Indian Accounting Standards (Ind AS) - Objectives & Benefits PDF

# Indian Accounting Standards (Ind AS) Indian Accounting Standards or Ind AS are rules that determine how Indian companies prepare and present their financial statements. ## What is Indian Accounting Standards (IND AS)? - Indian Accounting Standards (Ind AS) are IFRS-converged standards issued by...

# Indian Accounting Standards (Ind AS) Indian Accounting Standards or Ind AS are rules that determine how Indian companies prepare and present their financial statements. ## What is Indian Accounting Standards (IND AS)? - Indian Accounting Standards (Ind AS) are IFRS-converged standards issued by the Central Government of India under the supervision and control of the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) and in consultation with the National Financial Reporting Authority (NFRA). ## History of Indian Accounting Standards (IND AS) - India used the Indian Generally Acceptable Accounting Principles (IGAAP) as its accounting standards before the adoption of the Ind-AS ## Who Issues Accounting Standards in India - The accounting standards are prepared by the Institute of Chartered Accountants of India (ICAI). - It is done under the administrative control of the Ministry of Corporate Affairs, Government of India. - There are currently 41 accounting standards that have been published by the Council of the Institute of Chartered Accountants of India (ICAI). ## Objectives of Accounting Standards (IND AS) - The Indian Accounting Standards (IND AS) primary objective is to ensure that large-scale activities are properly accounted for through continuous disclosure, treatment and reformation. - IND AS standardizing accounting policies and principles for the country's economy. - Provides a unified framework for the preparation of books of accounts and ensures financial transparency. - The Indian Accounting Standards (IND AS) ensure that all institutions and governmental bodies are accepted globally. ## List of Indian Accounting Standards (IND AS) | Sr NO | IND AS NO: | Name of Indian Accounting Standard (IND AS ) | Sr No | IND AS NO | Name of Indian Accounting Standard (IND AS ) | |---|---|---|---|---|---| | 1 | Ind AS 101 | Ind AS is being used for the first time. | 22 | Ind AS 11 | Construction Contracts - Amendment Rules, 2018. | | 2 | Ind AS 102 | Shared Payment. | 23 | Ind AS 12 | Income Taxes. | | 3 | Ind AS 103 | Business Combination. | 24 | Ind AS 16 | Property, Plant, and Equipment. | | 4 | Ind AS 104 | Insurance Contracts. | 25 | Ind AS 19 | Employee Benefits. | | 5 | Ind AS 105 | Non-Current Assets Held for Sale and Discontinued Operations. | 26 | Ind AS 20 | Accounting for and disclosing government grants. | | 6 | Ind AS 106 | Exploration for and Evaluation of Mineral Resources. | 27 | Ind AS 21 | The Effects of Changes in Foreign Exchange Rates. | | 7 | Ind AS 107 | Financial Instruments & Disclosures. | 28 | Ind AS 21 | The Effects of Changes in Foreign Exchange Rates. | | 8 | Ind AS 108 | Operating Segments. | 29 | Ind AS 23 | Borrowing Costs. | | 9 | Ind AS 109 | Financial Instruments. | 30 | Ind AS 24 | Related Party Disclosures. | | 10 | Ind AS 110 | Consolidated Financial Statements. | 31 | Ind AS 27 | Separate Financial Statements. | | 11 | Ind AS 111 | Joint Arrangements. | 32 | Ind AS 28 | Investments in Associates and Joint Ventures. | | 12 | Ind AS 112 | Disclosure of Interests in Other Entities. | 33 | Ind AS 29 | Financial Reporting in Hyperinflationary Economies. | | 13 | Ind AS 113 | Fair Value Measurement. | 34 | Ind AS 32 | Financial Instruments: Presentation. | | 14 | Ind AS 114 | Regulatory Deferral Accounts. | 35 | Ind AS 33 | Earnings per Share. | | 15 | Ind AS 115 | Revenue from Contracts with Customers(Applicable from April 2018). | 36 | Ind AS 34 | Interim Financial Reporting. | | 16 | Ind AS 116 | Leases - Applicable from April 2019. | 37 | Ind AS 36 | Impairment of Assets. | | 17 | Ind AS 1 | Presentation of Financial Statements. | 38 | Ind AS 37 | Provisions, Contingent Liabilities, and Contingent Assets. | | 18 | Ind AS 2 | Inventories. | 39 | Ind AS 38 | Intangible Assets. | | 19 | Ind AS 7 | Statement of Cash Flows | 40 | Ind AS 40 | Investment Property. | | 20 | Ind AS 8 | Accounting Policies, Changes in Accounting Estimates and Errors. | 41 | Ind AS 41 | Agriculture. | | 21 | Ind AS 10 | Events occurring after Reporting Period. | - | - | - | ## Applicability of Ind AS - Ind AS or Indian Accounting Standards were made applicable in a phased manner. They were not applied to all companies at once. - Initially, in 2015, Ind AS was made mandatory only for large companies and listed companies. They were voluntary for others. - From 2016-17, all companies with net worth above ₹500 crores had to adopt Ind AS. This included listed as well as unlisted firms. - From 2017-18, companies with net worth between ₹250-500 crores were required to implement Ind AS. Small companies with a net worth of up to 250 crores continue to follow Indian GAAP. They have an option to voluntarily adopt Ind AS. - Among listed companies, those with a net worth of more than 1,000 crores had to mandatorily implement Ind AS from 2016-17 - Smaller listed companies with a net worth between ₹500-1,000 crores were given time till 2018-19 to implement Ind