Latest Indian Accounting Standards in News

IAS Prelims 2023

Companies with a net worth of Rs 500 crore or more will have to follow new Indian Accounting Standards (Ind AS) from April 1.

The new standards have been converged with the globally followed International Financial Reporting Standards or IFRS.

The shift to the new standards will make Indian corporate accounts comparable internationally and transparent. The new standards are expected to fill the gaps in reporting standards that India follows currently. This will lead companies to make wider disclosures on transactions and associated companies as well as provide explanations on various numbers and how they are arrived at.

SEBI recently extended the deadline for some listed companies to file their results for the quarter ended June 2016, to give them additional time to comply with new ‘Ind AS’ rules. These companies now have time until September 14, 2016, to declare results with the new accounting standard.

Ind AS or Indian Accounting Standards:

Ind AS or Indian Accounting Standards govern the accounting and recording of financial transactions as well as the presentation of statements such as profit and loss account and balance sheet of a company.

Indian Accounting Standards (abbreviated as Ind-AS) in India accounting standards were issued under the supervision and control of Accounting Standards Board (ASB), which was constituted as a body in the year 1977.

ASB is a committee under Institute of Chartered Accountants of India (ICAI) which consists of representatives from government department, academicians, other professional bodies viz. icsi ,icai , representatives from ASSOCHAM, CII, FICCI, etc.

For long, there has been a heated debate about Indian companies moving to the globally accepted International Financial Reporting Standards (IFRS) for their accounts.

But firms have resisted this shift, stating that this will lead too many changes in the capture and reporting of their numbers. Ind AS has been evolved as a compromise formula that tries to harmonise Indian accounting rules with the IFRS.

Ind AS will have a transformational impact on accounting for financial instruments, business combinations, revenue recognition and consolidated financial statements for entities. The new rules will impact the way financial assets and liabilities are classified and measured. Many off-balance sheet items will now have to be reported.

All scheduled commercial banks, term-lending refinancing institutions such as Exim Bank, NABARD, NHB and SIDBI, and insurance companies are required to prepare Ind AS-based financial statements for accounting periods beginning from April 1, 2018 with comparatives for the periods ending March 31, 2018.

Nearly half (45%) believe management approach for identification of segments will have a major impact on disclosures.

While at present, under the Indian Gaap, segmental information is based on the business and geographical reporting, under the Ind AS, segmental information has to be disclosed on the same basis as to how the chief operating decision-makers evaluate financial information for allocating resources and taking stock of performance.

This is important as investors will now see a change in the way segment information is reported using management approach.

Taxation is another area which is expected to have a major impact under the Ind AS, PwC said, adding that under this too, the financial services, retail and consumer and technology sectors will be the three most impacted sectors.

Unlike Indian Gaap accounting, income tax is another area there will be major impact as higher use of fair value accounting can potentially increase the minimum alternate tax liabilities for companies, as under Ind AS, unrealised gains on various financial instruments like investments and derivatives will get recognised in the income statement.

Also, under Indian Gaap, deferred tax assets on carry forward losses are not recognised due to a very high recognition threshold but under the Ind AS, since the threshold is lower there will be higher deferred tax assets, resulting in a positive impact on net income and networth.