Ind As roadmap

(dated 2 January 2015)

The following is the summary of the roadmap.

Voluntary adoption

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.

Mandatory applicability

Phase I

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:

  • Companies whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth of 500 crore INR or more.
  • Companies having net worth of 500 crore INR or more other than those covered above.
  • Holding, subsidiary, joint venture or associate companies of companies covered above.

Phase II

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:

  1. Companies whose equity and/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 500 Crore.
  2. Unlisted companies other than those covered in Phase I and Phase II whose net worth are more than 250 crore INR but less than 500 crore INR.
  3. Holding, subsidiary, joint venture or associate companies of above companies.


The notification has clarified many previously open questions, some of which have been described below:

Net worth

  • It has been clarified that net worth will be determined based on the standalone accounts of the company as on 31 March 2014 or the first audited period ending after that date.
  • Net worth has been defined to have the same meaning as per section 2(57) of the Companies Act, 2013. It is the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation.

Standalone and consolidated financial statements

  • It is now clear that Ind AS will apply to both consolidated and stand-alone financial statements of a company covered by the roadmap. This is helpful as companies will not have to maintain dual accounting systems.

Foreign operations

  • It is a relief that an overseas subsidiary, associate or joint venture of an Indian company is not required to prepare its stand-alone financial statements as per the Ind AS, and instead, may continue with its jurisdictional requirements. However, these entities will still have to report their Ind AS adjusted numbers for their Indian parent company to prepare consolidated Ind AS accounts.

Applicability to insurance, banking and non-banking financial companies

  • Insurance, banking and non-banking financial companies shall not be required to apply Ind AS either voluntarily or mandatorily. However, it appears (though not clarified), that if these entities are subsidiaries, joint venture or associates of a parent company covered by the roadmap, they will have to report Ind AS adjusted numbers for the parent company to prepare consolidated Ind AS accounts.

Early adoption of standards

  • The debate on two of the most significant standards, revenue recognition and financial instruments has now been settled with them being notified. Interestingly, India will be one of the first countries to mandatorily adopt these standards from 1 April 2015 while the rest of the world will follow from 2017. These two standards will have a significant effect on entities, impacting not only their financial results but also catalysing numerous organisational and business changes.


  • There was hope that companies will be given an option to prepare their financial statements as per IFRS issued by the IASB (the true IFRS), which has been now ruled out.
  • The rules specify that in case of conflict between Ind AS and a law, the provisions of the law shall prevail and the financial statements shall be prepared in conformity with it.

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

  • How are we preparing for the board communication, education process with respect to changes resulting from Ind AS including the impact on key metrics historically communicated?
  • How well are we engaging with the board and whether it is timely?
  • How will we communicate our findings to our shareholders, analysts and others?
  • What are our competitors doing? How do we benchmark? How will others compare with us?
  • What are the typical industry issues?

Operations, infrastructure and regulatory

  • Are we considering the impact of Ind AS in our current negotiations and dealings with customers, vendors, lenders, etc.?
  • How should long-term contract discussions be shaped today keeping in mind the requirements of Ind AS?
  • What change management structures are in place? Will they get the job done?
  • Can we consolidate legacy IT systems and processes under Ind AS?
  • Are we buying, modifying or implementing new IT systems based on an Indian GAAP world? Will they provide us with the information we need under Ind AS?
  • Are we embedding the implications of Ind AS into our internal control systems?
  • What implications does Ind AS have on our tax strategies?
  • How will accounting under Ind AS blend with the requirements of the new income computation and disclosure standards (ICDS) under tax?
  • How will adoption of Ind AS interact with the provisions of MAT?

Human capital strategies

  • Are all appropriate functional disciplines and business locations sufficiently engaged?
  • Have we set up an appropriate project framework and communication channels?
  • Which are the best incentives in ensuring a business-wide conversion?
  • How does this change affect our employee compensation strategy?
  • What level of in-house experience or expertise do we have? What types and extent of training will we require?
  • How will we monitor milestones and progress?

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!


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