List of Indian Accounting Standards (Ind AS List)
Accounting & Bookkeeping

Indian Accounting Standards – Applicability and Objectives

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Indian Accounting Standards, also known as Ind AS, were developed as accounting standards that would bring Indian financial reporting within the ambit of the global tradition. Ind AS standards bring to the country the benefits of transparency, comparability, and credibility in financial statements.

Based on International Financial Reporting Standards, Ind AS addresses the evolving needs of its stakeholders, ranging from investors to regulators and the business community across the globe.

This blog explores the applicability and objectives of Indian Accounting Standards to enlighten businesses in India on its relevance.

Understanding Indian Accounting Standards

Financial reporting forms the core of effective decision-making in any business entity. The Indian Accounting Standards in India have transformed the way that companies publish their financial information. Introduced by the Ministry of Corporate Affairs in consultation with the Institute of Chartered Accountants of India, Ind AS are applicable to specified corporates and are intended to harmonize the financial reporting of India with that of the global arena.

The standards would include revenue recognition, financial instruments, leases, and consolidation of financial statements; all these comprehensive standards are brought in by the new Ind AS to ensure consistency and accuracy, so it enhances credibility about the given information and lines India’s accounting practice with global standards.

Objectives of Indian Accounting Standards

The main aims of Ind AS are to provide good-quality financial reporting and to promote standardization in the accounting practices of Indian entities. The objectives are as follows –

  1. Improve Comparability

A key goal of Ind AS is to make it easier to compare the financial statements of companies, both within India and across different countries. It has a very positive impact on the companies, the investors, and the analysts who function in different markets; hence, the evaluation process will be a lot simpler.

  1. Promote Transparency

Ind AS means that the financial reporting should be fully disclosed. As a result, the stakeholders are able to view all the information they need.

  1. Global Integration

The alignment of Ind AS with IFRS facilitates the integration of Indian business into the world economy. Therefore, Indian businesses can attract more foreign investments to expand their activities globally.

  1. Enhanced Decisions

Financial reporting of superior quality under Ind AS ensures the availability of information for better management and investor decisions by the regulators and management.

  1. Consistency

Ind AS encourages consistency in financial reporting. It will, therefore, make it easier for stakeholders to analyze financial statements over time, thereby ensuring the trends are easy to spot and the performance is better evaluated.

Applicability of Indian Accounting Standards

Applicability is guided by Companies (Indian Accounting Standards) Rules 2015. The latter comes from the Ministry of Corporate Affairs, known as the MCA, which deals with details that define companies regarding listing and their net worth position along with the classification in which the company is situated-whether belongs to a group of companies.

  1. Listed Companies

All Indian-listed companies on recognized stock exchanges have to prepare their financial statements under Ind AS. It ensures uniformity and transparency in the financial reporting of public companies, thereby ensuring investor confidence and market integrity.

  1. Unlisted Companies

Unlisted companies with a net worth of Rs 250 crore or more have to comply under Ind AS. It ensures large companies impact the economy and draws heavy attention from stakeholders that are operated in accordance with global standards.

  1. Applicability to Group Entities

In case a particular company falls into the scope based on Ind AS, all those group entities grouping holding and subsidiaries, association companies, or joint ventures- income statement consolidation and balance sheets would also attract such applicability irrespective of their group net worth status.

  1. Applicability to Specific Sectors

Non-banking financial companies, insurance companies, and banks have different guidelines for the adoption of the Ind AS. Large non-banking financial companies with a net worth above Rs 500 crore shall have to adopt Ind AS. Smaller NBFCs follow a different timeline; therefore, they may be exempt.

Industry-specific standards under the sector are adopted in case of insurance companies, which is formulated by Insurance Regulatory and Development Authority of India. Likewise, large banks adopt RBI guidelines and may adopt the roadmap differently.

  1. Voluntary Adoption

Companies that are not required to follow Ind AS can choose to adopt it voluntarily. This option is helpful for businesses that want to improve their financial reporting, attract international investors, or get ready for future expansion.  By voluntarily embracing Ind AS, companies show their devotion to being straightforward and taking worldwide measures.

  1. Exemptions

The MCA exempts certain entities from the obligation of Ind AS compliance. This includes SMEs with a net worth below Rs 250 crore and entities in sectors with specific regulatory frameworks. The approach ensures that there is a balanced approach in terms of the compliance of the significant economic impact while allowing the smaller businesses to operate under simpler frameworks.

Benefits of Implementing Ind AS

Indian entities and the economy at large have several advantages when adopting Ind AS.

  1. Increased Investor Confidence- The improved quality of reporting under Ind AS draws interest from both domestic and international investors.
  2. Simplified Cross-Border Operations- By following global rules, Ind AS helps Indian companies do business through mergers, buying other companies, and investing in other countries more easily.
  3. Better Access to International Markets- Compliance with Ind AS often forms a pre-requirement for access to international capital markets.
  4. Better Corporate Governance- The inherent concept of transparency and disclosures builds further on accountability and governance within organizations.
  5. Simplification in Consolidation- Ind AS helps to simplify consolidation of financial statements for groups of companies having subsidiaries operating in more than one jurisprudence.

Conclusion

Ind AS marks a great milestone in the country’s financial reporting scenario. Conformity to global standards enables Ind AS to improve the quality and credibility of financial statements. More importantly, India will take strides in terms of its global economic integration through the implementation of Ind AS.

For businesses, the adoption of Ind AS means much more than compliance; rather, it involves a strategic play to foster investor confidence, drive growth, and increase transparency. Although the process for its implementation would be challenging, the long-run benefits make Ind AS a central tenet in modern financial reporting in India.

As India continues its growth as an economic superpower, the significance of Ind AS in promoting transparency and trust cannot be overstated. Businesses and professionals must embrace such standards to open up new vistas and ensure growth that is sustainable.

Related Services

References 

The Companies (Indian Accounting Standards) Rules, 2015

https://www.icai.org

https://www.mca.gov.in

https://resource.cdn.icai.org

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Advocate by profession, currently pursuing an LL.M. from the University of Delhi, and an experienced legal writer. I have contributed to the publication of books, magazines, and online platforms, delivering high-quality, well-researched legal content. My expertise lies in simplifying complex legal concepts and crafting clear, engaging content for diverse audiences.
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