How new accounting standards will impact Indian companies

India was following accounting standards from Indian Generally Acceptable Accounting Principle
(IGAAP) prior to convergence of Ind-AS.
The new standards have been converged with the globally followed i.e.: International Financial
Reporting Standards (IFRS).Use of new accounting standards will make accounts comparable
internationally.
As per the corporate affairs ministry roadmap Ind AS will have impact on accounting for financial
instrument, Revenue recognition and consolidated financial statement for entities. The new rule will
impact the way assets and liabilities are measured.

Different Phases of Ind AS adoption:

Ind As is similar to international financial reporting standards (IFRS). Companies could adopt Ind As
voluntarily from 1st April, 2015. However once they adopt this, they cant move back.
Comparatives for

31st March,2015 or

31st March,2016 or

31st March,2017 or

period ending
Applicable to

thereafter
1) Voluntary adoption

thereafter
1) Companies whose

thereafter
1) Companies Listed or

net worth is 500 crore

in process of listing on

INR.

stock exchange having

companies

net worth of less than

2) Holding, Joint

500 crore INR.

Venture,
Associated companies

2) Holding, Joint

or subsidiary of above

Venture,

company.

Associated companies
or subsidiary of above
company.
3) Unlisted company
whose net worth is 250
crore INR or more.

New Accounting Norms:

These are few basic classification of Existing Standards, New accounting standards and their impact
on Indian companies

Existing Standards

New Accounting Standards

Impact

Revenue calculated net of excise

Revenue will be calculated by

Higher revenue, Lower margins

and duties

adding excise and duties

Companies having ESOP based

Mandate

on intrinsic value

under fair value

Purposed dividend is recognized

Purposed

year

Likely to increase the year end

in the same year

Assets are recognised at book

approved by shareholders
Assets and liability to recognised

book value of company

Companies having high goodwill

value

at fair value, Goodwill tested to

in balance sheet will see vitalities

Current investment valued at cost

be tested annually
Needs to be evaluated at fair

at their earnings
Much volatility in other income,

value or market value

value.

Cash rich companies impacted

ESOP

cost

dividend

booked

in

Likely to increase employee cost

more
Major repair charges are expense

Allowed to capitalised

Could lead to lower EPS

Major impact of change in accounting policies:

The new accounting standards recognise substance over form and fair value to compute financial
statement. It will reflect more accurate picture of companies finance.
** Substance over form transaction should not be recorded in a manner that hide true intent of
transaction, Which could mislead the user to analyse financial statement.

Impact on Companies:
It will impact the phenomenon of computing Revenue, Asset value, Book value, Return on equity and
operating profit. Earlier assets and liability computed on book value now things valued at fair value.
Earlier sales are calculated after deducting excise duty, under the new rules excise duty will be
treated as a tax on manufacturing activity.
For complete guide of converged accounting standard following link can be refer:
https://www.pwc.in/assets/pdfs/publications/2015/ind-as-pocket-guide-2015.pdf

Submitted By : Varun Bansal (WMP12082), Ayush Gurjar (WMP12056)

Submission Date : 1st Sept, 2016

References:

http://www.pwc.in/services/ifrs/ifrs-in-india_roadmap.html; Accessed on 10th Aug, 2016

http://economictimes.indiatimes.com/markets/stocks/policy/how-new-accounting-standards-willimpact-indian-companies/articleshow/53200549.cms ; Accessed on 12th Aug, 2016
http://www.accountingtools.com/questions-and-answers/what-is-substance-over-form.html; Accessed
on 16th Aug, 2016
http://economictimes.indiatimes.com/news/economy/policy/new-accounting-standards-to-kick-in-forcompanies-with-net-worth-of-rs-500-crore-or-more/articleshow/51599531.cms; Accessed on 16th Aug,
2016