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Ministry of Corporate Affairs has finally announced the Companies (Indian Accounting Standards) Rules, 2015 for applicability of Accounting Standards converged with IFRS. A notification in this regard has been issued on 16th February, 2015. Importantly, the Notification also clarifies and sets at rest certain uncertainties prevailing on some of the issues, leading the way to a smooth convergence.  With the issuance of these Rules, 39 new converged Accounting Standards (Ind AS) have been notified.

Some of the questions unanswered so far have now been clarified as follows:

1. Clarity has now emerged on computation of Net Worth. This was crucial because Net Worth is a key factor in determining the applicability of the Converged Standards to an entity. It has now been clarified that the net worth shall be calculated in accordance with the stand-alone financial statements of the company as on 31st March, 2014 or the first audited financial statements for accounting period which ends after that date.

2. Further, it has been clarified that Net worth will have the same meaning as assigned to it in section 2(57) of the Companies Act, 2013. It is the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation.

3. These Standards shall apply to both stand-alone financial statements and consolidated financial statements.

4. Overseas subsidiary, associate, joint venture and other similar entities of an Indian company may prepare its standalone financial statements in accordance with the requirements of the specific jurisdiction.

5. Comparatives for the previous year will have to be provided as per the converged standards. Significantly, it implies that an entity for whom the converged accounting standards become mandatory with effect from 1st April, 2016 will in fact require an Opening Balance Sheet duly compliant with the converged standard, as of 1 April 2015.

Since India has decided to converge with IFRS rather than adopt IFRS, certain carve outs have been introduced in the notified Accounting Standards to suit Indian business conditions. Significantly, a number of carve outs initially proposed in 2011 have been relooked and some deleted.

Clearly the intention is to align as closely as possible with IFRS, while deciding to converge with them.


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