Applicability of IND AS - Phases of Adoption, Objectives, Calculation, NBFCs and FAQs

Specific criteria for companies to adopt IND AS in a phase-wise

MCA has notified a phase-wise convergence to IND AS from current accounting standards. IND AS shall be adopted by specific classes of companies based on their Net worth and listing status. Let's see each of the phases in detail below:

Phase I

Mandatory applicability of IND AS to all companies from 1st April 2016, provided:

• It is a listed or unlisted company
• Its Net worth is greater than or equal to Rs. 500 crore*

*Net worth shall be checked for the previous three Financial Years (2013-14, 2014-15, and 2015-16).

Phase II

Mandatory applicability of IND AS to all companies from 1st April 2017, provided:

• It is a listed company or is in the process of being listed (as on 31.03.2016)
• Its Net worth is greater than or equal to Rs. 250 crore but less than Rs. 500 crore (for any of the below mentioned periods).

Net worth shall be checked for the previous four Financial Years (2014-14, 2014-15, 2015-16, and 2016-17)

Phase III

Mandatory applicability of IND AS to all Banks, NBFCs, and Insurance companies from 1st April 2018, whose:

• Net worth is more than or equal to INR 500 crore with effect from 1st April 2018.

IRDA (Insurance Regulatory and Development Authority) of India shall notify the separate set of IND AS for Banks & Insurance Companies with effect from 1st April 2018. NBFCs include core investment companies, stockbrokers, venture capitalists, etc. Net Worth shall be checked for the past 3 financial years (2015-16, 2016-17, and 2017-18)

Phase IV

All NBFCs whose Net worth is more than or equal to INR 250 crore but less than INR 500 crore shall have IND AS mandatorily applicable to them with effect from 1st April 2019.

Objectives of Indian Accounting Standards (Ind As)

The following are the objectives of utilising Indian Accounting Standards:

• Ensures that companies in India adopt such standards to carry out international recognised and best practices.
• Ensures that compliance is maintained across the globe.
• Have one framework related to unified accounting system.
• Such standards are developed on the principles of the IFRS. Hence this would be a guide to the applicability of such standards.
• Accounting Systems which are utilised in India can be analysed and understood by global companies.
• Through this financial statements and reports of companies would be transparent.
• Such standards are harmonized in order to ensure that the company is complying with global requirements.
• More coverage can be adopted through these Indian Accounting Standards, as Indian companies have increased their global reach when compared to the past.

Indian Accounting Standards- Key Factors for Conversion

There are few key factors which have to be taken into consideration for adopting the above standards by Indian Companies:

• Activities that are managed by the company.
• Identifying and Analysing the Different Tax Implications applicable by implementing such standards.
• Redefining and Redrafting Financial Statements to ensure that standards are maintained.
• Identifying and vetting issues related to accounting standards.
• Redrafting Contracts and Entering into Negotiations conducted by various parties.
• Preparation of Financial Reporting as required as per the Indian Accounting Standards.

Calculation of the net worth

Net worth shall have the same meaning as defined under section 2(57) of the Companies Act, 2013.

Net worth = (Total paid-up share capital + reserves out of profit + securities premium account) - (accumulated losses + expenditure + miscellaneous expenditures which are written off).

Net worth shall be calculated from the first audited financial statement.

For Scheduled Commercial Banks (excluding RRBs), Insurers/Insurance companies and Non-Banking Financial Companies (NBFC)

Non-Banking Financial Companies (NBFC)

PHASE-I: From 1^st April,2018 (with comparatives)

1. NBFC (whether listed or unlisted) having net worth 500 crores or more
2. Holding, Subsidiary, JV and Associate companies of above NBFC other than those already covered above corporate roadmap shall also apply from said date.

PHASE-II: From 1^st April,2019 (with comparatives)

1. NBFC whose equity and/or debt securities are listed or are in process of listing on any stock exchange in India or outside India and having net worth less than 500 crores.
2. NBFC that are unlisted having net worth between 250 crores and 500 crores
3. Holding, Subsidiary, JV and Associate companies of above NBFC other than those already covered above corporate roadmap shall also apply from said date.

