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Applicability of IND AS

Let’s walk through the basics of IND AS, how many Ind AS are there, and the applicability of Ind AS.

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.

 
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Frequently Asked Questions

Get answers to the most common queries related to the CBSE Class 11 Examination Preparation.

How many Indian Accounting Standards are there which are applicable?

Ans : Ind AS is applicable in India are 39 by march 2022. These are issued by the Institute of Chartered Accountants...Read full

Is Ind AS applicable to subsidiary or associate companies?

Ans : If a company is following Ind AS, then these would also apply to its holding, subsidiary, and associate compan...Read full

Explain the difference between Indian financial reporting standards (IFRS) and Indian Accounting Standards (IND AS)?

Ans : Indian Accounting Standards were developed in India and they are also followed only in India while IFRSs are f...Read full

Which organization developed the Ind AS?

Ans : Accounting Standard Board (ASB) is a regulatory body and authority established in 1977, that developed these s...Read full