Indian Accounting Standards: Applicability & List
Indian Accounting Standards (Ind AS) are a set of accounting principles developed by the Ministry of Corporate Affairs (MCA), converging Indian norms with the globally recognized International Financial Reporting Standards (IFRS). These standards provide a consistent framework for preparing and presenting financial statements, enhancing transparency, comparability, and accountability. Ind AS applies to specific classes of companies in India based on their listing status and financial thresholds. The aim is to make Indian companies globally competitive and improve the reliability of their financial reporting.
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What Are Accounting Standards and Their Objectives?
Accounting standards are formal guidelines for accounting policies and procedures, offering a framework to record, report, and interpret financial data consistently. In India, these standards are notified by the MCA and developed by the Institute of Chartered Accountants of India (ICAI).
The key objectives include ensuring consistency in financial reporting, promoting transparency, facilitating comparability across companies and periods, and improving investor confidence. They also support statutory compliance by aligning financial reports with legal and regulatory requirements. For example, Ind AS 1 sets the presentation structure for financial statements, while Ind AS 2 covers inventory valuation.
As of the latest update, there are 40 Indian Accounting Standards (Ind AS) issued by the Ministry of Corporate Affairs. These standards are reviewed and revised regularly to stay aligned with the latest IFRS updates. They are categorized under different financial reporting themes such as presentation, measurement, disclosure, consolidation, financial instruments, etc.
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Importance and Significance of Accounting Standards
Financial accounting standards are crucial for maintaining the quality and credibility of financial reporting. They help:
- Ensure comparability of financial statements across companies and time periods.
- Provide clarity to stakeholders, including investors, regulators, and auditors.
- Promote uniformity in financial practices, which is essential for corporate governance.
- Reduce ambiguity and potential manipulation in reporting.
- Enhance cross-border investment by aligning Indian standards with international norms.
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Applicability of Indian Accounting Standards (Ind AS)
Ind AS is applicable in phases, depending on a company’s net worth, listing status, and industry type. As per MCA’s roadmap:
- Phase I: From April 1, 2016, mandatory for listed/unlisted companies with a net worth of > ₹500 crore.
- Phase II: From April 1, 2017, mandatory for other listed companies and unlisted companies with a net worth between ₹250–₹500 crore.
- Banks, Insurance Companies, and NBFCs: From April 1, 2018–2019, based on specific criteria.
Once Ind AS is applicable to a company, it must follow these standards for all future financial statements.
Indian Accounting Standards List
Here is a partial list of key Ind AS notified by the MCA:
- Ind AS 1: Presentation of Financial Statements
- Ind AS 2: Inventories
- Ind AS 7: Statement of Cash Flows
- Ind AS 10: Events after Reporting Period
- Ind AS 12: Income Taxes
- Ind AS 16: Property, Plant and Equipment
- Ind AS 17: Leases (replaced by Ind AS 116)
- Ind AS 18: Revenue (replaced by Ind AS 115)
- Ind AS 19: Employee Benefits
- Ind AS 21: Effects of Changes in Foreign Exchange Rates
- Ind AS 33: Earnings Per Share
- Ind AS 109: Financial Instruments
- Ind AS 115: Revenue from Contracts with Customers
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Indian vs. International Accounting Standards
Indian Accounting Standards are largely converged with International Financial Reporting Standards (IFRS) but with some modifications known as carve-outs. These modifications account for Indian economic conditions, regulatory requirements, and terminology. For instance:
- IFRS uses the term “Statement of Financial Position” while Ind AS uses “Balance Sheet.”
- Ind AS includes detailed guidance on fair value measurement tailored to Indian markets.
Despite these differences, Ind AS facilitates international comparability and financial credibility, essential for companies operating or seeking investments abroad.
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Conclusion
Indian Accounting Standards (Ind AS) play a vital role in aligning domestic financial reporting with global practices, enhancing transparency, consistency, and investor trust. By converging with IFRS while adapting to India’s economic environment, Ind AS ensures that Indian companies remain competitive and credible on the world stage. Whether you’re a business owner, investor, or auditor, understanding the applicability and scope of these standards is key to accurate financial reporting and regulatory compliance in today’s evolving business landscape.
As a Chartered Accountant with over 12 years of experience, I am not only skilled in my profession but also passionate about writing. I specialize in producing insightful content on topics like GST, accounts payable, and income tax, confidently delivering valuable information that engages and informs my audience.
