What is IND as in financial accounting?
Indian Accounting Standards (Ind ASs) are Standards prescribed under Section 133 of the Companies Act, 2013. Material Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements.
The Indian Accounting Standards (Ind AS), as notified under section 133 of the Companies Act 2013, have been formulated keeping the Indian economic & legal environment in view and with a view to converge with IFRS Standards, as issued by and copyright of which is held by the IFRS Foundation.
Indian Accounting Standard provides principles for recognition, measurement, treatment, presentation and disclosures of accounting transactions in financial statements prepared by any company. The primary objective of accounting standards is to harmonize the different accounting policies.
AS were rule-based, providing detailed guidance on specific accounting treatments. Ind AS adopts a more principles-based approach, focusing on the underlying substance of transactions rather than merely adhering to strict rules.
In the interest of data transparency, there are more elaborate disclosures by corporations to the MCA in the Ind AS taxonomy than there are in Indian GAAP. In fact, in INGAAP additional disclosures such as rate reconciliation, tax holidays and even joint ventures are not required.
The objectives of IND AS are as follows: 1. Uniform System: It aims to establish a unified accounting system by making all the companies follow the same manner of recording transactions, preparing financial statements, reporting financial statements, etc.
Impact of Ind AS
The reported financial statements of companies are likely to undergo significant changes. This will make the comparability between financials under revised accounting standards and those under Indian GAAP difficult.
Ind AS or Indian Accounting Standards govern the accounting and recording of financial transactions as well as the presentation of statements such as balance sheet and profit and loss account of a company in India.
It is largely based on IFRS, with some modifications to suit the Indian business environment and regulatory requirements. The adoption of Ind AS in India began in phases, with listed companies and specific categories of companies required to comply with Ind AS based on their size and other criteria.
Explanation: Ind-AS are principle-based accounting standards. Principle-based accounting standard refers to the type of accounting standard that provides general knowledge and guidance about accounting for some transactions and events.
What is IND as revenue?
Revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. This Standard identifies the circ*mstances in which these criteria will be met and, therefore, revenue will be recognised.
According to the Indian GAAP, the Consolidation of Accounts of subsidiary companies is not mandatory. However, if an enterprise presents their consolidated financial statements, they have to comply with AS 21. As per the US GAAP, Consolidation of results of Subsidiary Companies is mandatory.
Fair value at initial recognition: If another Ind AS requires or permits an entity to measure an asset or a liability initially at fair value and the transaction price differs from fair value, the entity shall recognise the resulting gain or loss in profit or loss unless that Ind AS specifies otherwise.
All companies listed on stock exchanges in India or outside India with a net worth of Rs. 250 crore or more and unlisted companies with a net worth of Rs. 500 crore or more are required to comply with Ind AS. This includes subsidiaries, joint ventures, and associates of such companies.
AS represents the traditional set of accounting standards issued by the Institute of Chartered Accountants of India (ICAI) before the introduction of Ind AS. These standards are more rule-based, providing specific guidelines for various accounting treatments.
International Financial Reporting Standards (IFRS) – as the name implies – is an international standard developed by the International Accounting Standards Board (IASB). U.S. Generally Accepted Accounting Principles (GAAP) is only used in the United States.
The three golden rules of accounting are (1) debit all expenses and losses, credit all incomes and gains, (2) debit the receiver, credit the giver, and (3) debit what comes in, credit what goes out. These rules are the basis of double-entry accounting, first attributed to Luca Pacioli.
Calculation of the net worth
Net worth = (Total paid-up share capital + reserves out of profit + securities premium account) - (accumulated losses + expenditure + miscellaneous expenditures which are written off). Net worth shall be calculated from the first audited financial statement.
Accounting Standard 3 deals with cash flow statement. This accounting standard accounts for information about changes in cash and cash equivalents of an entity during a particular period.
The International Financial Reporting Standards (IFRS) are globally acknowledged accounting standards. The Indian Accounting Standards (IND AS) are the Indian adaptation of the IFRS.
What is IND as related to financial instrument?
Ind AS 32 deals with the presentation of Financial instrument in the Balance Sheet. Typically, it is the Issuer who needs to decide whether the instrument is to be presented as financial liability or equity instrument. Irrespective the holder would always present it as financial asset.
Revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. This Standard identifies the circ*mstances in which these criteria will be met and, therefore, revenue will be recognised.
As of 2023, there are 28 accounting standards in India. What is the purpose of AS 9: Revenue Recognition? The objective of AS 9: Revenue Recognition is to explain how companies should document the money they get from sales, services, interest, royalties and dividends in their finances.
AS 26 permits recognition if the entity has contractual rights and control over such rights. Ind AS 38 permits recognition of intangible assets only if the entity has a contractual right over the intangible and control over such rights.
Only regulated and publicly traded businesses must adhere to GAAP. However, about one third of private companies choose to comply with these standards to provide transparency.
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