Indian Accounting Standards ( Ind-AS).

This paper has been divided in to four parts :-

PART I - General Discussions

PART II - When and How to Begin ?

PART III - Companies (Indian Accounting Standards) Rules 2015

PART IV - List of 39 Ind-AS as notified

PART I - General Discussions

Finally Ind-As has now become a reality. The much awaited day has come, bringing Achhe Din for the accounting fraternity.

Companies (Indian Accounting Standards) Rules 2015 notified Ind-AS.

Companies (Indian Accounting Standards) Rules, 2015. hereafter referred to as the Rules 2015 notified on 16th February,2015

The Rules 2015 shall come into force from 1st Day of April,2015

Ind-AS will be implemented in three phases.

Phase I voluntarily - accounting periods beginning on or after 1st April,2015

Phase II mandatorily - accounting periods beginning on or after 1st April,2016

Phase III mandatorily - accounting periods beginning on or after 1st April,2017

The earliest date of compliance with Ind-AS being 1st April,2015, the time has already started ticking for Ind-AS in India for those companies who have opted for Ind-AS voluntarily.

The Indian Accounting Standards (Ind AS) shall be the accounting standards applicable to classes of companies specified in rule.

Exemptions.- The insurance companies, banking companies and non-banking finance companies shall not be required to apply Indian Accounting Standards (Ind AS) for preparation of their financial statements either voluntarily or mandatorily. ( Rule 5 of the Rules 2015)

Summary of Companies (Indian Accounting Standards)
Rules 2015

Ind-AS will be applicable both to standalone financial statements (SAF) and consolidated financial statements (CFS)

Phase I Voluntary Compliance for accounting periods beginning on or after 1st April,2015

Companies can voluntarily comply with Ind-AS. However, this choice is irrevocable. No threshold limits of net worth or turnover for compliance of Ind-AS voluntarily.

Any type of company, whether listed or not, public or private , if voluntarily wants to comply with Ind-As can do so.

Para 4 of the Rules 2015 prescribes as to which type of Companies shall comply with Ind-AS.

Any company may comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning on or after 1st April, 2015, with the comparatives for the periods ending on 31st March, 2015, or thereafter ( Para 4.1 of the rule)

• No threshold limit specified - subsidiaries, associates and JVs are required not to follow Ind-AS for this category of company , however on practical note the group companies will follow Ind-AS
• Once applied the Company has to follow consistently and for ever ,regardless of fall in net worth etc.

Phase II Mandatory application - accounting periods beginning on or after 1st April,2016

The following companies shall comply with the Indian Accounting Standards (Ind AS) for the accounting periods beginning on or after 1st April, 2016, with the comparatives for the periods ending on 31st March, 2016, or thereafter, namely:-

1. Companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of rupees five hundred crore or more;
2. Companies other than those covered by sub-clause (a) of clause (ii) of sub-rule (1) and having net worth of rupees five hundred crore or more;
3. Holding, subsidiary, joint venture or associate companies of companies covered by sub-clause (a) of clause (ii) of sub- rule (1) and sub-clause (b) of clause (ii) of sub- rule (1) as the case may be; and - Note this limb is missing Rule 4(1)(i)

Thus, companies , whether listed or not , having net worth in excess of ₹ 500 crore as on 1st April 2014 shall have to comply with Ind-AS.

Phase III Mandatory application - accounting periods beginning on or after 1st April,2017

The following companies shall comply with the Indian Accounting Standards (Ind AS) for the accounting periods beginning on or after 1st April, 2017, with the comparatives for the periods ending on 31st March, 2017, or thereafter, namely:-

1. Companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of less than rupees five hundred crore;
2. Companies other than those covered in clause (ii) of sub- rule (1) and sub clause(a) of clause (iii) of sub-rule (1), that is, unlisted companies having net worth of rupees two hundred and fifty crore or more but less than rupees five hundred crore.
3. Holding, subsidiary, joint venture or associate companies of companies covered under sub-clause (a) of clause (iii) of sub- rule (1) and sub-clause (b) of clause (iii) of sub- rule (1), as the case may be: ( in other words of the above companies)

Thus, unlisted companies having net worth less than Rs 250 crore will not be covered in any of above phases. They will be covered as and when their net worth crosses the thresholds prescribed above.

