IFRS vs Ind AS

⇒ Introduction:-

Ind AS is the most recent subject in the Indian Financial Reporting world. To harmonize the global accounting system International Accounting Standard Committee (IASC) was setup in the year of 1973. This committee is responsible to formulate Accounting Standards. Headquarter of IASC is situated at United Kingdom. From year 1973 to 2000 IASC has issued 41 International Accounting Standards (IAS). In addition to International Accounting Standard Committee (IASC) there is a separate committee called International Accounting Standard Interpretation Committee (IASIC) which was responsible to issue various Interpretations relating to matters discussed in IAS.

After the year of 2000 the name of the committee is changed from International Accounting Standard Committee (IASC) to International Accounting Standard Board (IASB) and thereafter International Financial Reporting Standard Board (IFRSB). Accounting Standards issued by IFRSB is knows as International Financial Reporting Standard (IFRS). Until now 17 IFRSs are issued, however IFRS-4 is deleted after IFRS-16 is become effective. As of now only 24 IAS are in effect out of 41 IAS, rest of the IAS were deleted with effect from issuance of IFRS on the same matters. In addition to International Financial Reporting Standard Board (IFRSB) there is a separate committee called International Financial Reporting Standard Interpretation Committee (IFRSIC) which was responsible to issue various Interpretations relating to matters discussed in IFRS. However IFRSs are subject to review and requires to amend whenever it is required.

⇒ Ind AS:-

Ind ASs are converged form of IAS and IFRS. Ind ASs are drafted after considering the Indian GAAP. Ind AS are formulated using following basis:

1) Change in Numbers:-
Number of the Ind ASs are given on the basis of the numbers of IAS and IFRS.
Ind AS formulated in the basis of IAS are numbered Serially as 1, 2, 3,…
For Ex. IAS-1 becomes Ind AS-1, IAS-2 become Ind AS-2 etc.
Ind AS that are formulated on the basis of IFRS are numbered with a code of 100.
For Ex. IFRS-1 becomes Ind AS-101, IFRS-2 becomes Ind AS-102 etc.
Interpretations on IAS and IFRS are merged with Ind AS as “APPENDIX”.

2) Change in Terminology:-
There are number of changes made in terminologies after taking into account Indian Laws, Economy, Trade and Commerce. Some of the changes are as follows:

IAS/IFRS Ind AS
Statement of Financial Position Balance Sheet
Statement of Comprehensive Income Profit and Loss Account and Other Comprehensive Income(OCI) Statement

3) Economic and Legal Position:-
Some changes are made in Ind AS that from IAS and IFRS due to legal and economic position of India.

4) Proposed changes in IFRS:-
Proposed changes in IFRS are already incorporated in Ind AS on earlier basis.

⇒ Applicability of Standards on entities:-

A) Large Entity:-
Following Entities are required to follow Ind AS:
– All listed companies including Holding, Subsidiary, Associate and Joint Venture Companies.
– Unlisted Companies having Net worth of Rs. 250 Cr and More including Holding, Subsidiary, Associate and Joint Venture Companies.
– Banks, Some NBFCs and Insurance Companies.

B) Small Entity:-
– Other than Large entities all entities are required to follow existing Accounting Standards and later on Revised Standards. Revised AS are yet to be notified.
Revised Accounting Standards will be based on Ind AS with following modifications:
– Reduction in use of present value
– Reduction in use of fair value
– Reduction in disclosures

⇒ Applicability of Ind AS:-

Applicability of Ind AS is divided into 3 parts:

1) Companies registered under Companies Act, 1956 or Companies Act, 2013:-
Any company may apply Ind AS after 01st April, 2015 on voluntary basis. However once Ind AS is followed by a company then Ind AS is required to be followed in all subsequent years also i.e. there is no exit rout. If one company follows Ind AS then it shall be applicable to its Holding, Subsidiary, Associates and Joint Venture Companies.

A) Mandatory Phase-I (1st April, 2016):
– Ind AS is mandatory from 01st April, 2016 on mandatory basis for all Companies (Listed/Unlisted) having Net Worth of Rs. 500 Cr. or more.
– Ind AS is mandatory from 01st April, 2016 on mandatory basis for all Holding, Subsidiary, Associates and Joint Venture Companies of the above company.

B) Mandatory Phase-II (1st April, 2017):
– Ind AS is mandatory from 01st April, 2017 on mandatory basis for all companies which were listed or in the process of listing having Net Worth of less than Rs. 500 Cr.
– Ind AS is mandatory from 01st April, 2017 on mandatory basis for all Unlisted Companies having Net Worth of Rs. 250 Cr. or more but less than Rs. 500 Cr.
– Ind AS is mandatory from 01st April, 2017 on mandatory basis for all Holding, Subsidiary, Associates and Joint Venture Companies of the above company.

→ However companies listed under SME are not subject to application of Ind AS.

2) Non-banking Finance Company (NBFC):-

A) Mandatory Phase-I (1st April, 2018):
– Ind AS is mandatory from 01st April, 2018 on mandatory basis for all NBFCs having Net Worth of Rs. 500 Cr. or more.
– Ind AS is mandatory from 01st April, 2018 on mandatory basis for all Holding, Subsidiary, Associates and Joint Venture Companies of the above company.

B) Mandatory Phase-II (1st April, 2019):
– Ind AS is mandatory from 01st April, 2019 on mandatory basis for all NBFCs (Listed/Unlisted) which were listed or in the process of listing having Net Worth of less than Rs. 500 Cr.
– Ind AS is mandatory from 01st April, 2019 on mandatory basis for all Unlisted NBFCs having Net Worth of Rs. 250 Cr. or more but less than Rs. 500 Cr.
– Ind AS is mandatory from 01st April, 2019 on mandatory basis for all Holding, Subsidiary, Associates and Joint Venture Companies of the above company.

→ Voluntary application of Ind AS by NBFCs are not allowed. NBSCs that are not following Ind AS is required to follow existing AS.

3) Insurance Company:-
All Insurance Companies are required to follow Ind AS with effect from 01st April, 2020.

⇒ Other important notes:-

1) Net Worth must be audited.
2) Net Worth must be tested on 31st March of every year.
3) Calculation of Net Worth

Particular Amount
–          Paid up Equity Share Capital

–          Paid up Preference Share Capital

–          Securities Premium

–          All Free Reserves (Credit balance of Profit & Loss A/c, Reserve created from profit)

–          Capital Reserve (if realized in cash)

Less:

–          Debit Balance of Profit and Loss A/c

–          Fictitious Assets

–          Unabsorbed Depreciation

 

XX

XX

XX

XX

XX

 

(XX)

(XX)

(XX)

4) In case of Foreign Subsidiary Company:-
– To prepare Accounts of Subsidiary Company-Follow local GAAP of Subsidiary Company
– To prepare Consolidated Accounts of Holding Company-Follow Ind AS

5) In case of Foreign Holding Company:-
– To prepare Accounts of Indian Subsidiary Company-Ind AS
– To prepare Consolidated Accounts of Holding Company- Follow local GAAP of Holding Company

6) Applicability of Ind AS on Banks has been deferred until RBI announces it.

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