Editorial Team – [2026] 184 taxmann.com 596 (Article)
Taxmann presents Practical Insights on Ind AS and SAs, a weekly series exclusively for Accounts and Audit Module subscribers of Taxmann.com, focusing on the practical application of Ind AS and Standards on Auditing through structured, issue-based analysis.
Each week features a focused topic with real-world illustrations. This edition examines the evolving framework for Ind AS implementation in India, with a focus on regulatory developments, conceptual foundations, and institutional mechanisms supporting its practical application across sectors.
1. Introduction
The development of financial reporting in India shows how national economic policies are aligned with global capital market expectations. The Ministry of Corporate Affairs (MCA), as the main regulator of companies, has implemented a phased move to Indian Accounting Standards (Ind AS), taking into account the size and complexity of different sectors. The Ind AS roadmap lays down three criteria to determine applicability for non-financial companies. A company must apply Ind AS if it meets any one or more of the following:
(a) the net worth criterion, where companies with a net worth of INR 500 crores or more (Phase 1, from 1 April 2016) or INR 250 crores or more (Phase 2, from 1 April 2017) are required to comply;
(b) the listing criterion, where all listed companies must follow Ind AS, with phase classification based on net worth; and
(c) the relationship criterion, where holding, subsidiary, associate, or joint venture companies of entities already covered under Ind AS are also required to apply Ind AS.
Once a company begins applying Ind AS based on these criteria, it must continue to follow Ind AS for all subsequent financial statements, even if it no longer meets the criteria. Further, a company required to comply with Ind AS must apply the same standards to both standalone and consolidated financial statements and cannot choose to apply Ind AS only to one of them. This transition also includes a structured roadmap for financial and non-financial companies, the process for first-time adoption under Ind AS 101, First Time Adoption of Indian Accounting Standards and its wider legal and regulatory implications.
This article explains the applicability and implementation of Ind AS in India, covering key principles, regulatory roadmap, and conceptual framework. It also highlights the role of ITFG in resolving practical implementation challenges.
2. General Instructions under the Ind AS Notification, 2025
The evolution of financial reporting in India represents a sophisticated alignment of national economic policy with global capital market expectations. The Ministry of Corporate Affairs (MCA), in its capacity as the primary regulator for corporate entities in India, has orchestrated a phased migration that accounts for the varying sizes and complexities of different industrial and financial sectors. It provides an exhaustive analysis of the regulatory roadmaps for non-financial and financial companies, the technical mechanics of first-time adoption governed by Ind AS 101, and the broader statutory implications of this transition.
The transition to Ind AS was catalysed by India’s commitment at the G20 summit to converge its national standards with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The objective was to create a single set of high-quality, global accounting standards that would enhance the comparability, transparency, and credibility of financial statements for international investors. While an initial attempt to converge was planned for 2011, several factors, including unresolved tax issues and the readiness of the corporate sector, led to a deferral.
The current regime was revitalised following the 2014 Union Budget speech by the finance minister, which emphasised the urgent need for a converged framework to put India at the centre stage of global financial reporting. Consequently, the MCA notified the Companies (Indian Accounting Standards) Rules, 2015, on February 16, 2015, providing the statutory foundation for a mandatory, phased rollout of 39 initial Ind AS standards. These standards are “converged” rather than “adopted” versions of IFRS, meaning they include specific “carve-outs” (departures from IFRS) and “carve-ins” (additions) tailored to the Indian economic and legal environment.
The said notification prescribes three General Instructions that govern the overall application of Ind AS:
(a) Instruction 1 – Supremacy of Law over Ind AS – Ind AS are designed to be in conformity with applicable laws. However, where a subsequent legislative amendment creates a conflict between a particular Ind AS and the law, the provisions of the law shall prevail. In such cases, financial statements must be prepared in conformity with the relevant law, notwithstanding the requirements of the applicable Ind AS.
(b) Instruction 2 – Materiality – Ind AS are intended to apply only to items that are material. Immaterial items are not required to be accounted for or disclosed in strict compliance with a particular standard, consistent with the overarching principle of materiality in financial reporting.
(c) Instruction 3 – Equal Authority of Bold and Plain Text – Each Ind AS comprises paragraphs in both bold italic type and plain type both carry equal authority. Paragraphs in bold italic denote the main principles of the standard. Every Ind AS must be read in the context of its stated objective and in accordance with these General Instructions.
These three instructions lay the foundational interpretive framework within which all individual Ind AS are to be read and applied.
3. Key Principles Governing the Applicability and Continuity of Ind AS under the Companies (Indian Accounting Standards) Rules 2015
The applicability of Indian Accounting Standards (Ind AS) under the Companies (Indian Accounting Standards) Rules, 2015, extends beyond mere threshold-based compliance and introduces a comprehensive framework governing the continuity, scope, and manner of financial reporting. Once an entity becomes subject to Ind AS i.e. whether through mandatory criteria or voluntary adoption, the implications are far-reaching, affecting not only the entity itself but also its group structure, including subsidiaries, associates, and joint ventures, both domestic and overseas.
In this context, certain key principles such as the irrevocable nature of Ind AS adoption, the reporting requirements for overseas entities, and the independent applicability of Ind AS to Indian subsidiaries of foreign parents play a crucial role in ensuring consistency, transparency, and uniformity in financial reporting across entities and jurisdictions.
(a) The Rule of Irrevocability – A critical legal provision of the Companies (Indian Accounting Standards) Rules, 2015, is the principle of irrevocability. Once an entity chooses to report its financial statements under Ind AS, whether voluntarily or mandatorily, it is prohibited from reverting to the previous IGAAP framework. This ensures consistency and prevents entities from switching back to IGAAP to avoid the more stringent measurement and disclosure requirements of Ind AS.
Even if a company starts following Ind AS due to mandatory Ind AS adoption criteria, it is required to follow Ind AS for perpetuity even if that company no longer meets any of the Ind AS applicability criteria.
(b) Financial Reporting for Overseas Entities – While an overseas subsidiary, associate, or joint venture may continue to prepare its standalone financial statements under the local laws of its specific jurisdiction, the reporting requirements for the Indian parent are distinct. If the Indian parent company falls under the Ind AS mandate either through meeting the net worth thresholds or by voluntary adoption, the overseas entity must provide a reporting package or financial statements aligned with Ind AS. This is essential for the parent company to fulfil its obligation of preparing Consolidated Financial Statements (CFS) in accordance with Ind AS.
(c) Reporting Obligations for Indian Subsidiaries of Foreign Parents – If an Indian company functions as a subsidiary, associate, or joint venture of a foreign corporation, it does not automatically default to the parent’s accounting framework. Instead, the Indian entity must assess its own Ind AS applicability criteria independently. If it meets the prescribed net worth thresholds (or opts for voluntary adoption), it is required to prepare its financial statements under Ind AS, notwithstanding the GAAP followed by its foreign parent.
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