Net Worth (NW) - as of which date ? based on SFS or CFS ?

Net worth( NW) means as defined U/s 2(57) of the Act 2013

NW is to be calculated in accordance with stand-alone financial statements (SFS) and not consolidated financial statements (CFS)

For Companies existing on 31st March,2014

The net worth shall be calculated in accordance with the stand-alone financial statements of the company as on 31st March, 2014 or the first audited financial statements for accounting period which ends after that date.

Companies not existing on 31st March,2014 or an existing company falling under any of thresholds specified in sub-rule (1) for the first time after 31st March, 2014

The net worth shall be calculated on the basis of the first audited financial statements ending after that date in respect of which it meets the thresholds specified in sub-rule (1) of Rule 4.

The first audited financial statements for accounting period which ends after that date.

Other Issues of Applicability

Once the company adopts Ind-As ,either voluntarily or mandatorily, it has to apply Ind-AS for ever, regardless of reduction of net worth.

The rules 2015 shall not apply to companies listed or in process of listing on SME exchanges are not covered.

Subsidiaries - Overseas Rule 4(5)

Overseas subsidiary, associate, joint venture and other similar entities of an Indian company , need not follow Ind-AS for its standalone financial statements, but may follow requirements of the specific jurisdiction:

Indian company shall prepare its consolidated financial statements in accordance with the Indian Accounting Standards (Ind AS) either voluntarily or mandatorily if it meets the criteria as specified in sub-rule (1).

Indian Subsidiaries - of foreign company 4(6)

Indian company which is a subsidiary, associate, joint venture and other similar entities of a foreign company shall prepare its financial statements in accordance with the Indian Accounting Standards (Ind AS) either voluntarily or mandatorily if it meets the criteria as specified in sub-rule (1).

PART II : When and How to begin ?

This discussion is based on for the companies voluntarily opting to comply with Ind-As from accounting period beginning after April 1 2015, all the dates are reckoned accordingly.

Ind-AS 101 First Time Adoption of Ind-AS needs to be applied. This standard contains few exemptions from retrospective application of Ind-AS in appendices (which are forming integral part of the standard) part of B , C and D.

Appendix B Exceptions to the retrospective application of other Ind ASs

Appendix C Exemptions from business combinations

Appendix D Exemptions from other Ind-AS

Be careful about these mandatory exceptions as the company should not apply these retrospectively, rather apply only prospectively.

Readers are advised to refer to Ind-AS 101 before applying Ind-AS.

Effectively , Ind-AS to be applied to :

1. its first Ind AS financial statements; and
2. each interim financial report, if any, that it presents in accordance

with Ind AS 34, Interim Financial Reporting, for part of the period covered by its first Ind AS financial statements

Date of Transition (DOT ) To Ind ASs

The beginning of the earliest period for which an entity presents full comparative information under Ind ASs in first Ind AS financial statements.

1st April, 2014 is the DOT

First Ind AS financial statements

The first annual financial statements in which an entity adopts Indian Accounting Standards (Ind ASs), by an explicit and unreserved statement of compliance with Ind ASs.
Companies must include statement of compliance in their financial statements.

Financial statements for the year ending 31st March 2016

First Ind AS reporting period

The latest reporting period covered by an entity's firstInd AS financial statements first-time adopter An entity that presents its first Ind AS financial statements would be 31st March 2016

Opening Ind AS Balance Sheet as at 1st April,2014 - restate Accounts of FY 2014-15.

An entity's Balance Sheet at the date of transition Viz., 1st April,2014 to Ind ASs is known as the Opening Ind-AS Balance Sheet.

This marks the beginning of company's irrevocable association with Ind-AS.