• Applicable for both Consolidated and Individual Financial Statements.
• NBFC having net worth below 250 crores shall not apply IND AS.
• Adoption of IND AS is allowed only when required as per roadmap.
• Voluntary Adoption of IND AS is not allowed.

Scheduled Commercial Banks (excluding RRBs) and Insurers/Insurance companies

• From 1^stApril, 2018 (with comparatives)
• Holding, Subsidiary, JV and Associate companies of Scheduled Commercial Banks (excluding RRBs) shall also apply from said date irrespective of it being covered under corporate roadmap.
• Applicable for both Consolidated and Individual Financial Statements
• Urban Cooperative Banks and Rural Regional Banks are not required to apply IND AS.
• However, IRDA has deferred the implementation of IND AS in the insurance sector in INDIA by two years i.e. IND AS would be applicable from 01/04/2020
• However, RBI has deferred the implementation of IND AS on commercial banks (except RRBs) by one year i.e. IND AS would be applicable from 01/04/2019

IND AS application on companies

Listed Company/Company in process of Listing

• NET WORTH >/= 500 Cr - applicable from 01/04/2016
• NET WORTH < 500 Cr - applicable from 01/04/2017

Unlisted Co

• NET WORTH => 500 Cr - applicable from 01/04/2016
• NET WORTH 250 and 500 Cr - applicable from 01/04/2017

IND AS Application on specified sectors

Banks

Applicable from 01/04/2018

* However, RBI has deferred the implementation of IND AS on commercial banks (except RRBs) by one year i.e. IND AS would be applicable from 01/04/2019

NBFC (listed)

• NET WORTH >/= 500 Cr - applicable from 01/04/2018
• NET WORTH < 500 Cr - applicable from 01/04/2019

NBFC (unlisted)

• NET WORTH => 500 Cr - applicable from 01/04/2018
• NET WORTH 250 and 500 Cr - applicable from 01/04/2019

Insurance co.

Applicable from 01/04/2018

* However, IRDA has deferred the implementation of IND AS in the insurance sector in INDIA by two years i.e. IND AS would be applicable from 01/04/2020

Summary

Major amendments notified in the Companies (Ind AS) Amendment Rules, 2021

(a) Ind AS 116 | Leases- The amendments extend the advantages of the COVID nineteen connected rent concession that were introduced last year (which allowed lessees to acknowledge COVID nineteen connected rent concessions as financial gain instead of as lease modification) from thirty June 2021 to thirty June 2022.

(b) Ind AS 109 | Financial Instruments - The change provides a sensible expedient for assessment of written agreement income check, that is one amongst the factors for being eligible to live a monetary quality at amortized value, for the changes within the monetary assets that will arise as a results of rate Benchmark Reform on. a further temporary exception from applying hedge accounting is additionally other for rate Benchmark Reform.

(c) Ind AS 101 | Presentation of Financial Statements - The change substitutes the item (d) mentioned in paragraph bismuth as 'Classification and activity of monetary instruments'. The term 'financial asset' has been replaced with 'financial instruments'.

(d) Ind AS 102 | Share-Based Payment - The amendments to the current commonplace ar created in relevancy the abstract Framework of monetary news beneath Ind AS in terms of process the term 'Equity Instrument' that shall be applicable for the annual news periods starting on or once 1 Gregorian calendar month 2021.

(e) Ind AS 103 | Business Combinations - The change substitutes the definition of 'assets' and 'liabilities' in accordance with the definition given within the framework for the Preparation and Presentation of monetary Statements in accordance with Ind AS for qualifying the popularity criteria as per acquisition technique.

(f) Ind AS 104 | Insurance Contracts - The change covers the insertion of sure paragraphs within the commonplace so as to take care of consistency with IFRS four and conjointly incorporates the steerage on accounting treatment for amendments thanks to rate Benchmark Reform.

