Ind AS vs IFRS: Key Differences and Similarities

Ind AS (Indian Accounting Standards) are converged with IFRS (International Financial Reporting Standards), but they are not identical. Ind AS are issued by the Institute of Chartered Accountants of India (ICAI) and are mandatory for certain classes of companies under the Companies (Indian Accounting Standards) Rules, 2015. IFRS, issued by the International Accounting Standards Board (IASB), are used in over 140 jurisdictions globally. The primary difference is that Ind AS retain certain carve-outs and carve-ins from IFRS to align with Indian legal, economic, and regulatory requirements.

For example, Ind AS 115 on Revenue from Contracts with Customers is largely aligned with IFRS 15, but Ind AS includes additional guidance on accounting for government grants and certain industry-specific transactions. Similarly, Ind AS 16 on Property, Plant and Equipment permits the use of the cost model or revaluation model, but the revaluation model under Ind AS requires revaluations to be carried out with sufficient regularity to ensure carrying amounts do not differ materially from fair value—a requirement that is identical to IFRS but applied with Indian-specific guidance on frequency.

Under the Companies Act, 2013, and the Companies (Indian Accounting Standards) Rules, 2015, Ind AS are mandatory for all listed companies and certain unlisted companies based on net worth thresholds. Specifically, companies with a net worth of INR 250 crore or more must apply Ind AS. Additionally, holding companies, subsidiaries, joint ventures, and associates of such companies are also required to follow Ind AS. Banks, insurance companies, and NBFCs are also required to apply Ind AS as per directions from the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI).

IFRS, on the other hand, are not directly applicable in India. Indian companies that are subsidiaries of foreign parents or that list on foreign stock exchanges may prepare IFRS financial statements for consolidation or listing purposes, but their statutory financial statements under Indian law must be prepared in accordance with Ind AS or the existing Accounting Standards (AS) as applicable. The ICAI has clarified that Ind AS are "converged" with IFRS, not "adopted," meaning they are based on IFRS but with modifications.

Ind AS include several carve-outs from IFRS to address Indian legal and economic realities. One significant carve-out relates to Ind AS 109 on Financial Instruments. Under IFRS 9, entities can apply the expected credit loss (ECL) model for all financial assets. Ind AS 109 is largely aligned, but the RBI has issued specific guidelines for banks on ECL implementation, which may differ from the IFRS approach in terms of transition and disclosure requirements.

Another notable carve-out is in Ind AS 16 on Property, Plant and Equipment. IFRS permits the revaluation model for all classes of assets, but Ind AS restricts the revaluation model to certain assets and requires revaluations to be performed by a registered valuer as per the Companies Act, 2013. Additionally, Ind AS 23 on Borrowing Costs requires capitalization of borrowing costs directly attributable to qualifying assets, which is identical to IFRS, but Ind AS includes specific guidance on government grants related to borrowing costs.

Ind AS 20 on Accounting for Government Grants is a key area of divergence. IFRS allows grants to be recognized as income over the periods necessary to match them with related costs. Ind AS 20 is similar but includes specific provisions for grants from the government that are in the nature of promoters' contribution, which are credited to capital reserve rather than income. This is a carve-in from the earlier Indian GAAP.

Both Ind AS 115 and IFRS 15 are based on the same five-step model: identify the contract, identify performance obligations, determine the transaction price, allocate the transaction price, and recognize revenue when performance obligations are satisfied. However, Ind AS 115 includes additional guidance on principal versus agent considerations and warranties that is more detailed than IFRS 15. For instance, Ind AS 115 provides specific examples for software and telecom sectors, which are not present in IFRS 15.

Another difference is in the treatment of contract costs. IFRS 15 requires capitalization of incremental costs of obtaining a contract, such as sales commissions, and amortization over the contract period. Ind AS 115 is identical in principle, but the ICAI has issued implementation guidance that clarifies the treatment for Indian industries, such as real estate and construction, where contract periods may be longer. Additionally, Ind AS 115 requires disclosure of the aggregate amount of transaction price allocated to remaining performance obligations, which is similar to IFRS 15 but with a shorter time frame for disclosure.

Ind AS and IFRS have largely similar presentation requirements under Ind AS 1 and IAS 1, but there are specific differences. For example, Ind AS 1 requires the presentation of a statement of changes in equity showing total comprehensive income for the period, which is identical to IFRS. However, Ind AS 1 also requires the presentation of a balance sheet (now called "Statement of Financial Position") with specific line items mandated by Schedule III to the Companies Act, 2013. This includes separate disclosure of "Share Application Money Pending Allotment" and "Capital Reserve," which are not required under IFRS.

In terms of disclosure, Ind AS 24 on Related Party Disclosures requires disclosure of related party transactions for all entities, including government-related entities, with specific exemptions for state-controlled entities. IFRS 24 provides a partial exemption for government-related entities, but Ind AS does not have this exemption. Additionally, Ind AS 108 on Operating Segments requires disclosure of segment information for all entities, while IFRS 8 applies only to entities whose debt or equity instruments are traded in a public market. This means that unlisted Indian companies applying Ind AS must also provide segment disclosures, which is not required under IFRS.

If your company is required to apply Ind AS or is considering transitioning from IFRS, you should review the specific carve-outs and additional requirements under Ind AS. Given the complexity of the standards and the legal implications under the Companies Act, 2013, consult a qualified chartered accountant or a professional with expertise in Ind AS and IFRS to ensure compliance.

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This page provides preliminary information. It is not legal advice. For your matter, consult a qualified professional.