IND AS vs AS

Accounting standards are introduced to harmonize accounting principles, policies & practices in order to standardize the financial statements of an entity thus making them comparable & more reliable.

Accounting Standards in India are issued by the Accounting Standards Board of Institute of Chartered Accountants of India (ICAI).

The main objective of Accounting Standards is to standardize the diverse accounting policies and practices. These Accounting Standards were implemented to Make financial statements comparable and reliable.

India has not adopted International Financial Reporting Standards(IFRS), instead India has adopted Indian Accounting Standards (Ind AS) which are based on and substantially converged with IFRS standards as issued by International Accounting standards board(IASB) The need to converge reporting standards (Existing Accounting Standards) with international standards was felt, which has led to the introduction of IND AS.

Why IND AS?

  • Better Comparability & Transparency
  • Better access to Capital Markets & Investor Community across the Globe
  • Eliminating Multiple Reporting’s
  • Increase in Cross Border Transactions

The Ministry of Corporate Affairs (MCA), notified Ind AS in year 2015 applicable to large entities as specified in its Roadmap for implementation of Ind AS.

MCA has Notified a phase –wise implementation of IND AS.

Phase I – Applicable from F.Y 2016-17Companies whose net worth is greater than or equal to Rs.500 crores.
Phase II – Applicable from F.Y 2017-18● All listed companies, Holding,
subsidiary, joint venture or associate of
the above companies is also required to
follow these standards.
● unlisted companies whose net worth is
more than 250 crores or more (but less
500 crores).
Phase III – Applicable from F.Y 2018-19IND AS is applicable to all banks, Insurance companies and also to the NBFCs Whose net worth is equal to Rs. 500 crores or more.
Phase IV – Applicable from F.Y 2019-20Mandatory applicable to all NBFCs whose net worth is more than or equal to Rs.250 crores but less than Rs 500 crores.

Important points:

  • A company may voluntary adopt the IND AS
  • Once IND AS is applicable, the company should follow IND AS in the subsequent years also even if it does not meet the criteria of applicability as notified.

Key Differences between Indian Accounting Standards & Indian GAAP (accounting standards) have been addressed below:

Indian Accounting standards (IND AS)Indian GAAP(Accounting Standards)
These standards are Principle BasedThese standards are Rule based
Consolidation is mandatory. For example: consolidation is required under Ind-AS 110 if the holding company has control over its subsidiary and definition of control is substance basedSuch provision is not Applicable. For example: as per AS 21, consolidation is required if a company holds more than 50% of the voting rights or controls the board of directors.
Ind-AS provide guidance on various transactions like agriculture, business combinations etcSuch standards did not exist.
specific guidance were included on various matters like depreciation or revenue recognitionNo such specific guidance were provided

The differences of Few standards are detailed below

STANDARDIndian Accounting standards (IND AS)Indian GAAP(Accounting Standards)
CASH FLOW STATEMENTSIND AS 7-
● Includes Bank overdrafts
payable on demand
● The term “functional
currency” is used
AS 3 –
● Does not includes Bank
overdrafts
● The term “Reporting
currency” is used
CONSTRUCTION CONTRACTSIND AS 11-
● Requires Revenue Shall be
measured at Fair Value.
● Provide specific treatment
for Service Concession
Arrangements
● Operators would not
recognize Infrastructure as
PPE, would recognize
either a financial asset or
an intangible Asset or both.
AS 7-
● revenue is measured at
consideration
received/receivable
● Does not deal with Service
Concession Arrangements
● Varied practices with some
enterprises reporting
infrastructure as PPE.
REVENUE RECOGNITIONIND AS 18-
● measured at the fair value
of the consideration.
● rebates, discounts, schemes cost will be reduced from
revenue when sales are
recognized.
● interest to be recognised
using the effective interest
method as set out in Ind AS
109.
● revenue is recognised in the
period in which services
would be rendered,
generally under percentage
completion method.
AS 9-
● recognized at the contractual
amount of consideration.
● Cash discount and certain schemes are reported as
expenditure in financial
statements.
● recognition from interest on
time proportion basis as per
contractual terms.
● revenue is recognised for
rendering services, using
either by completed services
or proportionate completion
method.
IDENTIFICATION OF SEGMENTSIND AS 108 –
Segment Identification is based on
“Management Approach”
AS 17 –
Identification is based on two sets of
segments, Primary & Secondary
● One is based on Products &
Services
● The other is based on
Geographical Areas
RELATED PARTY DISCLOSURESIND-AS 24, Definition of related
parties is different from that of
Indian GAAP
● Covers “Close members”
of the family of KMP
● Covers KMP of the entity
as well as those of its
parents.
● Includes any director
whether executive or
otherwise.
AS 18, covers “Relatives” who may be expected to influence, or be influenced by that individual in his/her dealings with Reported enterprise.
PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETSIND AS 37 –
● provisions to be at present
value if time value of
money is material
● The increase in liability is
treated as borrowing cost
● Provisions are recognised
based on Constructive
Obligation
AS 29-
● prohibits discounting the
amounts of provision
● provisions are recognized
based on legal obligation
TAXESIND AS 12-
● Based on Balance sheet
approach
● Provides guidance that
deferred tax asset/liability arising from revaluation of
assets shall be measured on
the basis of tax
consequences from the sale
of asset rather than through
use.
AS 22-
● Based on Income Statement
Approach
● Specifically provides
guidance regarding recognition of deferred tax in
the situations of Tax Holiday
under Sections 80-IA and 80-
IB and Tax Holiday under
Sections 10A and 10B of the
Income Tax Act, 1961.

Leave comment

Your email address will not be published. Required fields are marked with *.