{"id":210,"date":"2023-12-06T09:15:00","date_gmt":"2023-12-06T09:15:00","guid":{"rendered":"https:\/\/www.henryharvin.com\/blogs\/?p=210"},"modified":"2026-06-04T09:51:38","modified_gmt":"2026-06-04T09:51:38","slug":"indian-accounting-standards","status":"publish","type":"post","link":"https:\/\/www.henryharvin.com\/blog\/indian-accounting-standards\/","title":{"rendered":"Indian Accounting Standards in 2026"},"content":{"rendered":"

Introduction to Accounting Standards<\/h2>\n

To ensure legitimate finance practices in a company, following accounting standards, which are a compilation of policies, regulations, and guidelines is necessary. In short, accounting standards refer to certain strict practices a company or a business entity must follow to generate accurate financial reports. The accounting guidelines encompass all the financial aspects including assets, liabilities, and shareholder’s equity along with a perfect financial picture of a company. In order to get a reliable and transparent financial picture, investors, banks, and other regulatory agencies rely on accounting standards.<\/p>\n

Most countries have certain accounting standards to ensure best finance practices. For instance, While several other foreign countries rely on International Financial Reporting Standards( IFRS) to report their financial statements, America depends on Generally Accepted Financial Principles ( GAAP).<\/p>\n

Each day, every business carries out several financial transactions to efficiently run the company. Therefore, one of the primary responsibilities of any company is to prepare statements legitimately to show them to banks and other investors in order to get loans or funds. Balance sheets and profit and loss statements are among the most important statements that tell about the financial health of a company. Hence, all companies must stick to accounting guidelines set by recognized accounting bodies. In short, accounting standards aim to standardize various accounting policies and principles.<\/p>\n

Significance of Accounting Standards<\/h2>\n

Primarily, the main objective of setting such standards is to ensure investors are given appropriate and accurate financial information regarding a company.\u00a0Accounting standards encompass certain rules and regulations that ensure uniformity in accounting. In short, they have a standard format for financial statements that makes sure of uniformity. Secondly, a stakeholder who invests their money in a company relies on financial statements for analyzing the financial picture of that company. Therefore, by following accounting standards a company can produce reliable financial statements. Thirdly, the principles and policies set in accounting standards must be abided by all the entities; as a result, the chances of fraud and manipulations are minimized.<\/p>\n

Most of all, following accounting standards by a company is a great help for auditors. When the auditor checks and confirms if all the accounting standard policies have been followed correctly, he assures the accuracy of financial statements. Also, following proper accounting standards measures the managerial performance of an entity. This helps in increasing the profits of a company.<\/p>\n

Origin of Indian Accounting Standards<\/h2>\n

Indian Accounting Standards (Ind AS) are issued by the Accounting Standard Board to converge Indian GAAP with International Financial Accounting Standards <\/a>(IFRS). Their objective is to remove variations in the treatment of several accounting aspects and to bring about standardization in the presentation.<\/p>\n

On 2 January 2015, the Press Information Bureau, Government of India, Ministry of Corporate Affairs (MCA) issued a note outlining the various phases in which Indian Accounting Standards converged with IFRS (Ind AS) is proposed to be implemented in India, for Companies other than Banking Companies, Insurance Companies, and NBFCs. Consequently, the companies will need to convert their accounts from Indian GAAP to IFRS.<\/p>\n

\"\"Roadmap to Implementation:<\/strong><\/figure>\n
\n\n\n\n\n\n\n\n
Financial year<\/strong><\/td>\nApplicable to<\/strong><\/td>\n<\/tr>\n
2016-2017<\/td>\nCompanies\u00a0 (listed and unlisted) whose net worth is equal to or greater than 500 crore INR<\/td>\n<\/tr>\n
2017-2018<\/td>\nUnlisted companies whose net worth is equal to or greater than 250 crore INR and all listed companies<\/td>\n<\/tr>\n
2018-2019 and onwards<\/td>\nWhen a company\u2019s net worth becomes greater than 250 crore INR<\/td>\n<\/tr>\n
2015-2016 and later<\/td>\nEntities, not under the mandatory roadmap, may later voluntarily adopt Ind AS<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Whenever a company gets covered under the roadmap, Ind AS becomes mandatory, its holding, subsidiary, associate and joint venture companies will also have to adopt Ind AS (irrespective of their net worth). Moreover, Ind AS will apply to both consolidated as well as standalone financial statements of a company. While overseas subsidiary, associate or joint venture companies are not required to prepare standalone financial statements under Ind AS, they will need to prepare Ind AS adjusted financial information to enable consolidation by the Indian parent.<\/p>\n<\/figure>\n

Presently, insurance companies, banking companies, and nonbanking finance companies (NBFCs) are not required to apply Ind AS. Ind AS rules are silent when these companies are subsidiaries, associates or joint ventures of a parent covered under the roadmap. It appears that these companies will need to report Ind AS adjusted financial information to enable consolidation by the parent.\u00a0In case of conflict between Ind AS and the law, the provisions of the law will prevail and financial statements are to be prepared in compliance with the law.<\/figure>\n
<\/figure>\n
Why is it essential to implement Indian accounting standards?<\/strong><\/figure>\n

Accounting, which is known as business language helps in communicating to others about the financial status of a company. In order to establish accurate and clear communication, accounting relies on Indian Accounting Standards that encompass certain rules and policies for the accurate generation of financial statements. Primarily, improving the financial statements is the main objective of Indian Accounting Standards. Secondly, following Indian Accounting Standards allows intra and interfirm comparisons so that we can check the company\u2019s progress and position in the market. Additionally, it aims to provide one set of accounting policies that cover both disclosure requirements and valuation methods of all financial transactions.<\/p>\n

Application of Indian Accounting Standards:<\/h2>\n

The Indian Accounting Standards set in India vary between companies according to their nature and size.<\/p>\n