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TMI BlogTHE COMPANIES (INDIAN ACCOUNTING STANDARDS) RULES, 2015 – AN OVERVIEWX X X X Extracts X X X X X X X X Extracts X X X X ..... THE COMPANIES (INDIAN ACCOUNTING STANDARDS) RULES, 2015 – AN OVERVIEW - By: - Mr. M. GOVINDARAJAN - Corporate Laws / IBC / SEBI - Dated:- 26-2-2015 - - The Central Government, in consultation with the National Advisory Committee on Accounting Standards and in exercise of the powers conferred by Section 133 read with Section 469 of the Companies Act, 2013 and Section 210A of the Companies Act, 1956 , made the Companies (Indian Accounting Standards) rules, 2015 . The said rules came into effect from 01.04.2015. Accounting Standard Rule 2(1)(a) defines the term Accounting Standards as the standards of accounting, or any addendum thereto for companies or class of companies as specified in Rule 3 which provides for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicability of Accounting Standards. The following are the Accounting standards: Indian Accounting Standard (Ind AS) 101 First-time Adoption of Indian Accounting Standards Indian Accounting Standard (Ind AS) 102 Share-based Payment Indian Accounting Standard (Ind AS) 103 Business Combinations Indian Accounting Standard (Ind AS) 104 Insurance Contracts Indian Accounting Standard (Ind AS) 105 Non-current Assets Held for Sale and Discontinued Operations Indian Accounting Standard (Ind AS) 106 Explora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for and Evaluation of Mineral Resources Indian Accounting Standard (Ind AS) 107 Financial Instruments: Disclosures Indian Accounting Standard (Ind AS) 108 Operating Segments Indian Accounting Standard (Ind AS) 109 Financial Instruments Indian Accounting Standard (Ind AS) 110 Consolidated Financial Statements Indian Accounting Standard (Ind AS) 111 Joint Arrangements Indian Accounting Standard (Ind AS) 112 Disclosure of Interests in Other Entities Indian Accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Standard (Ind AS) 113 Fair Value Measurement Indian Accounting Standard (Ind AS) 114 Regulatory Deferral Accounts Indian Accounting Standard (Ind AS) 115 Revenue from Contracts with Customers Indian Accounting Standard (Ind AS) 1 Presentation of Financial Statements Indian Accounting Standard (Ind AS) 2 Inventories Indian Accounting Standard (Ind AS) 7 Statement of Cash Flows Indian Accounting Standard (Ind AS) 8 Accounting Policies, Changes in Accounting Estimates and Errors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Accounting Standard (Ind AS) 10 Events after the Reporting Period Indian Accounting Standard (Ind AS) 12 Income Taxes Indian Accounting Standard (Ind AS) 16 Property, Plant and Equipment Indian Accounting Standard (Ind AS) 17 Leases Indian Accounting Standard (Ind AS) 19 Employee Benefits Indian Accounting Standard (Ind AS) 20 Accounting for Government Grants and Disclosure of Government Assistance Indian Accounting Standard (Ind AS) 21 The Effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Changes in Foreign Exchange Rates Indian Accounting Standard (Ind AS) 23 Borrowing Costs Indian Accounting Standard (Ind AS) 24 Related Party Disclosures Indian Accounting Standard (Ind AS) 27 Separate Financial Statements Indian Accounting Standard (Ind AS) 28 Investments in Associates and Joint Ventures Indian Accounting Standard (Ind AS) 29 Financial Reporting in Hyperinflationary Economies Indian Accounting Standard (Ind AS) 32 Financial Instruments: Presentation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian Accounting Standard (Ind AS) 33 Earnings per Share Indian Accounting Standard (Ind AS) 34 Interim Financial Reporting Indian Accounting Standard (Ind AS) 36 Impairment of Assets Indian Accounting Standard (Ind AS) 37 Provisions, Contingent Liabilities and Contingent Assets Indian Accounting Standard (Ind AS) 38 Intangible Assets Indian Accounting Standard (Ind AS) 40 Investment Property Indian Accounting Standard (Ind AS) 41 Agriculture Non applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility The provisions of this Rule are given exemption to the insurance companies, banking companies and non banking finance companies. The Indian Accounting Standards (Ind AS) are not applicable to those companies for preparation of their financial statements either voluntarily or mandatorily. Applicability Rule 3 provides that the accounting standards shall be the accounting standards to classes of companies specified in Rule 4. Rule 4(1)(i) provides for voluntary adoption of accounting standards. Rule 4(1)(i) provides that any company may comply with the Indian Accounting Standards for financial statements for accounting periods beginning on or after 01.04.2015 , with the comparatives for the period ending on 31.03.2015 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r thereafter. Rule 4(1)(ii) provides for the mandatory adoption of accounting standards by certain class of companies. The said rule provides that the following companies shall comply with the Indian Accounting Standards for the accounting periods beginning on or after 01.04.2016 with the comparatives for the periods ending on 31.03.2016, or