The company will have to prepare its Opening Ind-AS Balance Sheet

(please note , not financial statements , but only the balance sheet )

The company will have to :

1. recognise all assets and liabilities whose recognition is required by Ind ASs;
2. not recognise items as assets or liabilities if Ind ASs do not permit such recognition;
3. reclassify items that it recognised in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with Ind ASs; and
4. apply Ind ASs in measuring all recognised assets and liabilities.

Subject to, provisions as described in paragraphs 13-19 and Appendices B-D, an entity shall, in its opening Ind AS Balance Sheet:

The resulting adjustments arise from events and transactions before the date of transition to Ind ASs. Therefore, an entity shall recognise those adjustments directly in retained earnings (or, if appropriate, another category of equity) at the date of transition to Ind AS.

While preparing Opening Ind-AS Balance- Sheet, take advantage of voluntary exemptions given in Ind-AS 101.This will make the transition to Ind-AS bit easier.

Restate Financial Statements for the Financial Year ending 31st March 2015.

Having prepared Opening Balance Sheet as at 1st April,2014, the next step is to re-state financials of financial year 2014-15. (which were prepared as per Accounting Standards)

Please note, the Company has to re-state all financial statements and not just the Balance Sheet for the financial year ending 31st March,2015.

Which Accounting Standards to apply to Opening Ind-As Balance Sheet ?

The moot question is , the opening Ind-AS Balance Sheet is to be prepared on the basis of which accounting standards ?

The one effective as at 1st April,2014 or

The one effective as at 1st April,2015 or

The one effective as at 1st April,2016 .

The answer is, the opening Ind-AS is to be prepared on the basis of Ind-AS effective on 31st March,2016 , to put technically :

"An entity shall use the same accounting policies in its opening Ind AS Balance Sheet and throughout all periods presented in its first Ind AS financial statements. Those accounting policies shall comply with each Ind AS effective at the end of its first Ind AS reporting period, except as specified in paragraphs 13-19 and Appendices B-D.- (Mandatory Exceptions and Voluntary Exemptions)"� para 7 of Ind-AS 101

To make the transition cost effective and smooth Ind-AS grants exemptions from retrospective application of Ind-AS

Ind AS grants limited exemptions in certain areas where the cost of compliance may exceed the benefits. These exemptions are optional and not mandatory.

An entity has to evaluate all these exemptions and understand the impact these will have on its financials in the short run as well as in the long run.

Quite a few new accounting policies may need to be adopted.

Previous policies may need modifications.

Basis of judgements and estimates will need detailed working and understanding.

For companies which has voluntarily opted to comply with Ind-AS will have to report their results for quarter ended 30th June 2015 as per Ind-AS

Financial Year ending on 31st March,2016

Company's first Ind AS financial statements are the first annual financial statements in which the entity adopts Ind ASs, in accordance with Ind ASs notified under the Companies Act, 2013 and makes an explicit and unreserved statement in those financial statements of compliance with Ind ASs.

It is very important to make an explicit and unreserved statement in the financial statements for the financial year ending 31st March, 2016, else the Company will be considered as non -Ind-As compliant.

Challenges of Implementation of Ind-AS

Reclassifications and Re-grouping

Presently, items are regrouped or reclassified to confirm to current year classification without any justification being provided in the financial statements. Under Ind AS, in case any regrouping or reclassification is done, the same needs to be disclosed along with reasons thereof.

Plan Implementation well.

Phase I: Plan Conversion

Phase II: Impact Analysis & Quantification

Phase III: Redefine / Redesign

Phase IV: Opening balance sheet as per Ind AS

Phase V: Reporting date - Ind AS financial statements

Adoption of Ind-AS needs very detailed and meticulous planning keeping in mind the accounting policies to be followed for group companies.

There is more to it then meet your eyes. Changes are not just for accounts but it impacts I T system as well.

Other Challenges

First Time Adoption

Regrouping/reclassification

Industry Comparatives

Changes in concepts requiring consideration

Awareness at Board level

External & internal communications

Availability of valuers

Transition may be difficult but not impossible.