(g) Ind AS 105 | Non-current assets held for sale and discontinued operations - The change substitutes the definition of ― “fair worth less prices to sell” with “fair worth less prices of disposal”

(h) Ind AS 106 | Exploration for and evaluation of mineral resources - The change has been created in relevancy the abstract Framework for monetary news beneath Indian Accounting Standards in respect of expenditures that shall not be recognized as exploration and analysis assets.

(i) Ind AS 107 | Financial Instruments: Recognition, Presentation and Disclosure - The change clarifies the sure further disclosures to be created on account of rate Benchmark Reform like

(i) the character and extent of risks to that the entity is exposed arising from monetary instruments subject to rate benchmark reform;

(ii) the entity's progress in finishing the transition to various benchmark rates, and the way the entity is managing the transition.

(j) Ind AS | 111 Joint Arrangements - so as to take care of consistency with the amendments created in Ind AS 103, various changes are created in Ind AS 111.

(k) Ind AS 114 | Regulatory Deferral Accounts - The change clarifies that AN entity could solely amendment its accounting policies for the popularity, activity, and impairment & derecognition of regulative deferral account balances if the amendment makes the monetary statements additional relevant to the economic decision-making wants of users and no less reliable.

(l) Ind AS 115 | Revenue from Contracts with Customers - sure amendments are created so as to take care of consistency with range of paragraphs of IFRS fifteen.

(m) Ind AS 8 | Accounting Policies, Changes in Accounting Estimates and Errors - so as to take care of consistency with the amendments created in Ind AS 114 and to substitute the word 'Framework' with the 'Conceptual Framework of monetary news in Ind AS', various changes are created within the commonplace.

(n) Ind AS 16 | Property, Plant and Equipment - The change has been created by work the words “Recoverable quantity is that the higher of AN asset's honest worth less prices to sell and its worth in use” with “Recoverable quantity is that the higher of an asset's honest worth less prices of disposal and its worth in use”.

(o) Ind AS 34 | Interim Financial Reporting - The amendments to the current commonplace ar created in relevancy the abstract framework of monetary news in Ind AS.

(p) Ind AS 37 | Provisions, Contingent Liabilities and Contingent Assets - The change substitutes the definition of the term 'Liability' as provided within the abstract Framework for monetary news beneath Indian Accounting Standards.

(q) Ind AS 38 | Intangible Assets - The change substitutes the definition of the term 'Asset' as provided within the abstract Framework for monetary news beneath Indian Accounting Standards.

FAQs on IND AS

Q1. What are the requirements of Ind AS 101?

Ind AS 101 requires the entity to do the following in the opening Ind AS statement of financial position that it prepares as a starting point for its accounting under Ind AS:

• Recognise all assets and liabilities whose recognition is required by Ind AS,
• Not recognise items as assets or liabilities if Ind AS do not permit such recognition,
• Reclassify items that it recognised in accordance with previous GAAP (Indian GAAP) as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with Ind AS, and
• Apply Ind AS in measuring all recognised assets and liabilities.

Q2. Does the standard provide any exemption from the requirements in any specified areas?

This standard grant exemption (either mandatory or as an option) from the Ind AS requirements in specified areas where the cost of complying with them would be likely to exceed the benefits to users of financial statements. An entity shall not apply these exemptions by analogy to other items.

Q3. Does the standard provide any exemption in the Presentation and disclosure requirements?

This Ind AS does not provide exemptions from the presentation and disclosure requirements in other Ind ASs.

Q4. Does the standard allow retrospective application of some aspects of other Ind AS?

This Ind AS prohibits retrospective application of some aspects of other Ind AS.

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Disclaimer: The Article is based on the Relevant Provisions and as per the information existing at the time of the preparation. In no event I shall be liable for any direct and indirect result from this Article. This is only a knowledge sharing initiative.

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