Understandings on the New Accounting Norms issued by MCA & NACAS

Reported by: |Updated: April 18, 2016

understanding on theSummary

The much awaited rules on the applicability of the converged IFRS (IND AS) and the final IND AS have been issued by the Ministry of Company Affairs. These rules clarify the following:

1.The accounting standards that would be applicable for companies qualifying a certain have been issued as an annexure to the rules.

2.The rules have clarified that the net worth of the stand-alone financial statements would be used for determining which companies would prepare financial statements under IND AS.

3.It has clarified that net worth would be as defined in section 2 of the Companies Act, 1956.

The Ministry of Company Affairs has issued the Companies (Indian Accounting standards) rules 2015 vide a notification dated 16 February 2015. The rules clarify on the certain aspects on the implementation of the converged IFRS (‘IND AS’) for the Indian Companies. These rules contain 39 accounting standards which would have to be followed by certain companies qualifying the criteria listed in the table below

Foraccounting periodscommencing from

April 1,2016

Foraccounting periodscommencing from

April 1,2017


listedorin the processofbeinglisted on anystock exchangein India oroutside India and havinga net worth ofmore than five hundred crore and above


listedor in the processofbeinglisted on anystock exchangein India oroutside India and havinga net worth oflessthanfive hundred crore and above

OtherCompanieshavinganetworthofrupees five

hundred croreormore

Unlisted Companieshavinga networth ofrupees

two hundredand fiftycrore ormore butlessthan five hundredcrore

Holding, subsidiary,jointventure orassociate

companiesofthe companies havinga paid up capitalofRupees five hundred crore andabove

Holding, subsidiary,jointventure orassociate

companiesofallthelistedcompaniesand unlisted companieshavinga paid upcapitalofRupees two

hundred andfiftycroreandabove butless thanfive hundred crore



All companies, however would have the option to voluntarily adopt IND AS for accounting periods commencing on or after April 1, 2015. The above is in line with the press release issued earlier by the Ministry of Company Affairs. However the following entities are specifically excluded or exempted even if they fall in the aforementioned criteria, unless they opt for voluntary adoption:

1.Companies whose securities are listed or in the process of being listed on SME exchange as referred to chapter XB on the institutional trading platform without initial public offering.

2.Insurance companies

3.Banking Companies

4.Non-banking finance companies

The rules have used the same definition of net worth as stated in clause 57 of section 2 of the Companies Act, 2013. As per section 2(57) of the Companies Act, 2014, net worth has been defined as follows:

Aggregate value of

  •  Paid up Share capital
  •  Securities premium account
  •  All other reserves created out of the profit and loss account

After deducting, Aggregate value of

  • Accumulated losses
  • Deferred expenditure, and
  • Miscellaneous expenditure not written off

Net worth does not include

  •   Reserves created out of revaluation of assets
  •   Write back of depreciation and
  •   Amalgamation

The net worth for the purposes of applying the standard would be calculated in accordance with the stand alone financial statements of the company on 31st March 2014 or the first audited financial statements for accounting period which ends after that date.

In case of companies which are not in existence on 31st March 2014 or an existing company which is falling under any of the aforementioned thresholds for the first time after 31st March 2014, the net worth would be calculated on the basis of first audited financial statements ending after that date in respect of which it meets the thresholds.

Further if an entity adopts IND AS , voluntary or mandatorily, it would be required to follow the IND ASs even if the net worth falls below the rupee 500 crore or rupee 250 crore or the entity get delisted.

Entities which are not required to adopt the IND ASs or do not opt for the standards voluntarily, would follow the accounting standards as specified in the Annexure to the Companies (Accounting standards) Rules 2006.

Charanjit Attra is an By IFRS Expert and the Executive Director of New Initiatives & Strategies, 3i Infotech Ltd.