PART III - Companies (Indian Accounting Standards) Rules 2015

In exercise of the powers conferred by section 133 read with section 469 of the Companies Act, 2013 (18 of 2013) and sub-section (1) of section 210A of the Companies Act, 1956 (1 of 1956), the Central Government, in consultation with the National Advisory

Committee on Accounting Standards, hereby makes the following rules, namely:-

1. Short title and commencement.- (1) These rules may be called the Companies (Indian Accounting Standards) Rules, 2015.

(2) They shall come into force on the 1st day of April, 2015

2. Definitions.- (1) In these rules, unless the context otherwise requires,-

1. "Accounting Standards"� means the standards of accounting, or any addendum thereto for companies or class of companies as specified in rule 3;
2. "Act"� means the Companies Act, 2013 (18 of 2013);
3. "Annexure"� in relation to these rules means the Annexure containing the Indian Accounting Standards (Ind AS) appended to these rules;
4. "entity"� means a company as defined in clause (20) of section 2 of the Act;
5. "financial statements"� means financial statements as defined in clause (40) of section 2 of the Act; (f) "net worth"� shall have the meaning assigned to it in clause (57) of section 2 of the Act.

(2) Words and expressions used herein and not defined in these rules but defined in the Act shall have the same meaning respectively assigned to them in the Act.

3. Applicability of Accounting Standards. - (1) The accounting standards as specified in the Annexure to these rules to be called the Indian Accounting Standards (Ind AS) shall be the accounting standards applicable to classes of companies specified in rule 4.

(2) The Accounting standards as specified in Annexure to the Companies (Accounting Standards) Rules, 2006 shall be the Accounting Standards applicable to the companies other than the classes of companies specified in rule 4.

(3) A company which follows the Indian Accounting Standards (Ind AS) specified in Annexure to these rules in accordance with the provisions of rule 4 shall follow such standards only.

(4) A company which follows the accounting standards specified in Annexure to the Companies (Accounting Standards) Rules, 2006 shall comply with such standards only and not the Standards specified in Annexure to these rules.

4. Obligation to comply with Indian Accounting Standards (Ind AS). - (1) The Companies and their auditors shall comply with the Indian Accounting Standards (Ind AS) specified in Annexure to these rules in preparation of their financial statements and audit respectively, in the following manner, namely:-

(i) any company may comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting periods beginning on or after 1stApril, 2015, with the comparatives for the periods ending on 31st March, 2015, or thereafter;

(ii) the following companies shall comply with the Indian Accounting Standards (Ind AS) for the accounting periods beginning on or after 1st April, 2016, with the comparatives for the periods ending on 31st March, 2016, or thereafter, namely:-

1. companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of rupees five hundred crore or more;
2. companies other than those covered by sub-clause (a) of clause (ii) of sub rule (1) and having net worth of rupees five hundred crore or more;
3. holding, subsidiary, joint venture or associate companies of companies covered by sub-clause (a) of clause (ii) of sub- rule (1) and sub-clause (b) of clause (ii) of sub- rule (1) as the case may be; and

(iii) the following companies shall comply with the Indian Accounting Standards (Ind AS) for the accounting periods beginning on or after 1st April, 2017, with the comparatives for the periods ending on 31st March, 2017, or thereafter, namely:-

1. companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of less than rupees five hundred crore;
2. companies other than those covered in clause (ii) of sub- rule (1) and sub clause (a) of clause (iii) of sub-rule (1), that is, unlisted companies having net worth of rupees two hundred and fifty crore or more but less than rupees five hundred crore.
3. holding, subsidiary, joint venture or associate companies of companies covered under sub-clause (a) of clause (iii) of sub- rule (1) and sub-clause (b) of clause (iii) of sub- rule (1), as the case may be:

Provided that nothing in this sub-rule, except clause (i), shall apply to companies whose securities are listed or are in the process of being listed on SME exchange as referred to in Chapter XB or on the Institutional Trading Platform without initial public offering in accordance with the provisions of Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Explanation 1. - SME Exchange shall have the same meaning as assigned to it in Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements)
Regulations, 2009.

Explanation 2. - "Comparatives"� shall mean comparative figures for the preceding accounting period.

