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CA RAGHAV AGARWAL
The Hon’ble Finance Minister in the presentation of the Union Budget for 2014-15, proposed the adoption of Indian Accounting Standards (Ind AS) that are converged with International Financial Reporting Standards (IFRS). The purpose of Ind AS is to ensure that financial statements prepared by Indian companies are consistent, transparent, and comparable to those of other countries. The adoption of Indian Accounting Standards (Ind AS) has enhanced the comparability of financial information of Indian companies at a global level. Ind AS involves application of several new and complex concepts. This requires significant level of judgement and estimation, accompanied by detailed qualitative and quantitative disclosures under Ind AS.
As on date, MCA has notified 40 Ind AS under the Companies (Indian Accounting Standards) Rules, 2015. These were applicable to the companies from Financial Year (FY) 2015-16 on a voluntary basis and from FY 2016-17 on mandatory basis, along with necessary comparatives. These reporting standards are contemporary and virtually at par with leading global standards. They will in turn improve India’s place in global rankings on corporate governance and transparency in financial reporting. The applicability of Ind AS depends on the size and type of the entity and its adoption requires significant changes in accounting practices and disclosures in the financial statements. Listed companies, companies with a net worth of over Rs. 500 crores, and holding, subsidiary, joint venture or associate companies of a listed or a company meeting the net worth criteria, are required to adopt Ind AS. However, certain entities such as insurance companies, banking companies, non-banking financial companies, and small and medium-sized enterprises (SMEs) are not required to adopt Ind AS. Other Indian companies can voluntarily adopt IFRS for their financial reporting. Companies that choose to adopt IFRS must ensure that they apply the standards correctly and appropriately in their financial statements.
How Can MNRS Help?
Here are some key roles that our firm can play in the implementation of Ind AS:
- Assessment and Gap Analysis: We can assess the impact of Ind AS on the company’s financial statements and conduct a gap analysis to identify areas where changes are required to comply with Ind AS. This requires review of the accounting policies and procedures currently followed by the company and identify areas where changes are required.
- Develop an Implementation Plan: Based on the gap analysis, we can develop a detailed implementation plan outlining the steps to be taken to comply with Ind AS. This plan includes timelines, resource requirements, and clear roles and responsibilities for all stakeholders.
- Training and Education: Our team can provide training and education to the finance team, auditors, and other stakeholders to ensure that they understand the changes required under Ind AS. We can also provide guidance on the interpretation of Ind AS, how to apply the standards, and the impact of the changes on the company’s financial statements. This helps employees to treat Ind AS not as a purely technical exercise, but a strategic one which requires organizational commitment
- Accounting Policy Development: We can assist the company in developing new accounting policies that comply with Ind AS. This encompasses policies related to revenue recognition, financial instruments, leases, and consolidation of financial statements.
- Financial Statement Preparation: We can assist the company in preparing its financial statements in accordance with Ind AS. This includes ensuring that the financial statements comply with the disclosure requirements and that the accounting policies are consistently applied.
- Internal Control Systems: We can also assist the company in developing and implementing internal control systems that comply with Ind AS. This includes ensuring that the company has appropriate controls in place to ensure the accuracy of financial reporting and compliance with Ind AS.
- Assists in development of your own roadmap by considering the key points along with new amendments in your business in accordance with Ind AS