17  Indian Accounting Standards and IFRS

17.1 Why Accounting Standards?

Accounting standards are authoritative pronouncements prescribing the recognition, measurement, presentation and disclosure of items in financial statements. They are designed to (a) enhance comparability between firms and across years, (b) reduce flexibility for opportunistic accounting choice, (c) improve quality of financial information, and (d) align Indian reporting with global practice. India currently runs two streams: the older Accounting Standards (AS) issued by ICAI under the Companies Act (notified through the Companies (Accounting Standards) Rules), and the converged Indian Accounting Standards (Ind AS) which are aligned with IFRS, notified under the Companies (Indian Accounting Standards) Rules 2015.

17.2 Standard-Setting Bodies

TipStandard-Setting Bodies
Body Jurisdiction Role
ICAI Accounting Standards Board (ASB) India Drafts AS and Ind AS
National Financial Reporting Authority (NFRA) India Recommends standards to Government; oversees audit
Ministry of Corporate Affairs (MCA) India Notifies standards
IASB — International Accounting Standards Board Global Issues IAS and IFRS
IFRS Foundation Global Trustees; oversight body
FASB — Financial Accounting Standards Board USA Issues US GAAP
ISSB — International Sustainability Standards Board Global Sustainability standards (IFRS S1/S2 since 2023)

17.3 Indian AS Framework — The Older Standards

The original Accounting Standards (AS) are notified under the Companies (Accounting Standards) Rules and apply to companies not following Ind AS. ICAI has issued 27 AS, of which most are mandatory.

TipSelected AS — Subject Matter
AS Subject
AS 1 Disclosure of Accounting Policies
AS 2 Valuation of Inventories
AS 3 Cash Flow Statements
AS 4 Contingencies and Events Occurring After the Balance Sheet Date
AS 5 Net Profit or Loss for the Period, Prior Period Items
AS 9 Revenue Recognition
AS 10 Property, Plant and Equipment
AS 11 Effects of Changes in Foreign Exchange Rates
AS 13 Accounting for Investments
AS 14 Accounting for Amalgamations
AS 17 Segment Reporting
AS 18 Related Party Disclosures
AS 19 Leases
AS 20 Earnings per Share
AS 21 Consolidated Financial Statements
AS 22 Accounting for Taxes on Income
AS 23 Investments in Associates
AS 26 Intangible Assets
AS 27 Joint Ventures
AS 28 Impairment of Assets
AS 29 Provisions, Contingent Liabilities and Contingent Assets

17.4 Ind AS — Convergence with IFRS

In 2015, India adopted a converged set of standards — Indian Accounting Standards (Ind AS) — that are substantially aligned with IFRS but retain certain carve-outs to reflect Indian conditions.

17.4.1 Roadmap of Adoption

TipInd AS Adoption Roadmap
Phase Effective Coverage
Phase I FY 2016-17 (transition FY 2015-16) Listed companies with net worth ≥ ₹500 crore; unlisted with net worth ≥ ₹500 crore
Phase II FY 2017-18 All other listed companies; unlisted with net worth ≥ ₹250 crore
Banks and NBFCs Originally FY 2018-19, deferred NBFCs phased in from FY 2018-19 (now applied with conditions); banks still on AS
Insurance Deferred Pending

17.4.2 Selected Ind AS — Subject Matter

TipSelected Ind AS
Ind AS Subject
Ind AS 1 Presentation of Financial Statements
Ind AS 2 Inventories
Ind AS 7 Cash Flow Statements
Ind AS 8 Accounting Policies, Changes in Estimates and Errors
Ind AS 10 Events after the Reporting Period
Ind AS 12 Income Taxes
Ind AS 16 Property, Plant and Equipment
Ind AS 19 Employee Benefits
Ind AS 21 Effects of Changes in Foreign Exchange Rates
Ind AS 23 Borrowing Costs
Ind AS 27 Separate Financial Statements
Ind AS 28 Investments in Associates and Joint Ventures
Ind AS 32 Financial Instruments — Presentation
Ind AS 33 Earnings per Share
Ind AS 36 Impairment of Assets
Ind AS 37 Provisions, Contingent Liabilities and Contingent Assets
Ind AS 38 Intangible Assets
Ind AS 103 Business Combinations
Ind AS 107 Financial Instruments — Disclosures
Ind AS 109 Financial Instruments (replaces IAS 39)
Ind AS 110 Consolidated Financial Statements
Ind AS 111 Joint Arrangements
Ind AS 113 Fair Value Measurement
Ind AS 115 Revenue from Contracts with Customers
Ind AS 116 Leases