AS. - The phased implementation of Ind AS gives companies more time for the transition. It eases the transition process. ## Concept of Indian Accounting Standards (IND AS) - Indian AS was created to harmonize standards for global reporting and accounting. - IND AS standardizes the entire accounting procedure of the Indian economy. - After the adoption of IND AS, all businesses uniformly record their transactions. - It is an attempt to make the entire accounting system more understandable to everyone in the business sector. ## Indian Accounting Standards and Its Adoption - Ind AS was adopted by Indian companies in 4 phases, which are mentioned below: | Phase | Adoption| Business | Net Worth | Calculating Year | |---|---|---|---|---| | | 1st April 2016. | All listed and unlisted companies. | Not less than 500 crores. | FY between 31/03/2014 and 31/03/2016. | | | 1st April 2017. | Indian AS is mandatorily applicable to all companies. | Net worth greater than or equal to Rs. 250 crores but less than Rs. 500 crores. | FY between 31/03/2014 and 31/03/2017. | | | 1st April 208. | Ind AS became mandatorily applicable to all Banks, NBFCs, and Insurance companies. | Not less than 500 crores. | FY between 31/03/2016 and 31/03/2018. | | | 1st April 2019. | Ind AS is mandatorily applicable to all NBFCs. | Net worth greater than or equal to Rs. 250 crores but less than Rs. 500 crores. | FY between 31/03/2017 and 31/03/2019. | ## Advantages of Accounting Standards - It simplifies and clarifies accounting information. - Helps an accounting system be uniform. - Provides acceptance on a global level. - Financial statements can be easily compared. - Helps in auditing. - Gives financial statements credibility. - Assess management performance. - Prevents fraud and manipulation. ## Need for IND AS adoption - Ind AS facilitates cross-border money flow. - Ind As facilitates global listing. - Ind As also facilitates global comparability of financial statements. - Ind AS improves the investor's ability to compare investments globally. - Thus, global investment becomes easier, and capital market stakeholders benefit. ## Accounting Standards Board of India - The Accounting Standards Board (ASB) was established in 1977 by the Council of the Institute of Chartered Accountants of India (ICAI) in response to the need for Accounting Standards in India. - It recommends to the Government of India Accounting Standards (Indian Accounting Standards (Ind AS) and Accounting Standards (AS) for notification under relevant provisions of various statutes, such as - the Companies Act 2013, and - Limited Liability Partnership Act, 2008. - The Accounting Standards Board of India (ASB) also issues Accounting Standards for noncorporate Entities in India. ## Accounting Standards Committee - The International Accounting Standards Committee (IASC) was an independent private-sector organization. - The IASC's objective was to establish uniform accounting principles for use in financial reporting by businesses and organizations all over the world. - On April 1st, 2001, IASC was replaced by the International Accounting Standards Board (IASB). ## International Financial Reporting Standards (IFRS) and Its Convergence with IND AS - Globalization has made it possible to accept the entire world as one economy. There was an urgent need to harmonize with one global accounting language for a better understanding of business reporting and consistency in accounting policies. - The use of a single set of accounting standards would improve the comparability of various entities. This is why more than 120 countries adhere to global accounting standards, also known as International Financial Reporting Standards (IFRS). - The IFRS broadly consists of the following: - 13 IFRS - Before the IFRS, 28 International Accounting Standards were issued. - There are 15 IFRIC interpretations. - The Standard Interpretation Committee (SIC) has issued 9 interpretations. ## Difference between IFRS and IND AS |Topic | IFRS | IND AS | |---|---|---| | Definition | International Financial Reporting Standards (IFRS) is a globally recognized accounting standard. | IND AS stands for Indian accounting standards; it is also recognized as the India-specific version of IFRS. | | Developed by | the International accounting standards board (IASB). | Ministry of corporate affairs (MCA), Govt. of India. | | Followed by | Followed by 144 countries across the world. | Followed only in India. | | Components of Financial statements | IFRS includes the following: - Financial position disclosure. - Profit an d loss statement. - Equity statement for the period. - Cash flow statement for the timeframe. | IND AS includes the following: - Cash flow statement. - Balance Sheet. - Profit and loss account. - Disclosure of accounting policies. - Statement of changes in equity. - Notes to financial statements. | ## Previous Years UPSC Mains Questions - Q1. Distinguish between Capital Budget and Revenue Budget. Explain the components of both these Budgets. (UPSC MAINS 2021, GS Paper 3: Economy). - Q2. Explain the meaning of investment in an economy in terms of capital formation. Discuss the factors to be considered while designing a concession agreement between a public entity and a private entity. (UPSC MAINS 2020, GS Paper 3: Economy).