(2) For the purposes of calculation of net worth of companies under sub-rule (1), the following principles shall apply, namely:-

1. the net worth shall be calculated in accordance with the stand-alone financial statements of the company as on 31st March, 2014 or the first audited financial statements for accounting period which ends after that date;
2. for companies which are not in existence on 31st March, 2014 or an existing company falling under any of thresholds specified in sub-rule (1) for the first time after 31st March, 2014, the net worth shall be calculated on the basis of the first audited financial statements ending after that date in respect of which it meets the thresholds specified in sub-rule (1).

Explanation.- For the purposes of sub-clause (b), the companies meeting the specified thresholds given in sub-rule (1) for the first time at the end of an accounting year shall apply Indian Accounting Standards (Ind AS) from the immediate next accounting year in the manner specified in sub-rule (1).

Illustration .- (i) The companies meeting threshold for the first time as on 31st March, 2017 shall apply Ind AS for the financial year 2017-18 onwards. (Ii) The companies meeting threshold for the first time as on 31st March, 2018 shall apply Ind AS for the financial year 2018-19 onwards and so on.

(3) Standards in Annexure to these rules once required to be complied with in accordance with these rules, shall apply to both stand-alone financial statements and consolidated financial statements.

(4) Companies to which Indian Accounting Standards (Ind AS) are applicable as specified in these rules shall prepare their first set of financial statements in accordance with the Indian Accounting Standards (Ind AS) effective at the end of its first Indian Accounting Standards (Ind AS) reporting period.

Explanation.- For the removal of doubts, it is hereby clarified that the companies preparing financial statements applying the Indian Accounting Standards (Ind AS) for the accounting period beginning on 1stApril, 2016 shall apply the Indian Accounting Standards (Ind AS) effective for the financial year ending on 31st March, 2017.

(5) Overseas subsidiary, associate, joint venture and other similar entities of an Indian company may prepare its standalone financial statements in accordance with the requirements of the specific jurisdiction:

Provided that such Indian company shall prepare its consolidated financial statements in accordance with the Indian Accounting Standards (Ind AS) either voluntarily or mandatorily if it meets the criteria as specified in sub-rule (1).

(6) Indian company which is a subsidiary, associate, joint venture and other similar entities of a foreign company shall prepare its financial statements in accordance with the Indian Accounting Standards (Ind AS) either voluntarily or mandatorily if it meets the criteria as specified in sub-rule (1).

(7) Any company opting to apply the Indian Accounting Standards (Ind AS) voluntarily as specified in sub-rule (1) for its financial statements shall prepare its financial statements as per the Indian Accounting Standards (Ind AS) consistently.

(8) Once the Indian Accounting Standards (Ind AS) are applied voluntarily, it shall be irrevocable and such companies shall not be required to prepare another set of financial statements in accordance with Accounting Standards specified in Annexure to Companies (Accounting Standards) Rules, 2006.

(9) Once a company starts following the Indian Accounting Standards (Ind AS) either voluntarily or mandatorily on the basis of criteria specified in sub-rule (1), it shall be required to follow the Indian Accounting Standards (Ind AS) for all the subsequent financial statements even if any of the criteria specified in this rule does not subsequently apply to it.

5. Exemptions.- The insurance companies, banking companies and non-banking finance companies shall not be required to apply Indian Accounting Standards (Ind AS) for preparation of their financial statements either voluntarily or mandatorily as specified in sub-rule (1) of rule

A. General Instruction. -

(1) Indian Accounting Standards, which are specified, are intended to be in conformity with the provisions of applicable laws. However, if due to subsequent amendments in the law, a particular Indian Accounting Standard is found to be not in conformity with such law, the provisions of the said law shall prevail and the financial statements shall be prepared in conformity with such law.

(2) Indian Accounting Standards are intended to apply only to items which are material.

(3) The Indian Accounting Standards include paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. An individual Indian Accounting Standard shall be read in the context of the objective, if stated, in that Indian Accounting Standard and in accordance with these General Instructions.

