Overview of Indian Accounting Standards
Accounting is known as the art of recording the exchanges in a manner to assist the perusers with showing up at the decisions or reaching a financial decision about the entity. This becomes fundamental that it ought to be joined into some normalized rules which are for the most part known to account for approaches.
Indian Accounting Standard is the Accounting standard taken on by organizations in India and given under the oversight of the Accounting Standards Board which was composed as a body in the year 1977.
The concocting of these strategies permits different organizations to adjust their accounting standards to repair for their own benefit. Standards are acquainted with quenching all disarrays, and these should have been set by the perceived accounting bodies. This idea repaired the way for the development of Accounting Standards. The Accounting Standards in India are given by the Institute of Chartered Accountants of India (ICAI).
Objectives of the Indian Accounting System
There are many objectives of an Indian Accounting system. We will discuss each and every point under IAS and understand its importance.
This way, the global scope of Indian companies is expanded and they have a wider
platform to perform on.
This way the Indian companies can imply their rates and demands according to the global rates.
This way the company accounts and the annual financial statements are transparent.
It is easy and can be understood by companies worldwide.
It lets us have a single framework for a single accounting framework.
Indian Accounting System: Benefits
As we already know that without benefits, nobody will try to pursue an accounting system like this. There are many benefits gained while following the Indian Accounting System, let us discuss all of them in detail.
International Base - This lets the business have an international base and platform for companies to perform.
Harmonization - This lets the companies harmonize their rules.
Compliance - Increase compliance in companies.
Global Acceptance - Globally reaches other companies and benefits them. This also gives global or international recognition.
Indian Accounting Standards List
Indian Accounting Standards Applicability
The Indian Accounting Standards are followed by all the companies. They shall follow Ind AS either Voluntarily or Mandatorily. When a company follows the Indian AS, either mandatory or voluntarily, it cannot return to its old method of Accounting.
Mandatory Applicability
Companies with a Net worth of not less than 500 crores are required to follow Ind AS.
Mandatory Applicability from Accounting Period beginning on or after 1 April 2017
By every Listed Company.
Also, by the Unlisted Companies with a Net worth which is greater than or equal to Rs. 250 crores but less than Rs. 500 crores
Indian Accounting Standards Summary
Every functioning body that operates, needs a defined guideline so as to maintain the procedure and the standards of the operations of its own business. The rules make the policies common for organizations that operate in similar fields.
FAQs on Indian Accounting Standards: Overview and Benefits
1. Which is higher, IFRS or IAS?
Both IFRS (International Financial Reporting Standards) and IAS (International Accounting Standards) set international frameworks for financial reporting. IFRS replaced IAS in 2001, making IFRS the current and more authoritative set of global accounting standards. Today, IFRS standards are issued and maintained by the International Accounting Standards Board (IASB). In comparison, IAS refers to older standards that were gradually replaced by IFRS, although some IAS remain valid. Essentially, IFRS is considered a higher-level, more updated system for international reporting, while IAS describes specific legacy standards still used alongside newer IFRS where applicable. Generally, IFRS holds more weight in global accounting practices now.
2. Are IFRS and IND AS the same?
IFRS (International Financial Reporting Standards) and IND AS (Indian Accounting Standards) are similar but not exactly the same. IND AS are Indian standards that have been largely converged with IFRS, aiming to bring Indian financial reporting closer to global norms. However, there are some key differences arising from Indian legal, regulatory, and economic environments. While both frameworks promote transparency and comparability, IND AS includes certain carve-outs and exceptions to meet local requirements. Overall, while IND AS is based on the IFRS framework, it is not a direct copy and has specific adaptations for Indian companies.
3. What is the difference between IND AS 24 and AS 18?
IND AS 24 and AS 18 both address related party disclosures, but they differ in scope and detail. IND AS 24 follows international best practices as it aligns with IFRS, whereas AS 18 is an older standard under Indian GAAP. The main differences include:
- Scope: IND AS 24 covers broader relationships like joint ventures and KMP compensation; AS 18 is narrower.
- Definitions: IND AS 24 uses updated definitions of related parties and transactions.
