IFRS vs. IND AS: Key Differences, Applicability & Global Impact

What is IFRS?

IFRS stands for International Financial Reporting Standards, it is an internationally recognised accounting standard developed by IASB (International Accounting Standards Board). It is followed by more than 140 countries across the world for the preparation and presentation of financial statements. 

The primary objective of International Financial Reporting Standards (IFRS) is to promote transparency, accountability, and efficiency in global financial markets. By establishing a universal accounting language, IFRS enables the preparation of consistent and comparable financial statements across countries and industries. IFRS facilitates informed decision-making among investors, regulators, and stakeholders.

It comprises of the following:

1. Statement of financial position.
2. Statement of profit and loss.
3. Statement of changes in equity for the period.
4. Statement of cash flows for the period.

Applicability

IFRS is applicable in 168 jurisdictions across the world, including major countries, like: Australia, Russia, Singapore, Taiwan, South Korea, Turkey, Brazil, Canada, The EU, Gulf countries, `Hong Kong, India, Israel, Malaysia, Pakistan, Philippians, Malaysia, Pakistan  

The United States and China, two of the world's largest economies, have opted to maintain their accounting standards, rather than adopting International Financial Reporting Standards (IFRS).

The US uses Generally Accepted Accounting Principles (GAAP), which is set by the Financial Accounting Standards Board (FASB). China has its accounting standards, known as the Accounting Standards for Business Enterprises (ASBE). Although China's standards are largely based on IFRS, they have some significant differences.

What is IND AS?

IND AS stands for Indian Accounting Standards developed the Institute of Chartered Accountants of India (ICAI) and implemented by the Ministry of Corporate Affairs (MCA) in India. It is followed only in India.

It comprises of the following:

1. Balance Sheet
2. Profit and loss account
3. Cash flow statement
4. Statement of changes in equity
5. Notes to financial statements
6. Disclosure of accounting policies

IND AS (Indian Accounting Standards) is India's adapted version of the International Financial Reporting Standards (IFRS), tailored to suit the country's unique legal, tax, and economic landscape. By adopting IND AS, the Indian government aimed to align its accounting practices with global standards while accommodating local regulations, tax structures, and business nuances.

Although IND AS is largely based on IFRS, significant differences exist due to India's distinct regulatory environment and business practices. Despite these variations, IND AS retains the core principles of IFRS, ensuring a harmonized accounting framework that balances global consistency with local relevance.

Why was IND AS introduced in India?

IND AS was introduced to align India’s accounting standards with international practices while addressing local tax laws, economic conditions, and regulatory needs.

Before the adoption of IND AS, Indian companies followed the Indian Generally Acceptable Accounting Principles as an accounting standard for financial accounting and reporting purposes. 

Applicability of IND AS

The Ministry of Corporate Affairs (MCA) has implemented IND AS in a phased manner since its inception, providing companies with adequate time to establish necessary infrastructure and training. Key milestones in IND AS adoption include:

- 2015: Mandatory adoption for listed companies and a few others, effective from FY 2016-17.

- 2018: Expanded mandatory adoption to:

• All listed companies, regardless of turnover.
• Unlisted companies with a net worth of ₹500 crores or more.
• Non-banking financial companies (NBFCs) with a net worth between ₹250 crores and ₹500 crores.

For other categories, IND AS adoption is voluntary. 

Currently, IND AS applicability falls into two categories:

1. Mandatory: Applies to specified companies based on listing status, turnover, and net worth.

2. Voluntary: Optional adoption for companies not meeting the mandatory criteria.

FAQs

How many IFRS standards are there?

38 standards and 26 interpretations as of May 2024.

Are IFRS and IND AS the same?

Although both aim for transparency and comparability, there are key differences in their scope and application:

IND AS is tailored to India's unique legal and regulatory environment, incorporating specific adjustments to accommodate the country's laws, tax structures, and business practices.

In contrast, IFRS is designed for global application, providing a standardized framework for financial reporting across countries and industries.

How many accounting standards are there in IND AS?

As of 2024, there are 41 accounting standards in IND AS.

What is the impact of IND AS adoption on Indian companies?

The implementation of IND AS has a transformative impact on Indian companies, enabling them to:

1. Align with global standards: IND AS convergence with IFRS facilitates international comparability and compatibility.
2. Enhance transparency: IND AS promotes clear and concise financial reporting, providing stakeholders with a more accurate understanding of a company's financial position.
3. Improve comparability: Standardized financial reporting enables investors, analysts, and regulators to make informed decisions by comparing the financial performance of Indian companies with their global peers.

By adopting IND AS, Indian companies can strengthen their credibility, attract foreign investment, and compete more effectively in the global marketplace.