Ind AS are the accounting standards that are issued under the supervision of ASB or Accounting Standard board. This board was constituted in 1977 as a body under ICAI or Institute of Chartered Accountants in India. These accounting standards are adopted by companies in India.
In this article, we will discuss the applicability of IND AS or Indian Accounting Standards that comes under financial accounting. Before describing the applicability of IND AS, we need to understand the basics of Ind AS and what it is.
Let’s start the article by defining the applicability of IND AS.
Applicability of IND AS
There are mainly four phases of applicability of Indian accounting standards. These phases are applicable on the basis of the net worth and the listing status of the company. These phases are divided by the MCA (Ministry of Corporate Affairs).
Phase I of Ind AS
This phase makes Indian accounting standards compulsorily applicable to the companies. This phase was introduced on 1 April 2016 and is applicable thereafter.
In the 1st phase, this Ind AS applies to all the listed companies and the companies that are in progress to be listed.
These Indian accounting standards are applicable to companies that have a net worth of Rs. 500crore and more.
Phase II of Ind AS
This phase started with the financial year 2017 and became compulsory for all the listed companies and the companies that are in progress to be listed or the companies which were on the stock exchange of India that were not included in phase 1.
All the Companies having a net worth value of Rs 250 crore and more but less than Rs 500 crore have to adopt the IND AS according to this phase.
Note: These Ind AS or Indian accounting Standards were concluded in the 2017 financial year but the net worth of a company will be considered for the previous financial years from 2013-2014 to 2015-2016.
Phase III of Ind AS
Phase III makes the applicability of Ind AS to all i.e. SEBI regulated entities, NBFCs, Insurance Companies, and all the types of banks, NBFCs. This phase will be applicable from the financial year 2018.
This phase would be applicable to the companies that are as follows:
Companies that have a net worth of Rs 500 crore and more
IRDAI or The Insurance Regulatory and Development Authority of India would ensure the meeting of the net worth of accounting requirements by Insurance companies
To check the net worth of other financial companies or institutions, NBFCs are to be concluded on the basis of the financial years of 2015-16, 2016-17, and 2017-18
Phase IV of Ind AS
This phase only covers all the Non-Banking Financial Companies (NBFCs) that have a net worth of more than Rs250 crore but less than Rs 500 crore.
This phase would be applicable from the financial year 2019 i.e. from April 1st, 2019.
Calculation of Net Worth-
Net Worth is found based on the standalone financial statements that should be audited. Net worth is nothing but only the sum total of paid-up share capital and all the reserves which are made out of the profit and securities premium account and then subtract the value of deferred expenditure, accumulated losses and miscellaneous expenditures that are not written off. Mathematically we can this as,
Net Worth = Total paid-up share capital + all reserves (made out of profit and including securities premium account) – deferred expenditure – miscellaneous expenditure (should not be written off) – accumulates losses.
Objectives of the IND AS
There are many objectives of the IND AS, some of which are given below-
It provides a single framework for the unified accounting system
Examine whether the compliance is being done properly or not
Examine that the companies of India and in India are following these standards to do international practices
To ensure that these standards are being followed over the world
Benefits of IND AS
Companies can maintain effective and efficient compliance by following these standards
Cooperation among accounting rules and policies can be maintained by the company
Companies can be accepted internationally by all government bodies and institutions by adopting these standards
These standards are accepted all over the world i.e. internationally. So, these standards should be followed by the company
Conclusion
Ind AS are the accounting standards that are to be followed by the companies. These Ind AS were made mandatory for the companies in different phases. By going through the above points, we get to know about the Indian accounting standards, their benefits, the objectives of adopting IND AS, and which companies should adopt these standards. We have also learnt that there are four phases of applicability of Ind AS and these phases are applicable on the basis of the Net Worth of the company which is calculated through the use of the audited Financial Statements.