange.
SME Exchange shall have the same meaning as assigned to it in Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.
iii) Overseas subsidiaries, associates, joint ventures of an Indian company is not required to prepare its stand-alone financial statements as per the Ind AS. Thus, they may prepare their standalone financial statements in accordance with its jurisdictional requirements.
However, it is apparent from the above fact that these entities will still have to report their Ind AS adjusted numbers for their Indian parent company to prepare consolidated Ind AS accounts.
Once a company starts following the Indian Accounting Standards (Ind AS) on the basis of specified 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. However, the companies which are not required to follow Ind AS shall comply with the Accounting Standards (AS) as specified to the Companies (Accounting Standards) Rules, 2006.
Download Ind AS Applicable in 2020-21
- Ind AS 1 Presentation of Financial Statements
- Ind AS 2 Inventories
- Ind AS 7 Statement of Cash Flows
- Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors
- Ind AS 10 Events after the reporting period
- Ind AS 12 Income Taxes
- Ind AS 16 Property, Plant and Equipment
- Ind AS 19 Employee Benefits
- Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance
- Ind AS 21 The Effects of Changes in Foreign Exchange Rates
- Ind AS 23 Borrowing Costs
- Ind AS 24 Related Party Disclosures
- Ind AS 27 Separate Financial Statements
- Ind AS 28 Investments in Associates and Joint Ventures
- Ind AS 29 Financial Reporting in Hyperinflationary Economies
- Ind AS 32 Financial Instruments Presentation
- Ind AS 33 Earnings per Share
- Ind AS 34 Interim Financial Reporting
- Ind AS 36 Impairment of Assets
- Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets
- Ind AS 38 Intangible Assets
- Ind AS 40 Investment Property
- Ind AS 41 Agriculture
- Ind AS 101 First-time Adoption of Indian Accounting Standards
- Ind AS 102 Share-based Payment
- Ind AS 103 Business Combinations
- Ind AS 104 Insurance Contracts
- Ind AS 105 Non-current Assets Held for Sale and Discontinued Operations
- Ind AS 106 Exploration for and Evaluation of Mineral Resources
- Ind AS 107 Financial Instruments Disclosures
- Ind AS 108 Operating Segments
- Ind AS 109 Financial Instruments
- Ind AS 110 Consolidated Financial Statements
- Ind AS 111 Joint Arrangements
- Ind AS 112 Disclosure of Interests in Other Entities
- Ind AS 113 Fair Value Measurement
- Ind AS 114 Regulatory Deferral Accounts
- Ind AS 115 Revenue from Contracts with Customers
- Ind AS 116 Leases