Ind AS / IFRS Conversion & Reporting

What is Ind AS conversion?

Indian Accounting Standards (Ind AS) are India's IFRS-converged accounting standards. They apply to listed companies, larger unlisted companies, and their group companies, in place of the older Accounting Standards most private companies follow.

Conversion means restating a company's accounts under Ind AS for the first time, following Ind AS 101. IFRS reporting is related work: preparing reporting packs for a foreign parent that consolidates under IFRS, which often means reconciling Indian accounts to IFRS every quarter.

The key terms

A handful of concepts explain most of what Ind AS changes:

Applicability

Ind AS applies to listed companies (other than those on SME exchanges) and companies in the process of listing, unlisted companies with net worth of ₹250 crore or more, and their holding, subsidiary, joint venture, and associate companies.

Voluntary adoption

Any company can adopt Ind AS voluntarily. Once a company follows Ind AS, it can't go back to the older standards.

Ind AS 101

The standard for first-time adoption, which sets how opening balances are restated and which exemptions are available.

Transition date

The start of the earliest period presented. Opening balance sheet adjustments are made at this date.

Fair value

Ind AS measures many financial instruments at fair value, where the older standards used cost.

Expected credit loss

Receivables are provided for based on expected losses, not just on specific debts known to be doubtful.

IFRS reporting pack

The set of figures and disclosures a subsidiary sends a foreign parent for its IFRS consolidation.

Why it matters

Ind AS changes reported numbers, sometimes significantly:

It's mandatory above the thresholds

Companies meeting the net worth tests, and their group companies, must follow Ind AS. It isn't a choice.

Numbers change

Revenue timing, lease accounting, financial instruments, and credit losses can change reported profit and equity.

It can't be reversed

Once a company adopts Ind AS, it continues on Ind AS, even if it later falls below the thresholds.

Group consistency

Subsidiaries of Ind AS or IFRS groups need to report consistently for consolidation.

Covenants and tax

Changes in reported profit and net worth can affect loan covenants, and there are specific tax computation rules for Ind AS companies.

Audit scrutiny

Ind AS involves more judgement. Auditors expect documented policies and workings for each area.

Investor expectations

Investors and acquirers increasingly expect IFRS-comparable accounts.

Who is this for?

Most small and mid-sized private companies stay on the older Accounting Standards, unless they're part of an Ind AS group.

Accounting Standards vs. Ind AS vs. IFRS

Here's how the three frameworks compare at a high level:

What we'll need from you

Current financial statements

The latest audited accounts under the existing standards, and the trial balance.

Group structure

Holding, subsidiary, and associate relationships, which decide whether Ind AS applies.

Contracts

Customer contracts, leases, and loan agreements, which drive revenue, lease, and financial instrument accounting.

Receivables data

Ageing and history of receivables, for the expected credit loss model.

Investments and derivatives

Details of investments, hedges, and any derivatives, for fair value measurement.

Parent's reporting requirements

For IFRS packs, the parent's templates, policies, and timetables.

Conversion is best started well before the first Ind AS reporting date, since comparatives have to be restated too.

How conversion works

A first-time adoption usually runs in these stages:

1. 1

   Confirm applicability

   We confirm whether and from when Ind AS applies, and the transition date.

2. 2

   Gap analysis

   Each area of the accounts is compared under the current standards and Ind AS, to find where numbers and disclosures change.

3. 3

   Choose policies and exemptions

   Accounting policies and Ind AS 101 exemptions are chosen and documented.

4. 4

   Restate opening balances

   The opening balance sheet at the transition date is restated, with adjustments taken to equity.

5. 5

   Prepare Ind AS statements

   Financial statements, comparatives, and first-time adoption reconciliations are prepared.

6. 6

   Embed the process

   Chart of accounts, reporting templates, and month-end processes are updated so future reporting stays on Ind AS.

Ongoing reporting

After conversion, a few things keep Ind AS reporting on track:

Updated policies

Keep the accounting policy manual current, especially for revenue, leases, and financial instruments.

Periodic fair values

Remeasure fair values and expected credit losses at each reporting date.

IFRS reconciliations

For foreign groups, reconcile Ind AS figures to IFRS for each reporting pack.

Tax computations

Apply the specific income-tax rules for Ind AS transition and ongoing adjustments.

New standards

Track amendments to Ind AS as they're notified.

Audit readiness

Keep workings and judgements documented for the auditor.

Benefits and responsibilities