Indian Accounting Standards (IND AS): Objectives, Applicability, List & Benefits

Indian Accounting Standards or Ind AS are rules that determine how Indian companies prepare and present their financial statements. Adopting Ind AS helps companies become more transparent. It helps them comply with global best practices. The accounting standards harmonize with IFRS, making Indian businesses familiar with international norms. They improve the reliability of company information, enabling appropriate evaluation and decision-making. In India, Indian accounting standards are issued by ICAI.

This topic of ‘Indian Accounting Standards (IND AS)’ is important from the perspective of the UPSC IAS Examination, which falls under General Studies Paper 3 (Mains) and General Studies Paper 1 (Preliminary) and particularly in the Economics section of UPSC IAS EXAM.

In this article, we shall discuss ‘Indian Accounting Standards (IND AS)’ and learn about Its Definition, Rules, Applicability, Features, Objectives, Benefits, & More.

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Indian Accounting Standards (Ind AS) are IFRS-converged standards issued by the Central Government of India under the supervision and control of the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) and in consultation with the National Financial Reporting Authority (NFRA). The Indian Accounting Standard (Ind-AS) is the accounting standard used by Indian companies and is issued under the supervision of the Accounting Standards Board, which was established in 1977.

Accounting Standards Definition

Accounting standards (AS) are a set of principles, standards, and procedures that serve as the foundation for financial accounting policies and practices.

History of Indian Accounting Standards (IND AS)

India used the Indian Generally Acceptable Accounting Principles (IGAAP) as its accounting standards before the adoption of the Ind-AS.

Indian GAAP refers to generally accepted accounting principles that apply in India, as established (1) by the Indian Institute of Chartered Accountants and (2) under the Companies Act, 1956.

Indian GAAP is primarily composed of 18 accounting standards issued by the Institute of Chartered Accountants of India (ICAI).

Indian Accounting Standards and Its Adoption

Ind AS was adopted by Indian companies in 4 phases, which are mentioned below.

Note: Once a company has adopted Indian AS, either mandatorily or voluntarily, it cannot revert to the old accounting method.

Who Issues Accounting Standards in India?

The accounting standards are prepared by the Institute of Chartered Accountants of India (ICAI). It is done under the administrative control of the Ministry of Corporate Affairs, Government of India.

There are currently 41 accounting standards that have been published by the Council of the Institute of Chartered Accountants of India (ICAI).

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Objectives of Accounting Standards of India include:

• The Indian Accounting Standards (IND AS) primary objective is to ensure that large-scale activities are properly accounted for through continuous disclosure, treatment, and reformation.
• IND AS standardizing accounting policies and principles for the country’s economy.
• Provides a unified framework for the preparation of books of accounts and ensures financial transparency.
• The Indian Accounting Standards (IND AS) ensure that all institutions and governmental bodies are accepted globally.

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Indian Accounting Standards List

There are currently 41 accounting standards that have been published by the Council of the Institute of Chartered Accountants of India (ICAI), Including

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Ind AS Applicability

Ind AS or Indian Accounting Standards were made applicable in a phased manner. They were not applied to all companies at once.

• Initially, in 2015, Ind AS was made mandatory only for large companies and listed companies. They were voluntary for others.
• From 2016-17, all companies with net worth above ₹500 crores had to adopt Ind AS. This included listed as well as unlisted firms.
• From 2017-18, companies with net worth between ₹250-500 crores were required to implement Ind AS.
• Small companies with a net worth of up to ₹250 crores continue to follow Indian GAAP. They have an option to voluntarily adopt Ind AS.
• Among listed companies, those with a net worth of more than ₹1,000 crores had to mandatorily implement Ind AS from 2016-17.
• Smaller listed companies with a net worth between ₹500-1,000 crores were given time till 2018-19 to implement Ind AS.
• The phased implementation of Ind AS gives companies more time for the transition. It eases the transition process.
• The applicability of Ind AS also considers companies' needs based on the following:
  • size, 
  • resources, and 
  • capabilities to implement the new standards.

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Benefits of Accounting Standards of India

Some of the advantages of Accounting Standards are as follows:

• It simplifies and clarifies accounting information.
• Helps an accounting system be uniform.
• Provides acceptance on a global level.
• Financial statements can be easily compared.
• Helps in auditing.
• Gives financial statements credibility.
• Assess management performance.
• Prevents fraud and manipulation.

Difference between IFRS and IND AS

The following are the major differences between IFRS and Indian Accounting Standards (IND AS):

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