Applicability of Ind AS in India
by Indian Accounting Standards (Ind AS) are accounting standards prescribed by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013. They are largely converged with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Ind AS aims to improve the comparability, transparency and reliability of financial statements prepared by Indian companies. Their applicability in India is mainly based on the nature of the entity, listing status and specified financial criteria. The implementation of Ind AS has been carried out in phases to ensure a systematic transition from existing Accounting Standards.
Applicability of Ind AS in India:
1. Regulatory Framework and Notification
Ind AS in India are notified by the Ministry of Corporate Affairs (MCA) under Section 133 of the Companies Act, 2013, read with the Companies (Indian Accounting Standards) Rules, 2015, after consultation with the National Financial Reporting Authority (NFRA). These rules prescribe which classes of companies must adopt Ind AS and from which financial year, based on criteria such as listing status and net worth. Once notified, compliance is mandatory and enforceable under company law, overriding earlier Accounting Standards (AS) for applicable entities. The framework ensures phased, structured convergence with IFRS rather than a one-time blanket transition across all Indian companies.
2. Phase I – Mandatory from 1 April 2016
Ind AS became mandatory from 1 April 2016 (with comparatives for FY 2015-16) for: (a) companies whose equity or debt securities are listed or in the process of listing on any stock exchange in India or outside India, having net worth of ₹500 crore or more; and (b) unlisted companies having net worth of ₹500 crore or more. Holding, subsidiary, joint venture, or associate companies of the above entities also fell within this phase, irrespective of their individual net worth, ensuring consistency in group-level financial reporting from the very first phase of implementation.
3. Phase II – Mandatory from 1 April 2017
From 1 April 2017 (with comparatives for FY 2016-17), Ind AS became applicable to: (a) all listed companies (or companies in the process of listing) not covered in Phase I; and (b) unlisted companies having net worth of ₹250 crore or more but less than ₹500 crore. As before, holding, subsidiary, joint venture, and associate companies of entities covered under this phase were also brought within its ambit, regardless of their standalone net worth. This phase significantly widened the coverage of Ind AS beyond large-cap companies to include a broader base of listed and mid-sized unlisted companies.
4. Net Worth Computation
Net worth is computed in accordance with Section 2(57) of the Companies Act, 2013, based on the audited standalone financial statements as at 31 March 2014, or the first audited financial statements for periods ending after that date for companies incorporated later. It is calculated using the aggregate value of paid-up share capital and all reserves created out of profits and securities premium, reduced by accumulated losses, deferred expenditure, and miscellaneous expenditure not written off. Once a company meets the threshold and adopts Ind AS, it must continue applying Ind AS for all subsequent years, even if net worth later falls below the threshold.
5. Applicability to Banking, Insurance, and NBFC Sectors
Scheduled commercial banks, insurers, and NBFCs follow a separate roadmap prescribed by their respective regulators (RBI, IRDAI) in coordination with MCA, rather than the general Phase I/II criteria. NBFCs (listed or unlisted) with net worth of ₹500 crore or more adopted Ind AS from 1 April 2018, while other NBFCs meeting lower thresholds followed from 1 April 2019, along with their holding, subsidiary, associate, and joint venture companies. RBI deferred Ind AS implementation for banks pending regulatory and legislative amendments, so banks continue to report under RBI-prescribed formats until further notification, despite MCA’s Ind AS roadmap.
6. Companies Exempted from Ind AS
Certain classes of companies are exempted from mandatory Ind AS application and continue to follow existing Accounting Standards (AS). These include companies whose securities are listed or to be listed on SME exchanges, insurance companies, banking companies (until separately notified), and NBFCs not meeting prescribed thresholds. Additionally, companies not falling under any of the specified net worth or listing criteria under Phase I or Phase II remain outside mandatory Ind AS applicability. Such companies may, however, choose to voluntarily adopt Ind AS, subject to conditions, since voluntary adoption is permitted under the rules for entities not otherwise mandatorily covered.
7. Voluntary Adoption of Ind AS
Companies not meeting the mandatory thresholds may voluntarily adopt Ind AS for accounting periods beginning on or after 1 April 2015, with comparatives for the preceding year. Once a company opts for voluntary adoption and prepares financial statements as per Ind AS, such adoption becomes irrevocable — the company cannot revert to the earlier Accounting Standards (AS) framework in subsequent years. This irrevocability ensures consistency and comparability of financial statements over time, preventing companies from switching back and forth between frameworks opportunistically. Voluntary adoption is often chosen by companies anticipating future listing, group reporting alignment, or improved investor perception.
8. Applicability to Holding, Subsidiary, Associate, and Joint Venture Companies
Once a company falls under the mandatory Ind AS criteria in Phase I or Phase II, all its holding, subsidiary, associate, and joint venture companies are also required to adopt Ind AS from the same date, irrespective of whether they individually meet the net worth or listing thresholds. This “group-wide” applicability ensures uniformity in accounting frameworks across the corporate group, facilitating consistent consolidation and comparability of financial statements. It prevents a situation where a parent company reports under Ind AS while its subsidiaries continue under the earlier AS framework, which would otherwise complicate consolidated financial reporting significantly.