In the world of finance and accounting, it would be fundamental to understand the concept of accounting standards that might guide financial reporting. A country like India, like most countries, holds an ambition of aligning its financial reporting systems toward global norms; such alignment, more often than not, introduces the use of IFRS. However, India made the transition differently, and thus a set of standards is known as Indian Accounting Standards, abbreviated as IND AS. Some of the important key differences between accounting standards and IFRS form a discussion point to understand the definition, scope, and detailed comparison between Indian accounting standards and IFRS.
What Is IFRS?
The full form of IFRS is International Financial Reporting Standards published under the International Accounting Standards Board, and most of the financial statements worldwide are prepared on this set of standards. IFSA believes in transparency, accountability, and efficiency in its concept of financial markets for making or establishing a concept—a kind of common accounting language. The international comparison thus becomes understandable in both accounts from companies.
Today, IFRS is already adopted in more than 120 countries, including the European Union and Australia. Other countries like the United States operate under different standards such as GAAP (Generally Accepted Accounting Principles). Adoption of the IFRS will permit investors, regulators, and stakeholders to compare financial data and make informed decisions based on that data.
Got Questions Regarding What Is IFRS?
Click Here for a Free Counselling Session
What Is IND AS?
Indian Accounting Standards are the accounting standards developed and implemented by the Institute of Chartered Accountants of India and enforced through the Ministry of Corporate Affairs. So, IND AS is just a version of IFRS adapted to suit the surroundings of India’s law, taxes, and the prevailing economic needs of the country.
The Government of India adopted IND AS to align the accounting practice in India with the international system of accounting, keeping in view the country’s regulations and tax structure. Although the underlying principles of IND AS are closely aligned with IFRS, there are significant variations because of the unique features of India’s business and regulatory environment.
What Are the Key Differences Between IFRS and IND AS?
The following table highlights the main differences between IFRS and IND AS:
| Aspect | IFRS | IND AS |
| Development Body | Developed by the International Accounting Standards Board (IASB). | Developed by the Institute of Chartered Accountants of India (ICAI). |
| Application | Used globally in over 120 countries. | Primarily applicable to specified entities in India. |
| Regulatory Authority | Regulated by the IFRS Foundation. | Regulated by the Ministry of Corporate Affairs (MCA). |
| Revaluation Model | Allowed for all assets, including property, plant, and equipment. | Allowed only for certain assets like land and buildings. |
| First-time Adoption | IFRS 1 provides guidelines for first-time adoption. | IND AS 101 provides similar guidelines with additional requirements. |
| Leases | IFRS 16 mandates recognizing almost all leases on the balance sheet. | IND AS 116 follows IFRS 16 with minor differences in implementation. |
| Fair Value Measurement | Encourages fair value in various areas, including investments. | Focuses on fair value but allows more flexibility in certain situations. |
| Impairment of Assets | Uses a “one-step” approach for impairment testing. | Uses a “two-step” approach for impairment testing. |
| Revenue Recognition | IFRS 15 governs revenue recognition based on contracts with customers. | IND AS 115 aligns with IFRS 15 but has some differences in interpretation. |
| Borrowing Costs | Allows capitalization is directly attributable to a qualifying asset. | Similar provisions with additional details related to tax benefits. |
| Income Taxes | Specific guidelines for deferred tax assets and liabilities. | Includes Indian-specific adjustments related to taxation. |
| Financial Statements | Allows flexibility in presentation. | Requires specific formats as per Indian law. |
Why Are There Differences Between IFRS and IND AS?
The difference between IFRS and IND AS emanates from accommodating the economic, legal, and business environment of India. Whereas IFRS was drafted to become a truly international standard, IND AS is incorporating amendments necessary because of the existing tax statutes and related regulatory provisions of India.
For example, the accounting treatment of leases and financial instruments could be different due to local legal requirements. These changes would make the IND AS relevant to the financial economy of India, and the standards would also converge with international practice.
What Are the Critical Differences Between IFRS and IND AS?
The critical difference between IFRS and Indian accounting standards:
- Revaluation of Assets: IFRS allows revaluation for all assets, while IND AS restricts this to some categories.
- Testing Impairment: Whereas IFRS has a one-step approach, in the case of IND AS, the use is a two-step technique.
- Presentation of Financial Statements: IND AS prescribed formats as per Indian statutes, whereas IFRS course provides flexibility.
Examples of IND AS and IFRS
- Revenue Recognition: According to IFRS 15, revenues are recognized by customer contracts. Similar is the underlying principle for IND AS 115 but may vary in interpretation of performance obligation.
- Lease Accounting: IFRS 16 requires all leases to be brought onto the balance sheet. IND AS 116 is an identity match, but it contains some additional Indian provisions.
How Are IFRS and IND AS Implemented in India?
Indian Accounting Standard and IFRS have been implemented in a phased manner in India. Large companies and listed entities have to follow IND AS, and they have to ensure consistency with international standards, also considering the requirements of the local regulator. The phased implementation will allow smaller businesses to make a smooth transition.
What Are the Benefits of Convergence to IFRS and IND AS?
Convergence to IFRS and IND AS has many advantages:
- Global Comparability: The comparability of financial statements is extended and becomes globally comparable.
- Improved Transparency: Better clarity in financial reporting instills confidence among investors.
- Attracting Investments: Alignment to global standards invites foreign investments.
- Regulatory Compliance: Brings ease to international trade and financial regulations compliance.
What Are the Challenges in Convergence to IFRS and IND AS?
Issues to be faced in adopting IFRS and IND AS are:
- Training and Awareness: There is a need for extensive training of professionals to understand the new standard.
- System Overhaul: Companies will have to upgrade their accounting systems.
- Cost of Transition: New standards could mean costly and operational investments.
- Issues of Interpretation: When there are differences in interpretation, it will also lead to inconsistencies in application.
Planning to Pursue IFRS Accounting Career?
To Book Your Free Counselling Session
Conclusion
IND AS vs IFRS: This becomes very important for any business, professional, or investor to understand the difference between IFRS and IND AS. While both frameworks have been designed with an element of enhancing transparency and comparability, their differences reflect unique requirements existing in global and Indian contexts. By the bridging of standards, India moves toward better integration with world financial markets while retaining its identity.
FAQs on Difference Between IFRS and IND AS
What are the major differences between IND AS and IFRS?
The differences refer to asset revaluation, methods of impairment testing, and presentation formats of their statements.
What is the difference between IND AS and AS?
IND AS is in line with internationally accepted standards like IFRS, while AS represents the older set of standards of India, which are not aligned—and have limited alignment—with the rest of the world.
Are IFRS and IND AS the same?
No, though IND AS is based on IFRS, it embodies modifications to adapt it to India’s requirements.
What is the impact of IND AS adoption on Indian companies?
The adoption of IND AS enhances transparency, attracts foreign investment, and provides comparability globally.
How do IFRS and IND AS handle revenue recognition?
Although they are similar in principle under IFRS 15 and IND AS 115, the difference could arise in contract and performance obligation interpretations.
