The following is the summary of the roadmap.
Companies can voluntarily adopt Ind AS for accounting periods beginning on or after 1 April 2015 with comparatives for period ending 31 March 2015 or thereafter. However, once they have chosen this path, they cannot switch back.
Ind AS will be mandatorily applicable to the following companies for periods beginning on or after 1 April 2016, with comparatives for the period ending 31 March 2016 or thereafter:
Ind AS will be mandatorily applicable to the following companies for periods beginning on or after 1 April 2017, with comparatives for the period ending 31 March 2017 or thereafter:
The notification has clarified many previously open questions, some of which have been described below:
Standalone and consolidated financial statements
Applicability to insurance, banking and non-banking financial companies
Early adoption of standards
With IFRS set to become the future Indian GAAP and IFRS being a moving target, Indian companies should actively monitor and participate in the IASB’s standard setting process.
In India, when businesses were simple, accounting standards were simple. Today, businesses have become complex and India needs comprehensive accounting standards. Move towards IFRS is an attempt to bridge this gap. This move would lead to certain fundamental changes and would impact businesses at large. Companies will have to examine the implication of this move on their performance and business.
Implication of change in accounting would have a direct implication on the way businesses are run. For example, it could affect credit rating, debt covenants, dividend distribution, employee KPI and bonuses, managerial remunerations, taxes, etc.
IFRS may not bring significant accounting changes to all companies. The impact of the move could be quite significant for certain companies with complex transactions. The impacts of change to Ind AS need careful analysis. Prior to embracing full-fledged conversion, a preliminary study would help you assess the level of complexities and challenges, and then prepare and plan for effective and efficient conversion exercise.
Implementing Ind AS is likely to impact key performance metrics and hence requires thoughtful communication with the board of directors, shareholders and other stakeholders. Internally, Ind AS implementation can have a wide-ranging impact on a company’s processes, systems, controls, income taxes and contractual arrangement.
Successful Ind AS implementation will require a thorough strategic assessment, a robust step-by-step plan, alignment of resources and training, effective project management as well as smooth integration of the various changes into normal business operations. The Ind AS implementation exercise needs to establish sustainable processes so as to continue to produce meaningful information long after the exercise is completed.
Ask the important questions now
Companies need to carefully plan for their Ind AS transition strategy. There are important questions that companies need to ask themselves and more importantly be prepared to answer with a clear action plan.
Communications with key stakeholders
Operations, infrastructure and regulatory
Human capital strategies
By addressing these questions early, companies increase their chances of ensuring a smooth and effective conversion. This thorough approach can help companies ‘bake-in’ rather than ‘bolt-on’ Ind AS changes. Failure to do this may lead to ongoing conversion efforts, each aiming to correct the previous effort.
The time to embrace the Ind AS transformation journey is now!