PART IV : List of Ind-AS

Ind-AS 101 First-time Adoption of Indian Accounting Standards - effective from

1. Appendix B - Exceptions to the retrospective application of other Ind Ass

2. Appendix C - Exemptions for business combinations

3. Appendix D - Exemptions from other Ind ASs

Ind- AS 102 Share-based Payment

Ind-AS 103 Business Combinations

1. Appendix C - Business combinations of entities under common control

Ind-AS 104 Insurance Contracts - effective from the date to be separately announced.

Ind-AS 105 Non-current Assets Held for Sale and Discontinued Operations

1. Appendix B - Extension of the period required to complete a sale

Ind-AS 106 Exploration for and Evaluation of Mineral Resources

Ind-AS 107 Financial Instruments: Disclosures

1. Appendix B - Classes of financial instruments and level of disclosure

Ind-AS 108 Operating Segments

Ind-AS 109 Financial Instruments

Ind-AS 110 Consolidated Financial Statements

Ind-AS 111 Joint Arrangements

Ind-AS 112 Disclosure of Interests in Other Entities

Ind-AS 113 Fair Value Measurement

Ind-AS 114 Regulatory Deferral Accounts

Ind-AS 115 Revenue from Contracts with Customers *

1. Appendix C - Service Concession Arrangements

2. Appendix D Service Concession Arrangements: Disclosures

* On 28 April 2015, the International Accounting Standards Board (IASB) had voted to publish an exposure draft (ED) proposing a one-year deferral of the effective date of IFRS 15, Revenue from Contracts with Customers to 1 January 2018.

Ind-AS 1 Presentation of Financial Statements

Ind-AS 2 Inventories

Ind-AS 7 Statement of Cash Flows

Ind-AS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Ind-AS 10 Events after the Reporting Period

1. Appendix A - Distribution of Non-cash Assets to Owners

Ind-AS 12 Income Taxes

1. Appendix A - Income Taxes"”Changes in the Tax Status of an Entity or its Shareholders

Ind-AS 16 Property, Plant and Equipment

1. Appendix A Changes in Existing Decommissioning, Restoration and Similar Liabilities

2. Appendix B Stripping Costs in the Production Phase of a Surface Mine

Ind-AS 17 Leases

1. Appendix A - Operating Leases"”Incentives

2. Appendix B - Evaluating the Substance of Transactions Involving the Legal Form of a Lease

3. Appendix C - Determining whether an Arrangement contains a Lease

Ind-AS 19 Employee Benefits

1. Appendix B - Ind AS 19 "”The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

Ind-AS 20 Accounting for Govt. Grants and Disclosure of Govt. Assistance

1. Appendix A - Government Assistance"”No Specific Relation to Operating Activities

Ind-AS 21 The Effects of Changes in Foreign Exchange Rates

Ind-AS 23 Borrowing Costs

Ind-AS 24 Related Party Disclosures

Ind-AS 27 Separate Financial Statements

Ind-AS 28 Investments in Associates and Joint Ventures

Ind-AS 29 Financial Reporting in Hyperinflationary Economies

1. Appendix A- Applying the Restatement Approach under Ind AS 29 Financial Reporting in Hyperinflationary Economies

Ind-AS 32 Financial Instruments: Presentation

Ind-AS 33 Earnings per Share

Ind-AS 34 Interim Financial Reporting

1. Appendix A - Interim Financial Reporting and Impairment

Ind-AS 36 Impairment of Assets

1. Appendix A - Using present value techniques to measure value in use

2. Appendix C - Impairment testing cash-generating units with goodwill and non-controlling interests

Ind-AS 37 Provisions, Contingent Liabilities and Contingent Assets

1. Appendix A - Rights to Interests arising from Decommission-ing, Restoration and Environmental Rehabilitation Funds

2. Appendix B - Liabilities arising from Participating in a Specific Market"” Waste Electrical and Electronic Equipment2

3. Appendix C - Levies

Ind-AS 38 Intangible Assets

1. Appendix A - Intangible Assets"”Web Site Costs

Ind-AS 40 Investment Property

Ind-AS 41 Agriculture