Applicability of Ind AS In India

Ind AS stands for Indian Accounting Standards. The government of India with a view to keep the local accounting standards at par with the global practice issued the Ind AS which are in line with the IFRS (International Financial Reporting Standard)

A country can adopt IFRS (International Financial Reporting Standards) in two ways:

- 100% adoption

- Converged IFRS adoption

100% adoption of IFRS means following the IFRS standard as it is.

Converged IFRS means making few changes which can as be referred to as carve in and carve out.

India has adopted the converged IFRS known as Ind AS (Indian Accounting Standards)

IND AS is applicable to

1. Companies – governed by MCA (Ministry of Corporate Affairs)

2. Banking and Non-Banking Financial Companies – governed by RBI (Reserve Bank of India)

3. Insurance – governed by IRDA (Insurance Regulatory and Development Authority)

IND AS is not applicable to

1. Sole Proprietorship Firm

2. Partnership Firm

3. Limited Liability Partnership (LLP)

4. Foreign Company

5. Branch office of foreign company

What is Net Worth?

Net Worth as per, Sec 2(57) of Companies Act, 2013 is arrived at as below:

Share Capital xxx

Add: Reserve and Surplus xxx

Less: Accumulated losses and deferred expenditure (xxx)

Less: Revaluation Reserve (xxx)

Less: Amalgamation Reserve (xxx)

Less: Miscellaneous Expenditure not written off (xxx)

Net Worth xxx

Other Points to keep in mind:

1. Net worth needs to be computed based on the latest audited financial statement under Indian GAAP.

2. Net worth needs to be tested on last date of the financial year.

3. Net worth needs to be computed as per standalone Financial Statement and not as per consolidated Financial Statement.

4. ESOP Reserve to be included in reserve and surplus while computing net worth.

FIRST TIME PREPARATION OF FINANCIAL STATEMENT, A COMPANY MUST CONSIDER THE FOLLOWING:

ASSUME THAT A COMPANY IS REQUIRED TO PREPARE IT FIRST FINANCIAL STATEMENT ON 31ST MARCH 2021

I I I

1st April 2019 31st March 2020 31st March 2021

Opening Balance sheet Comparative Balance Sheet Closing Balance Sheet

NET WORTH

– Rs.245 crore – Rs.255 crore – Rs.260 crore

BALANCE SHEET TO BE PREPARED AS PER IND AS

Yes Yes Yes

PROFIT AND LOSS STATEMENT TO BE PREPARED AS PER IND AS

No Yes Yes

CASH FLOW STATEMENT TO BE PREPARED AS PER IND AS

No Yes Yes

NOTES TO ACCOUNTS TO BE PREPARED AS PER IND AS

IF PERTAINING TO BALANCE SHEET

Yes Yes Yes

IF PERTAINING TO PROFIT AND LOSS STATEMENT

No Yes Yes

ACCOUNTING POLICY TO BE PREPARED AS PER IND AS**

Yes Yes Yes

RECONCILATION STATEMENT TO BE PREPARED AS PER IND AS

IF PERTAINING TO EQUITY

Yes Yes No

IF PERTAINING TO PROFIT AND LOSS STATEMENT

No Yes No

** ACCOUNTING POLICIES MUST BE SAME FOR ALL THE THREE BALANCE SHEETS