USE OF IFRS AND IND AS

Unit 1
 TOPICS
 Understand the application of IFRS in India through the
use of Ind AS
 the applicability of Ind AS
 differences between IFRS & Ind AS –
 Conceptual & Regulatory Framework.
 IFRS AND IND AS
All government bodies issue certain accounting standards or
accounting systems for all companies.
These contain the rules, regulations, obligations and guidelines for
the companies.
This makes it easier for the companies as they know how to record
and present their finances and statements.
It also tells them how to record other things like inventories and
depreciation. 
 IFRS AND IND AS

 All companies, irrespective of their size are under the obligation

to abide by the standards issued by the International Accounting
Standards Board (IASB). The accounting standards set by the
IASB are termed as International Accounting Standards (IAS). 

 International Financial Reporting Standards (IFRS) are a set of

accounting rules for the financial statements of public
companies that are intended to make them consistent,
transparent, and easily comparable around the world.
 IFRS AND IND AS

 India followed accounting standards from Indian Generally

Acceptable Accounting Principle (IGAAP) prior to adoption of
the Ind-AS.
 Indian Accounting Standard (abbreviated as Ind-AS) is
the Accounting Standard adopted by companies in India and
issued under the supervision of Accounting Standards Board
(ASB) which was constituted as a body in the year 1977.
 APPLICABILITY OF IND AS
 The Ministry of Corporate Affairs (MCA), in 2015, had notified the Companies (Indian
Accounting Standards (IND AS)) Rules 2015, which stipulated the adoption and
applicability of IND AS in a phased manner beginning from the Accounting period
2016-17.

The MCA has since issued three Amendment Rules, one each in year 2016, 2017, and
2018 to amend the 2015 rules.

 The IND AS are basically standards that have been harmonized with the IFRS to make
reporting by Indian companies more globally accessible.

Since Indian companies have a far wider global reach now as compared to earlier, the
need to converge reporting standards with international standards was felt, which has
led to the introduction of IND AS.
 PHASES OF ADOPTION
 MCA has notified a phase-wise convergence to IND AS from
current accounting standards. IND AS shall be adopted by specific
classes of companies based on their Net worth and listing status.
 PHASE I

Mandatory applicability of IND AS to all companies from 1st April

2016, provided:  
 It is a listed or unlisted company
 Its Net worth is greater than or equal to Rs. 500 crore*

*Net worth shall be checked for the previous three Financial Years
(2013-14, 2014-15, and 2015-16).  
 PHASE II
Mandatory applicability of IND AS to all companies from 1st April
2017, provided:
 It is a listed company or is in the process of being listed (as on
31.03.2016)
 Its Net worth is greater than or equal to Rs. 250 crore but less than
Rs. 500 crore (for any of the below mentioned periods).
Net worth shall be checked for the previous four Financial Years
(2014-14, 2014-15, 2015-16, and 2016-17)
 PHASE III
Mandatory applicability of IND AS to all Banks, NBFC’s and Insurance
companies from 1st April 2018, whose:
 Net worth is more than or equal to INR 500 crore with effect from 1st
April 2018.
 IRDA (Insurance Regulatory and Development Authority) of India
shall notify the separate set of IND AS for Banks & Insurance
Companies with effect from 1st April 2018.
 NBFCs include core investment companies, stock brokers, venture
capitalists, etc.
Net Worth shall be checked for the past 3 financial years  (2015-16,
2016-17, and 2017-18)
 PHASE IV

 All NBFCs whose Net worth is more than or equal to INR 250 crore
but less than INR 500 crore shall have IND AS mandatorily
applicable to them  with effect from 1st April 2019.
DIFFERENCE
 CONCEPTUAL AND LEGAL
REGULATORY FRAMEWORK
 A conceptual framework is:
• a coherent system of interrelated objectives and fundamental
principles
• a framework which prescribes the nature, function and limits of
financial accounting and financial statements.

 A regulatory framework is required to ensure that relevant and

reliable financial reporting is achieved to meet the needs of
shareholders and other users.
OBJECTIVE OF FINANCIAL REPORTING

 The objective of financial reporting is to

provide financial information about the
reporting entity that is useful to existing
and potential investors, lenders and other
creditors in making decisions about
providing resources to the entity.
 QUALITATIVE CHARACTERISTICS
 Qualitative characteristics are the attributes that make information
provided in financial statements useful to others.
 The Framework splits qualitative characteristics into two categories:

(i) Fundamental qualitative characteristics

– Relevance
– Faithful representation
(ii) Enhancing qualitative characteristics
– Comparability
– Verifiability
– Timeliness
– Understandability
RELEVANCE
 Information is relevant if:
• it has the ability to influence the economic decisions of users,
and
• is provided in time to influence those decisions.
 FAITHFUL REPRESENTATION
To be a perfectly faithful representation, financial information would
possess the following characteristics:
 Completeness – To be understandable information must contain all
the necessary descriptions and explanations.
 Neutrality – Information must be neutral, i.e. free from bias.

Financial statements are not neutral if, by the selection or presentation

of information, they deliberately influence the making of a decision or
judgment in order to achieve a predetermined result or outcome.
 Free from error – Information must be free from error within the
bounds of materiality. A material error or omission can cause the
financial statements to be false or misleading, and thus unreliable and
deficient in terms of their relevance.
VERIFIABILITY
 'Verification can be direct or indirect. Direct verification means
verifying an amount or other representation through direct
observation, for example, by counting cash.
 Indirect verification means checking the inputs to a model,
formula or other technique and recalculating the outputs using
the same methodology'
COMPARABILITY
Users must be able to:
 compare the financial statements of an entity over time to
identify trends in its financial position and performance
 compare the financial statements of different entities to
evaluate their relative financial performance and financial
position.
 For this to be the case there must be:

• consistency • disclosure.
UNDERSTANDABILITY
Understandability depends on:
 the way in which information is presented
 the capabilities of users.

It is assumed that users:

• have a reasonable knowledge of business and economic
activities
• are willing to study the information provided with reasonable
diligence. For information to be understandable users need to
be able to perceive its significance.
TIMELINESS
 'Timeliness means having information available to decision
makers in time to be capable of influencing their decisions.
Generally, the older the information is the less useful it
becomes'
THE END