Indian Accounting Standards (IndAS)

•  The government and the Reserve Bank of India (RBI) may postpone the implementation of new accounting standards for banks because of the legislative changes and additional capital requirements the process would entail.
• Banks and non-banking financial companies are due to switch to Indian Accounting Standards (IndAS) from 1 April 2018. They currently follow Indian generally accepted accounting principles (GAAP) standards. Other corporate entities started complying with IndAS with effect from 1 April 2016.

About GAAP:

• India is changing its accounting standards from generally accepted accounting principles (GAAP) to Indian Accounting Standards (Ind-AS) from April 2016.
• Adoption of the new Indian Accounting Standards (IndAS) which bring in the concept of fair valuation and greater rigour on accounting for the substance of a transaction rather than its form.
• All listed companies (except those listed on the Small & Medium Enterprises Exchange) and unlisted companies with net worth exceeding R250 crore, including group companies, will be required to mandatorily adopt IndAS in a phased manner.
• These standards are set of accounting standards notified by the Ministry of Corporate Affairs which are converged with International Financial Reporting Standards (IFRS).
• This standard is followed by all companies other than the insurance companies, banking companies and NBFCs.

A complete set of financial statements under Ind AS comprises:

• A balance sheet as at the end of the period.
• Statement of profit and loss.
• Statement of changes in equity.
• A statement of cash flows.
• Notes including summary of accounting policies and other explanatory information.

About GAAP (Generally accepted accounting principles):

• GAAP is based on established concepts, objectives, standards and conventions that have evolved over time to guide how financial statements are prepared and presented.
• GAAP is set with the objective of providing information that is useful to investors, lenders, or others that provide or may potentially provide resources to a company or not-for-profit organization.
• A similar objective applies to financial reporting for state and local governments. An additional objective for governmental reporting is to provide information that enables taxpayers and others who use governmental financial statements to hold governments accountable.

By: Vishal