Indian Accounting Standards (Ind AS) Notified
From Actuary's Desk
Indian Accounting Standards (Ind AS) Notified
Moving closer to the implementation of new accounting norms, the government has notified the rules for Indian Accounting Standards (Ind AS), which will be mandatory for certain companies from the accounting periods beginning on or after April 1, 2016.
Ind ASs, which are converged with global standards IFRS, can be followed by corporates on a voluntary basis for accounting periods beginning on or after 1st April, 2015, with the comparatives for the periods ending on 31st March, 2015. Mandatory applicability of these standards is discussed below.
Please note that banking, insurance and non-banking finance companies are currently exempted from the roadmap.
Companies with obligation to comply with Indian Accounting Standards (Ind ASs) for the 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:
- 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;
- companies other than those covered by clause above and having net worth of rupees five hundred crore or more;
- holding, subsidiary, joint venture or associate companies of companies covered by any of the two clauses above.
Companies with obligation to comply with Indian Accounting Standards (Ind ASs) for the 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:
- 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;
- companies other than those covered by the applicability criteria for accounting periods beginning on or after 1st April, 2016 or by clause (a) above and having net worth of rupees two hundred and fifty crore or more but less than rupees five hundred crore;
- holding, subsidiary, joint venture or associate companies of companies covered by any of the two clauses above.
Please note that the above criteria are an extract from the notified Companies (Indian Accounting Standards) Rules, 2015. It is recommended to refer to the original text in determining applicability for your organisation. You can access the same and all the notified Ind AS that appeared on the MCA website by clicking here.
Impact on Actuarial Valuations
The above change will effect actuarial valuations of employee benefits as well. Many of the Indian companies that do not report results on IFRS basis are going to find IndAS19 a big change from actuarial valuation perspective.
In particular, the change will mean that certain items that are currently charged to Profit and Loss Account will then be charged to Other Comprehensive Income. Also, there will be significantly enhanced qualitative disclosures (such as explaining the characteristics of its defined benefit plans and risks associated with them) as well as quantitative disclosures (such as disclosing sensitivity analysis, projected cash flows etc).
We will of course be decoding what this change exactly means for you and shall keep you posted so you stay in complete compliance right from the day one.
I thank you for reading this page and welcome any comments or recommendations or observations you may have on the subject. You can direct those to the email address mentioned below.
Khushwant Pahwa, FIAI, FIA, B Com (H)
Founder and Consulting Actuary
KPAC (Actuaries and Consultants)
k.pahwa@kpac.co.in
www.kpac.co.in