17.5 IFRS — International Financial Reporting Standards

17.5.1 Origin and Bodies

The International Accounting Standards Committee (IASC) was formed in 1973 by professional bodies of nine countries. It issued International Accounting Standards (IAS) between 1973 and 2001. The IASC was reorganised as the International Accounting Standards Board (IASB) in 2001, which now issues International Financial Reporting Standards (IFRS). The IASB is overseen by the IFRS Foundation (Trustees), with headquarters in London.

17.5.2 Adoption Around the World

TipIFRS Adoption — Status
  • More than 140+ jurisdictions require IFRS for all or most domestic listed companies.
  • European Union (since 2005) — IFRS for consolidated accounts of listed companies.
  • USA — FASB maintains separate US GAAP; SEC accepts IFRS from foreign issuers but not from US issuers.
  • Japan — voluntary adoption.
  • China — Chinese standards substantially converged with IFRS.
  • India — converged via Ind AS (not full adoption).

17.5.3 Selected IFRS

TipSelected IFRS / IAS
Standard Subject
IAS 1 Presentation of Financial Statements
IAS 2 Inventories
IAS 7 Statement of Cash Flows
IAS 16 Property, Plant and Equipment
IAS 36 Impairment of Assets
IAS 38 Intangible Assets
IFRS 3 Business Combinations
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 13 Fair Value Measurement
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
IFRS 17 Insurance Contracts
IFRS S1, S2 Sustainability and Climate Disclosure (ISSB, 2023)

17.6 Ind AS vs IFRS — Key Carve-Outs

Ind AS retains certain carve-outs and carve-ins from IFRS:

TipMajor Carve-Outs of Ind AS from IFRS
  • Ind AS 21 — option to defer/capitalise foreign-exchange differences on long-term monetary items (carve-in continuing the old AS 11 option).
  • Ind AS 28 — equity method optional in standalone financial statements of investor.
  • Ind AS 32 — classification of foreign-currency convertible bonds (FCCBs) modified.
  • Ind AS 101 — additional first-time-adoption exemptions for Indian-specific situations.
  • Ind AS 103 — common-control combinations are treated using pooling-of-interests method (Appendix C), retaining a vestige of pre-IFRS thinking.

flowchart LR
  IFRS[IFRS<br/>by IASB] -->|Converged with carve-outs| INDAS[Ind AS]
  AS[Older AS<br/>by ICAI] -->|Continues for non-Ind-AS companies| AS2[AS for small companies]
  INDAS -->|Notified by MCA| LIST[Large listed and unlisted companies]
    classDef default fill:#003366,color:#ffffff,stroke:#ffcc00,stroke-width:3px,rx:10px,ry:10px;

17.7 Conceptual Framework

The IFRS Conceptual Framework (revised 2018) is the foundation document for IFRS — and, with ICAI’s adaptation, for Ind AS. It defines:

TipConceptual Framework — Key Elements
  • Objective of general-purpose financial reporting — provide useful information to existing and potential investors, lenders, other creditors.
  • Qualitative characteristics — fundamental (relevance, faithful representation) and enhancing (comparability, verifiability, timeliness, understandability).
  • Elements of financial statements — assets, liabilities, equity, income, expenses.
  • Recognition — when items meet the definition and have probable economic benefit/sacrifice and reliable measurement.
  • Measurement bases — historical cost, current cost, realisable value, present value, fair value.
  • Concepts of capital — financial capital maintenance and physical capital maintenance.

