On July 10,2014, the FM, while presenting the budget
for 2014-15 in para 128 has announced that: “There is an urgent need to
converge the current Indian Accounting Standards with International
Financial Reporting Standards (IFRS). I propose for adoption of the new
Indian Accounting Standards (Ind. AS) by the Indian Companies from the
financial year 2015-16 voluntarily and from the financial year 2016-17
on a mandatory basis…………”
Pursuance to above announcement, the
Ministry of Corporate Affairs announced a revised roadmap for
implementation of the new set of Indian Accounting Standards (Ind – AS)
converged with IFRS on 16th February 2015. The revised roadmap does not
cover banking and insurance companies and NBFC’s. The important
provisions of the the Companies (Indian Accounting Standards) Rules,
2015 are discussed below and these Rules are effective from 1st April
2015
– Voluntary Compliance of these Rules by companies– F.Y.2015-2016
Any company can voluntarily comply with IND AS for its financial statements for the mentioned f inancial year
– First Phase – Mandatory from F. Y. 2016/17
a.
Companies whose equity or debt securities are listed or are in the
process of being listed on any recognized stock exchange in India or
outside India and with a net worth of Rs. 500 crores or more and;
b. Companies other than those covered above having a net worth of Rs.500 crores or more;
c. the holding, subsidiary, joint venture or associate companies of the aforementioned companies; –
Second Phase: – Mandatory from F. Y. 2017/18 a.
a.
Companies whose equity or debt securities are listed on a recognized
stock exchange in India or outside India and whose net-worth is less
than Rs.500 crores;
b. Unlisted companies whose net worth is more than Rs.250 crores but less than Rs.500 crores;
c. the holding, subsidiary, joint venture or associate companies of the aforementioned companies;
Exemption:
However,
companies that are listed or in the process of being listed on SME
Exchange are exempt referred to in Chapter XB or on the Institutional
Trading Platform without initial public offering in accordance with the
provisions of Chapter XC of the Securities and Exchange Board of India
(Issue of Capital and Disclosure Requirements) Regulations, 2009.
On
February 16, 2015 the following Companies (Indian Accounting Standards)
Rules, 2015 have been notified by the Ministry of Corporate Affairs
Overview of the impact of the Indian Accounting Standard
–
Objective of the Standards: The objective of IFRS is move from a rule
based method of accounting to principle based method of accounting.
Hence during the initial period there is bound to be significant
volatility in the financial statements.
– Benefits: The Key benefits for Indian Companies with the applicability of Ind – AS include:
i) Improved access to Global Markets:
Majority
of the Stock Exchange globally require financial information as per
IFRS. The need to prepare multiple financial statements for different
requirements is eliminated.
ii) Lower cost of capital:
Convergence
with IFRS means the Indian companies need not prepare two sets of
Financial Statements comply with the requirements abroad and this would
lead to lower cost of administration and minimise the risk premium. Thus
pricing could be comparable and companies can approach any market for
capital.
iii) Benchmarking with Global Peers:
Preparing
accounts as per IFRS will give better understanding of performance in
relation to the Global benchmarks. Targets and milestones will be set
based on the global business environment.
iv) True Value of
acquisition: I n Indian GAAP except for few exceptions net assets
acquired are recorded at its carrying value instead of fair value. Hence
its true value is not reflected. IFRS overcomes this flaw as it
mandates accounting of business combinations at fair value.
