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Chartered Accountancy is a professional course and thus, it is expected from a CA student to possess an understanding which lives up to the title. A CA student is expected to understand the world of finance, not just parrot out bookish data. Thus, while studying, keep in mind you're not just a reader or a student trying to score passing marks in an exam, no, you are a professional. You will be the driving force behind the economy.

The very first paper of the CA Final course is Financial Reporting (FR). Financial Reporting stands for the process of maintaining and displaying the financial information of a business entity in an easy to interpret report format. Consistent, comparable and understandable financial reporting is essential to develop a robust economy. Thus, various restrictions, guidelines, laws and standards, depending on the country, turnover or the business structure of an entity, govern the process of financial reporting.

To ensure that India stood head to head on the global market, The Government of India in consultation with the Institute of Chartered Accountants of India, decided to converge the existing national accounting standards (I GAAP) with the internationally accepted IFRS, which gave birth to the Indian Accounting Standards also known as Ind AS. Thereafter, the Ministry of Corporate Affairs has notified these Ind AS under Companies (Indian Accounting Standards) Rules, 2015 vide Notification dated February 2015; along with a roadmap for its applicability.

As the scope of applicability of Ind AS spreads, it was considered necessary to teach them to the future chartered accountants under Financial Reporting (FR) subject. The current FR syllabus comprises entirely of Ind AS, their application in real life and their carve-outs from IFRS. Since it is the first paper and applicable to all listed companies, it is prudent that a CA student is well versed in Ind AS. The new Ind AS norms for accounting differ substantially from the earlier taught AS at Intermediate level. Through this blog, I'd try to make the transition easy for all students reading.

Ind AS: An Introduction and how to study them

It would be beneficial to sit and recall the previously learned accounting standards and the basic principles they were based on. However, if you don't remember a lot, it is absolutely fine. CA Final gives you a fresh start in the accounting front.

Let us begin by building a basic background for the need behind the topic. Indian Accounting Standards are primarily focused on representing accounting estimates in such a manner that they record all assets and liabilities at their closest possible fair value. This mindset is crucial as the economic structure is observing a western shift. Earlier where most businesses enjoyed perpetual existence, it wasn't a big concern at what values long term assets and liabilities appeared. When the economy began to show signs of growth in the culture of start-up funding and securitisation, the need for financial reporting to be done in a manner where the assets and liabilities are shown at closest to the value they will realise on sale. Ind AS ensures, in case of frequent change in ownership or quick mortality of modern companies the financials do not have to be restated. Moving on, it could be safe to say Ind AS do provide a more true and fair view of things than the previous standards. Once you internalise the need and the foundation principle of “fair value” on which Ind AS is based, it is easier to read the bare text and understand it. The most effective way to prepare something is to understand the application of the topic for future professional use. If you have exposure of Ind AS applicable entities through your articleship make sure you use that opportunity to the fullest. If, however, you are a dummy article or do not have the necessary client base at the firm you work with, you can easily download the Annual Report for any Ind AS applicable entity like National Thermal Power Corporation of India, Infosys, etc.

Once you have the Ind AS compliant audited financial statements of an entity, start with reading the accounting policy. The accounting policy is drafted with the bare text of Ind AS and will be well linked to different areas of the balance sheet. It will explain the application of the standards practically and you should try and reconcile the same with the numbers. Explore the accounting entries being passed for each Ind AS adjustment, study how the trial is presented in the format of Schedule III, and ask as many questions as possible. It is recommended to study the balance sheet for the period when the first-time adoption was taking place, so the application of Ind AS 101 is also clearly depicted.

If you're someone who just wants to clear the exam as quickly as possible but is struggling with the complex nature of Ind AS, I can assure you, the simplest way to prepare for FR is this. Pick up the module, read the text, read the relevant accounting policy paragraph of NTPC's report, reference the corresponding figures and then attempt the question given in the module. Answering mock test series is also a good choice as it helps to acquaint yourself to the type and pattern of the questions.Choice the test series wisely. The most recommended one is Prepca test series.   

Even most established chartered accountants while providing consultancy or assurance services facing new clients with Ind AS applicability use the same method to quickly understand the scope of work. The above-mentioned exercise will also serve as handy measure for learning Ind AS for those who studied under old course but intend to work with MNCs, PSUs or big fours in the future. Without the knowledge of Ind AS there is no survival in the competitive market out there.

Financial Year 2018-19 saw Ind AS being applied to non-banking financial corporations (NBFCs) with turnover over 500 crores, and by the end of the current year 2019-20, they are proposed to be applied to the banking sector as well. Further, they are set to be applied to the insurance sector in the near future as well. The world is changing, and a professional's pace must be two steps ahead.


Published by

Rohan Deshmukh
(Tax analyst)
Category Students   Report

8 Likes   13 Shares   21846 Views


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