17.8 Practice Questions

Q 01 Body Easy

International Financial Reporting Standards (IFRS) are issued by:

  • AIASC
  • BIASB
  • CFASB
  • DICAI
View solution
Correct Option: B
**IASB** since 2001; predecessor IASC issued IAS (1973-2001).
Q 02 IASB Easy

The IASB is headquartered in:

  • ALondon
  • BNew York
  • CGeneva
  • DParis
View solution
Correct Option: A
IASB and the IFRS Foundation are based in **London**.
Q 03 Ind AS Medium

Phase I of Ind AS applicability (FY 2016-17) covered listed and unlisted companies with net worth of at least:

  • A₹100 crore
  • B₹250 crore
  • C₹500 crore
  • D₹1,000 crore
View solution
Correct Option: C
Phase I — net worth ≥ **₹500 crore**.
Q 04 Standards Medium

Match each Ind AS with the subject:

Standard Subject
(i) Ind AS 115 (a) Leases
(ii) Ind AS 116 (b) Revenue from Contracts with Customers
(iii) Ind AS 109 (c) Fair Value Measurement
(iv) Ind AS 113 (d) Financial Instruments
  • A(i)-(b), (ii)-(a), (iii)-(d), (iv)-(c)
  • B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
  • C(i)-(d), (ii)-(c), (iii)-(b), (iv)-(a)
  • D(i)-(c), (ii)-(d), (iii)-(a), (iv)-(b)
View solution
Correct Option: A
115 — Revenue; 116 — Leases; 109 — Financial Instruments; 113 — Fair Value.
Q 05 AS Medium

"Disclosure of Accounting Policies" is dealt with in:

  • AAS 1
  • BAS 2
  • CAS 9
  • DAS 11
View solution
Correct Option: A
AS 1 — Disclosure of Accounting Policies.
Q 06 IFRS 15 Medium

IFRS 15 / Ind AS 115 prescribes a **five-step model** for:

  • ALeases
  • BInventory valuation
  • CRevenue recognition
  • DFair-value measurement
View solution
Correct Option: C
Five-step: identify contract → POs → transaction price → allocate → recognise.
Q 07 Lease Medium

Under IFRS 16 / Ind AS 116, almost all leases (other than short-term and low-value) appear on the lessee's balance sheet as:

  • AOperating lease — expense only
  • BA right-of-use asset and a lease liability
  • CCapitalised lease only if title transfers
  • DOff-balance sheet
View solution
Correct Option: B
IFRS 16/Ind AS 116 introduced the **right-of-use** model — bringing operating leases onto the balance sheet.
Q 08 IFRS 9 Medium

IFRS 9 / Ind AS 109 introduced which impairment model for financial assets?

  • AIncurred-loss model
  • BExpected credit loss model (ECL)
  • CCost model
  • DFair-value-only model
View solution
Correct Option: B
IFRS 9 replaced IAS 39's incurred-loss model with the **expected credit loss** model.
Q 09 IASB Year Medium

IASC was restructured into IASB in:

  • A1973
  • B1995
  • C2001
  • D2015
View solution
Correct Option: C
**2001** — IASB began operations; IFRS replaced IAS as the new prefix.
Q 10 EU IFRS Medium

The European Union made IFRS mandatory for consolidated accounts of listed companies from:

  • A2001
  • B2005
  • C2010
  • D2015
View solution
Correct Option: B
EU IAS Regulation made IFRS mandatory from **2005** for listed companies' consolidated statements.
Q 11 NFRA Hard

NFRA is established under which section of Companies Act 2013?

  • A§129
  • B§132
  • C§148
  • D§143
View solution
Correct Option: B
**§132** of Companies Act 2013 establishes the NFRA; constituted 2018.
Q 12 Carve-out Hard

A "carve-out" in Ind AS refers to:

  • AA standard not applicable to small companies
  • BA deviation from the corresponding IFRS to reflect Indian conditions
  • CAn exemption for first-time adoption
  • DA transition adjustment to retained earnings
View solution
Correct Option: B
**Carve-out** = Indian deviation from IFRS (e.g., Ind AS 21 forex option, Ind AS 103 common-control combinations).
Q 13 IAS Easy

Match each Ind AS / IFRS with the topic:

Standard Topic
(i) Ind AS 16 / IAS 16 (a) Provisions and Contingencies
(ii) Ind AS 36 / IAS 36 (b) Property, Plant and Equipment
(iii) Ind AS 37 / IAS 37 (c) Earnings per Share
(iv) Ind AS 33 / IAS 33 (d) Impairment of Assets
  • A(i)-(b), (ii)-(d), (iii)-(a), (iv)-(c)
  • B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
  • C(i)-(c), (ii)-(d), (iii)-(b), (iv)-(a)
  • D(i)-(d), (ii)-(a), (iii)-(b), (iv)-(c)
View solution
Correct Option: A
16 — PPE; 36 — Impairment; 37 — Provisions; 33 — EPS.
Q 14 QC Hard