- Disclosure: IND AS 24 requires more extensive and detailed disclosures than AS 18.
4. What is the difference between US accounting standards and Indian accounting standards?
US accounting standards, known as US GAAP (Generally Accepted Accounting Principles), and Indian accounting standards (IND AS) differ in their underlying principles and application. US GAAP is rule-based with detailed guidance, while IND AS, aligned with IFRS, is more principle-based and flexible. Key differences include:
- Recognition and measurement: US GAAP often relies on historical cost, IND AS uses fair value in more cases.
- Revenue recognition: The criteria and timing for recognizing revenue can differ.
- Presentation: Financial statement formats and disclosures are not always the same.
5. What are Indian Accounting Standards (IND AS)?
Indian Accounting Standards (IND AS) are a set of accounting rules notified by the Indian government to align with International Financial Reporting Standards (IFRS). They guide how companies in India should record, measure, present, and disclose their financial transactions. IND AS applies to certain classes of companies, like listed companies and those meeting specific net worth criteria. By following IND AS, companies ensure their financial statements are transparent and comparable with global peers. The aim is to boost investor confidence and make Indian businesses more compatible with international practices.
6. Why were Indian Accounting Standards (IND AS) introduced?
IND AS was introduced to modernize Indian financial reporting and align it with international standards. Before IND AS, Indian companies followed Accounting Standards (AS), which differed from global practices, causing comparability issues for investors and stakeholders. The main reasons for adopting IND AS include:
- Improved comparability with global companies.
- Enhancing transparency and corporate governance.
- Attracting more foreign investment.
- Reducing confusion for multinational companies operating in India.
7. Who must follow IND AS in India?
Not all companies in India are required to follow IND AS. The government has set eligibility thresholds based on company type and financial size. Currently, the following must comply:
- Listed companies on Indian stock exchanges.
- Unlisted companies with a net worth of ₹250 crore or more.
- Holding, subsidiary, joint venture, or associate companies of the above.
8. How are IND AS different from traditional Indian Accounting Standards (AS)?
IND AS sets a modern framework modeled after IFRS, while traditional Indian Accounting Standards (AS) are older and less globally aligned. Key differences are:
- Principle-based vs. rule-based: IND AS focuses on principles, AS is more prescriptive.
- Fair value measurement: IND AS uses fair value more widely than AS, which relies on historical cost.
- Disclosure requirements: IND AS demands more detailed disclosures.
9. How many Indian Accounting Standards (IND AS) are there?
As of 2024, there are 39 notified Indian Accounting Standards (IND AS) that govern financial reporting in India. These standards cover a wide range of topics, including revenue recognition, financial instruments, leases, and employee benefits. Each IND AS offers specific guidance on how to account for different financial transactions to ensure transparency and comparability. The number of standards may be updated from time to time as India further aligns with global accounting rules or introduces changes for local needs. All companies required to use IND AS must apply the relevant standards in the preparation of their financial statements.
10. What are the key benefits of adopting Indian Accounting Standards?
Adopting IND AS brings several advantages for Indian companies and the broader economy. The key benefits include:
- Global comparability: Financial statements are easier to compare with international peers.
- Improved transparency and investor trust.
- Attracts foreign investment.
- Streamlines financial consolidation for multinational groups.
11. How often are IND AS updated or revised?
IND AS standards are periodically updated to reflect new developments or changes in the global accounting landscape, especially as IFRS evolve. The Ministry of Corporate Affairs reviews the standards regularly and may issue amendments, updates, or new standards as required. Updates can result from regulatory changes in India, feedback from industry, or the need to align with recent international guidelines. Companies using IND AS must stay informed about these periodic revisions to comply with the most current accounting requirements. This process ensures financial reporting remains reliable and up to date.
12. What challenges do companies face when implementing IND AS?
Implementing IND AS can be challenging for many Indian companies, especially those transitioning from traditional AS. Common issues include:
- Understanding complex fair value measurements.
- Upgrading accounting systems and processes.
- Training staff on new requirements.
- Ensuring accurate and timely disclosures.
