1. What is IndAs?
2. Whai is Road map of application of IndAS ?
3. What is complete set of IndAS ?
Text Covered in this video
Applicability and accounting principles of Indian Accounting
Standards (Ind AS)
Presently, the Institute of Chartered Accountants of India (ICAI)
has issued 39 Indian Accounting Standards (Ind AS) which
have been notified under the Companies (Indian Accounting
Standards) Rules, 2015 (‘Ind AS Rules’), of the Companies Act,
Applicability of Ind AS
As per the notification released by the Ministry of Corporate Affairs (MCA) on 16 February 2015
Whenever a company gets covered under the roadmap, Ind AS
becomes mandatory, its holding, subsidiary, associate and joint
venture companies will also have to adopt Ind AS (irrespective of
their net worth).
For the purpose of computing the net worth, reference should be made to the definition under the Companies Act, 2013. In accordance with section 2 (57) of the Companies Act, 2013, net worth is computed as follows:
Net worth means the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation.
Ind AS will apply to both consolidated as well as standalone financial statements of a company. While overseas subsidiary, associate or joint venture companies are not required to prepare standalone financial statements under Ind AS, they will need to prepare Ind AS adjusted financial information to enable consolidation by the Indian parent.
Presently, insurance companies, banking companies and nonbanking finance companies (NBFCs) are not required to apply Ind AS. The Ind AS rules are silent when these companies are subsidiaries, associates or joint ventures of a parent covered under the roadmap. It appears that these companies will need to report Ind AS adjusted financial information to enable consolidation by the parent.
In case of conflict between Ind AS and the law, the provisions of law will prevail and financial statements are to be prepared in compliance with the law.
Principles of Ind AS
The entities’ general purpose financial statements give information about performance, position and cash flow that is useful to a range of users in making financial decisions. These users include shareholders, creditors, employees and the general public
A complete set of financial statements under Ind AS includes the
• Balance sheet at the end of the period
• Statement of profit and loss for the period
• Statement of changes in equity for the period
• Statement of cash flows for the period; notes, comprising a summary of significant accounting policies and other explanatory information
• Comparative financial information in respect of the preceding period as specified
• Balance sheet as at the beginning of the preceding period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements having an impact on the balance sheet as at the beginning of the preceding period.
India has chosen a path of International Financial Reporting Standards (IFRS) convergence rather than adoption. Hence, Ind AS are primarily based on the IFRS issued by the International Accounting Standards Board (IASB). However, there are certain carve-outs from the IFRS. There are also certain general differences between Ind AS and IFRS:
• The transitional provisions given in each of the standards under IFRS have not been given in Ind AS, since all transitional provisions related to Ind AS, wherever considered appropriate, have been included in Ind AS 101, ‘First-time adoption of Indian Accounting Standards’, corresponding to IFRS 1, ‘First-time adoption of international Financial Reporting Standards’.
• Different terminology is used in Ind AS when compared to IFRS, e.g. the term ‘balance sheet’ is used instead of ‘statement of financial position’ and ‘statement of profit and loss’ is used instead of ‘statement of comprehensive income’.
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