In the IFRS Conceptual Framework, *enhancing* qualitative characteristics include:

  • ARelevance and Faithful Representation
  • BComparability, Verifiability, Timeliness, Understandability
  • CMateriality and Cost-Benefit
  • DGoing Concern and Accrual
View solution
Correct Option: B
Fundamental — Relevance + Faithful representation; **Enhancing — CVTU**.
Q 15 IFRS Foundation Medium

Under the IFRS Foundation, the standard-setting board for **sustainability disclosures** is:

  • AFASB
  • BIFAC
  • CISSB
  • DIASB
View solution
Correct Option: C
**ISSB** — International Sustainability Standards Board (established 2021); IFRS S1 and S2 issued in 2023.
Q 16 Ind AS 103 Hard

Under Ind AS 103, common-control business combinations are accounted for using:

  • AAcquisition method only
  • BPooling of interests method (Appendix C carve-in)
  • CEquity method
  • DCost method
View solution
Correct Option: B
Ind AS 103 Appendix C retains **pooling of interests** for common-control combinations — an Indian carve-in.
Q 17 Sequence Hard

Arrange the following standard-setting events chronologically:

(i) ISSB issues IFRS S1 and S2
(ii) IASC formed
(iii) IASB replaces IASC
(iv) Ind AS Phase I applicable in India

  • A(ii), (iii), (iv), (i)
  • B(i), (ii), (iv), (iii)
  • C(iv), (iii), (ii), (i)
  • D(iii), (ii), (i), (iv)
View solution
Correct Option: A
IASC (1973) → IASB (2001) → Ind AS Phase I (2016-17) → ISSB IFRS S1/S2 (2023).
Q 18 USA Medium

In the USA, accounting standards for domestic companies are set by:

  • AIASB
  • BSEC
  • CFASB
  • DPCAOB
View solution
Correct Option: C
**FASB** issues US GAAP; SEC regulates public companies and accepts IFRS only from foreign filers.
Q 19 Ind AS 1 Medium

"Presentation of Financial Statements" is dealt with in:

  • AInd AS 1 / IAS 1
  • BInd AS 7 / IAS 7
  • CInd AS 16 / IAS 16
  • DInd AS 8 / IAS 8
View solution
Correct Option: A
**Ind AS 1 / IAS 1** — Presentation of Financial Statements.
Q 20 Adoption Medium

India adopted Ind AS through:

  • ADirect adoption of IFRS without modification
  • BConvergence with IFRS, with selected carve-outs
  • CContinuing only the older AS
  • DAdopting US GAAP
View solution
Correct Option: B
India followed *convergence* — Ind AS aligns with IFRS but retains carve-outs.

17.9 Quick Recall

ImportantQuick recall
  • Standard-setters: ICAI ASB (drafts), NFRA (§132), MCA (notifies); globally IASB (London) under IFRS Foundation; ISSB for sustainability.
  • India has two streams: older AS (27 standards under Companies (AS) Rules) and Ind AS (Companies (Ind AS) Rules 2015).
  • Ind AS roadmap: Phase I FY 2016-17 for net worth ≥ ₹500 crore; Phase II FY 2017-18 for net worth ≥ ₹250 crore.
  • Key standards: AS 1 — accounting policies; AS 2 — inventory; AS 3 — cash flow; AS 9 — revenue (Ind AS 115); AS 10 — PPE (Ind AS 16); AS 14 — amalgamation; AS 21 — CFS (Ind AS 110); AS 26 — intangibles (Ind AS 38).
  • Key Ind AS / IFRS: 115 Revenue (five-step), 116 Leases (right-of-use), 109 Financial Instruments (ECL), 113 Fair Value, 103 Business Combinations.
  • IASC (1973) → IASB (2001); EU adoption 2005; USA stays on US GAAP (FASB).
  • India is converged, not fully adopted — carve-outs include Ind AS 21 forex option and Ind AS 103 common-control pooling.
  • Conceptual Framework: fundamental QC = relevance + faithful representation; enhancing = comparability, verifiability, timeliness, understandability.
  • ISSB issued IFRS S1 and S2 in 2023.