The Indian Accounting Standards also known as Ind AS and are structured in line with the International Financial Reporting Standards (IFRS). The nomenclature for the naming and numbering of Ind AS is same as that of IFRS
With Ind As compliance being mandatory for specified companies, for companies operating in India need to prepare for Ind AS implementation. Businesses should firstly develop an outline of how the new standards will replace existing ones, and then look to embed Ind AS into their operational systems, train their financial teams, and ensure all company managers understand the new accounting principles.
These standards have introduced several changes in the way companies report financials, including how they account for income and expenditure and items in the balance sheet. Ind AS is different from the existing Indian GAAP framework in following key aspects:
Fair valuation
Substance over legal form
Emphasis on the Balance Sheet
New framework is principle based, rather than rule based.
Impact of Ind AS (Illustration):
The volume and breadth of differences between Indian GAAP and Ind AS is enormous. Further, its impact will vary by industry and for each company. Ind AS will cover every area comprising reported revenues, expenses, assets, liabilities and equity. Companies have to devote substantial amount of their time especially in the following areas while preparing for Ind AS adoption.
Revenue recognition
Financial Instruments
Consolidation
Business Combination
Taxes
Key steps to be followed in implementation of Ind AS:
Preliminary impact assessment on financial statements of company -An initial assessment required to be done to identify standards which will have impact on financial statements in terms of recognition, measurement, disclosure or classification of items as per IndAS in comparison of existing accounting standards.
Key Ind AS standards with an impact on financial statements of company -A detail comparative presentation needs be prepared to assess its impact for each key Ind AS in restated balance sheet and income statement at conversion date.
First time adoption of Ind AS involves the following:
Selection of appropriate options as per Ind AS 101, which contains the transition provisions for an entity to adopt Ind-AS for the first time.
Preparation of opening balance sheet as at under Ind AS.
Preparation of financial statements under Ind AS from starting of adopting FY.
Exceptions to the retrospective application of other Ind AS:
This Ind AS prohibits retrospective application of some aspects of other Ind ASs. The implementation of Ind AS is a major change process requiring substantial preparation and training effort for which the company must establish a project team and dedicated considerable resources. Our audit methodology will include thoughtful communication with the board of directors, shareholders and other stakeholders for Implementing Ind AS, which is likely to impact key performance metrics. Internally, Ind AS implementation can have a wide-ranging impact on a company’s processes, systems, controls, income taxes and also contractual arrangement. We assist in full-fledged implementation of Ind AS through strategic assessment, a proper audit plan, arrangement of trainings for the staff, providing the proficient staff with excellent Ind AS knowledge, good project management and finally ensuring a smooth Ind AS conversion.