How Ind AS Differs from IFRS: A Detailed Look at Carve-Outs and Carve-Ins
Ind AS, while based on IFRS, includes key carve-outs and carve-ins to reflect India’s legal, regulatory, and economic environment, ensuring relevance for Indian businesses
Indian Accounting Standards (Ind AS) are India’s version of International Financial Reporting Standards (IFRS), adapted to suit the Indian legal and economic environment. Issued by the Institute of CharteredAccountants of India (ICAI) and notified by the Ministry of Corporate Affairs (MCA), Ind AS is largely aligned with International Financial Reporting Standards (IFRS)....
Indian Accounting Standards (Ind AS) are India’s version of International Financial Reporting Standards (IFRS), adapted to suit the Indian legal and economic environment. Issued by the Institute of CharteredAccountants of India (ICAI) and notified by the Ministry of Corporate Affairs (MCA), Ind AS is largely aligned with International Financial Reporting Standards (IFRS).
Full adoption was not considered feasible due to India’s specific legal framework, business practices, and market conditions. So, “carve-outs” (modifications to IFRS requirements) and “carve-ins” (additional provisions specific to Ind AS) were introduced to make the standards more relevant and practical for Indian entities.
Carve-Outs: Deviations from IFRS in Ind AS
Carve-outs are specific changes made to IFRS requirements to align with Indian regulations and economic realities. The table below summarizes key carve-outs:
| Aspect | IFRS Requirement | Ind AS Modification | Rationale |
| Amortization of Intangibles | IAS 38 restricts revenue-based amortization | Ind AS 38 allows it for toll road service concessions | Reflects the nature of toll road revenue streams in India |
| Functional Currency | IAS 21 focuses solely on the primary economic environment | Ind AS 21 includes guidance for multiple currencies | Helps Indian companies operating in diverse currency settings |
| Exchange Differences | IAS 21 mandates recognition in P&L | Ind AS 21 allows deferral in equity | Offers flexibility for long-term funding common in India |
| Fair Value Changes – Liabilities | IFRS 9 records its own credit risk in OCI | Ind AS 39 records it in P&L | Aligns with Indian market practices |
| Bargain Purchase Gain | IFRS 3 is recognized in P&L | Ind AS 103 requires OCI recognition unless justified | Reflects Indian accounting preference for capital reserve |
| Associates – Reporting Period | IAS 28 allows a 3-month difference | Ind AS 28 adds “unless impracticable” | Adds practical flexibility for Indian entities |
These carve-outs are essential for addressing ground realities in India. For instance, permitting revenue-based amortization of toll roads better represents the asset’s economic usage.
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Carve-Ins: Additions to Ind AS Not Found in IFRS
Carve-ins are enhancements or additional guidance included in Ind AS to deal with Indian-specific scenarios not covered in IFRS. The table below highlights some key carve-ins:
| Aspect | IFRS Approach | Ind AS Addition | Rationale |
| Dividends | IAS 10 requires disclosure | Ind AS 10 mandates liability recognition | Complies with Indian corporate law requirements |
| Right of Return | IFRS 15 includes refund and asset recovery | Ind AS 115 adds guidance for unconditional return rights | Addresses India’s retail return practices |
| Excise Duty | Not separately presented | Ind AS 115 requires a separate line item | Enhances transparency as per Indian tax law |
| Common Control Business Combinations | IFRS 3 excludes them | Ind AS 103 provides detailed guidance | Relevant for India’s family-owned and group structures |
| Comparatives in First-time Adoption | IFRS 1 requires full IFRS comparatives | Ind AS 101 allows optional presentation | Reduces transition burden for Indian companies |
| Actuarial Gains/Losses | IAS 19 offers accounting options | Ind AS 19 mandates recognition in OCI only | Aligns with Indian preference for consistent equity treatment |
| Post-Employment Benefit Discount Rate | Based on corporate bond yields | Based on government bond yields | Reflects an underdeveloped Indian corporate bond market |
| Real Estate Revenue | IFRS 15 follows the sale of goods model | Ind AS refers to the construction contract model | Better suited to Indian real estate transactions |
| Rate Regulated Entities | No guidance | Ind AS includes the ICAI note for revenue recognition | Addresses industry-specific regulatory scenarios in India |
These carve-ins ensure that financial reporting in India aligns with local laws, business practices, and industry needs. For example, mandating the recognition of dividends declared after the reporting period reflects a legal obligation under Indian law.
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Implications of Carve-Outs and Carve-Ins
These carve-outs and carve-ins have meaningful implications for financial reporting in India. By aligning financial statements more closely with Indian laws, business practices, and industry realities, they enhance the relevance and reliability of financial information for local stakeholders. For example, revenue-based amortization of toll road assets and specific guidance on dividend liabilities ensure that reports better reflect operational and legal realities.
At the same time, these differences may introduce challenges for international comparability. Investors comparing the financials of an Indian company using Ind AS with a global peer using IFRS may encounter variations in how certain transactions are recognized. Nonetheless, these adjustments are essential to ensure that the reporting framework is fit for purpose in the Indian context.
Expert Insights and Industry Perspectives
The development and implementation of Ind AS have been the subject of continuous debate and consultation among regulators, professionals, and industry leaders. While many appreciate its alignment with IFRS, there is also recognition of the need for contextual adaptations.
Meanwhile, industry leaders continue to call for capacity building and simplified guidance, especially for small and medium enterprises adopting Ind AS for the first time.
The consensus among professionals is clear: Ind AS is a well-thought-out framework tailored for Indian business needs, and with ongoing refinements, it continues to evolve in line with international best practices, without losing its domestic relevance.
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