Ind AS applicability: which companies must follow it.

What is Ind AS applicability?

Ind AS (Indian Accounting Standards) are the IFRS-converged accounting standards notified by the Ministry of Corporate Affairs (MCA) under the Companies (Indian Accounting Standards) Rules, 2015. Not every company applies them — the MCA rolled Ind AS out in phases, based on whether a company is listed and on a net worth threshold, with separate rules for NBFCs and for banks and insurers. "Ind AS applicability" is the question of which of these phases (if any) a given company falls into for a given financial year.

Get this wrong and the consequences are real: financial statements prepared under the wrong framework, an audit opinion qualified for non-compliance, and — because adoption is a one-way door — a company that mistakenly starts on Ind AS early cannot simply revert.

The phase-wise roadmap

The MCA roadmap works on two independent triggers for a company: (a) is it listed (or in the process of listing), and (b) what is its net worth as per the last audited balance sheet. A company that meets either trigger in a phase is in; so is any company that is a holding, subsidiary, joint venture or associate of a company already covered — regardless of that company's own size.

These exact effective dates and net worth figures are set by MCA notification and can be amended. Verify the current thresholds and applicable financial year on the MCA portal (Companies (Indian Accounting Standards) Rules, 2015, as amended) before applying this to a specific client — do not rely on a remembered figure for a borderline net worth case.

The holding/subsidiary pull-in rule — where practitioners slip

The most commonly missed part of the roadmap: once a parent company is covered by Ind AS under Phase I or Phase II, every holding, subsidiary, joint venture and associate company in that group is pulled in too — from the same phase as the parent, and irrespective of the subsidiary's own net worth. A ₹5 crore net worth subsidiary of a listed parent is on Ind AS from day one alongside the parent; it does not get to wait until it independently crosses ₹250 crore.

This also flows for consolidation purposes — if the parent prepares Ind AS consolidated financial statements, the subsidiaries being consolidated must report figures on an Ind AS basis, even if a subsidiary's own standalone financial statements (for a purpose outside the consolidation, e.g. a standalone regulatory filing where it is not otherwise covered) might not otherwise require it.

Once in, no going back — and other practical notes

• One-way adoption. Once a company applies Ind AS — whether because it crossed a threshold or because it got pulled in as a subsidiary — it must continue applying Ind AS for all subsequent years, even if net worth later drops below the threshold or the group relationship ends.
• Net worth is measured off the last audited balance sheet under the Companies Act, 2013 definition (paid-up capital + reserves out of profit and securities premium, less accumulated losses and unamortised deferred expenditure). Recompute this every year for a company sitting near a threshold — a single good year with a large securities premium or a bonus issue can tip a company over ₹250 crore or ₹500 crore.
• NBFCs run on their own clock. Don't assume an NBFC follows the general Phase I/II dates above — check the NBFC-specific row, and remember an NBFC's holding/subsidiary group is pulled in the same way as under the general rule.
• Banks and insurers follow their regulator, not MCA. RBI has deferred Ind AS implementation for scheduled commercial banks more than once; always confirm the live effective date from the regulator's current circular rather than assuming the last date you saw is still in force.
• First-time adoption needs its own workplan. A company crossing into Ind AS for the first time must prepare an opening Ind AS balance sheet (transition date), remeasure key items (financial instruments at fair value, leases under Ind AS 116, revenue under Ind AS 115) and reconcile equity and profit to the previous GAAP figures — this is a separate exercise from ongoing applicability and is usually where the real audit effort goes in year one.

Keeping books ready either way

Most companies below the Ind AS thresholds — the vast majority of TatvaBooks' user base — stay on the existing Accounting Standards and never need to think about this roadmap directly. Where TatvaBooks helps either way is the same: GST-correct books from the first invoice, a clean trial balance, and Schedule III-ready financial statements your audit team can start from — so if a client does cross into Ind AS territory later, the underlying books are already in good shape for the transition workpapers.

Frequently asked questions