thereafter: Companies whose equity of debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of ₹ 500 crore or more; Companies other than those covered in (a) and having net worth of ₹ 500 crore or more; Holding, subsidiary, joint venture or associate companies of companies covered in (a) and ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) as the case may be. Rule 4(1)(iii) also provides for the mandatory adoption of Accounting Standards by certain companies, as detailed below, for the accounting periods on or after 01.04.2017, with the comparatives for the periods ending on 31.03.2017 or thereafter: Companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of less than ₹ 500 crore; Companies other than in (a) and Rule 4(1)(ii) i.e., unlisted companies having net worth of ₹ 250 crores or more but less than ₹ 500 crore; Holding, subsidiary, joint venture or associate companies of companies covered under (a) and (b) Nothing in this Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 4(1), except clause (i) shall apply to the companies whose securities are listed or are in the process of being listed on SME exchange or on the institutional trading platform without initial public offering. Net worth of the Company The term net worth is defined under Rule 2(1)(f) as having the meaning assigned to it in Section 2(57) of the Companies Act. Section 2(57) of the Companies Act, 2013 defines the term Net worth as the aggregate value of the paid up share capital and all reserves created out of the profit and securities premium account after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not include, reserves created out of revaluation of assets, write back of depreciation and amalgamation. Rule 4(2) provides that for the purposes of calculation of net worth of companies the following principles shall apply: The net worth shall be calculated in accordance with the stand alone financial statements of the company as on 31.03.2014 or the first audited financial statements for accounting period which ends after that date; For companies which are not in existence on 31.03.2014 or an existing company falling under any thresholds specified in Rule 4(1) for the first time after 31.03.2014, the net worth shall be calculated on the basis for first audited financial statements ending after that date in respect of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it needs the thresholds specified in Rule 4(1). Obligation Rule 3(3) provides that a company which follows the Indian Accounting Standards as specified shall follow such standards only. Rule 4(3) provides that the standards to these rules once required to be complied with in accordance with these rules shall apply to both to stand alone financial statements and consolidated financial statements. The companies in which the Standards are applicable shall prepare their first set of financial statements in accordance with the standards effective at the end of its first Indian Accounting Standards reporting period. It is clarified that the companies preparing financial statements applying the standards for the accounting period be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginning on 01.04.2016 shall apply the Indian Accounting Standard effective for the financial year ending 31.03.2017. Overseas subsidiary, associate, joint venture and other similar entities of an Indian company may prepare its standalone financial statements in accordance with the requirements of the specific jurisdiction. Such company shall prepare its consolidated financial statements in accordance with the Standard either voluntarily or mandatorily if it meets the criteria. Indian company, which is a subsidiary, associate, joint venture and other similar entities of a foreign company shall prepare its financial statements in accordance with the standards either voluntarily or mandatorily if it meets the criteria. Any company opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the Standards voluntarily for its financial statements shall prepare its financial statements as per the Standards consistently. Once the Standards are applied voluntarily, it shall be irremovable and such companies shall not be required to prepare another set of financial statements in accordance with the Accounting Standards Rules, 2006 . Once a company starts following the Standards either voluntarily or mandatorily it shall be required to follow the Standards for all the subsequent financial statements even, if any of the criteria does not subsequently apply to it. Companies (Accounting Standards) Rules, 2006 Rule 3(2) provides that the Accounting Standards as in Annexure to the Companies (Accounting Standards) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rules, 2006 shall be the Accounting Standards applicable to the companies other than the classes of companies specified in Rule 4. A company which follows the Accounting standards specified in Annexure to the Companies (Accounting Standards) Rules, 2006 shall comply with such standards only and not the standards specified in Annexure to these rules. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... 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