Important Accounting Standards Every CA Should Know
Accounting standards, including Ind AS and AS, are essential tools that ensure consistent, transparent financial reporting in India, requiring CAs to master both for effective client service.
Accounting standards are the backbone of financial reporting, ensuring that the recognition, measurement, treatment, presentation, and disclosure of transactions are consistent and transparent across companies. In India, these standards are issued by the Institute of Chartered Accountants of India under the guidance of the Accounting Standards Board with oversight from the Ministry of Corporate Affairs. They play an important role in maintaining stakeholder trust and aligning Indian practices with global reporting norms.
Transition from AS to Ind AS
India’s shift from traditional Accounting Standards (AS) to Indian Accounting Standards (Ind AS) marks a significant alignment with International Financial Reporting Standards (IFRS). This transition began in 2016, driven by the increasing global presence of Indian companies and the need for comparability in financial statements across international markets.
The implementation of Ind AS has been phased:
- Phase I (April 1, 2016): Companies with net worth of Rs. 500 crore and above.
- Phase II (April 1, 2017): Companies with net worth between Rs. 250 crore and Rs. 500 crore.
- Phase III (April 1, 2018): Banks, NBFCs, and insurance companies with net worth of Rs. 500 crore and above.
- Phase IV (April 1, 2019): NBFCs with net worth between Rs. 250 crore and Rs. 500 crore.
A key aspect is that once a company adopts Ind AS, its subsidiaries, associates, and joint ventures must also adopt Ind AS for consistency in consolidated financial statements.
Despite the gradual shift to Ind AS, traditional AS continues to be applicable to smaller enterprises that fall outside the Ind AS thresholds, leading to a dual reporting framework in India. This means Chartered Accountants must remain proficient in both systems to serve diverse clients effectively.
Key Indian Accounting Standards (Ind AS)
Ind AS are principles-based standards aligned with IFRS, making them essential for companies with international dealings and for those seeking global investments. As of 2025, there are 40 Ind AS standards, excluding Ind AS 11.
Some of the most significant Ind AS standards include:
- Ind AS 1: Presentation of Financial Statements.
- Ind AS 2: Inventories.
- Ind AS 7: Statement of Cash Flows.
- Ind AS 8: Accounting Policies, Changes in Accounting Estimates and Errors.
- Ind AS 10: Events After the Reporting Period.
- Ind AS 16: Property, Plant, and Equipment.
- Ind AS 18/115: Revenue recognition (with Ind AS 115, Revenue from Contracts with Customers, being the updated standard).
- Ind AS 21: The Effects of Changes in Foreign Exchange Rates.
- Ind AS 33: Earnings per Share.
- Ind AS 36: Impairment of Assets.
These standards enhance transparency in financial reporting and support global comparability for investors and stakeholders.
Key Accounting Standards (AS)
Traditional Accounting Standards, issued by ICAI, continue to apply to enterprises not mandated to adopt Ind AS, primarily smaller and medium-sized enterprises. These standards are rule-based, providing clear guidelines for preparing financial statements.
Some critical AS standards include:
- AS 1: Disclosure of Accounting Policies.
- AS 2: Valuation of Inventories.
- AS 4: Contingencies and Events Occurring After the Balance Sheet Date.
- AS 5: Net Profit or Loss for the Period, Prior Period Items, and Changes in Accounting Policies.
- AS 9: Revenue Recognition.
- AS 10: Accounting for Fixed Assets.
- AS 11: The Effects of Changes in Foreign Exchange Rates.
- AS 15: Employee Benefits.
- AS 16: Borrowing Costs.
- AS 22: Accounting for Taxes on Income.
- AS 28: Impairment of Assets.
- AS 29: Provisions, Contingent Liabilities, and Contingent Assets.
These standards ensure smaller enterprises adhere to a structured and consistent reporting framework, enabling reliability in financial statements.
Applicability Based on Enterprise Level
The applicability of AS depends on enterprise size, categorized into three levels:
- Level I: Companies with turnover above Rs. 50 crore or borrowings above Rs. 10 crore and listed companies.
- Level II: Companies with turnover between Rs. 40 lakh and Rs. 50 crore or borrowings between Rs. 1 crore and Rs. 10 crore.
- Level III: All other companies below Level II thresholds.
Level I companies must comply fully with AS, but Level II and III enterprises enjoy certain exemptions to reduce compliance burdens while maintaining reporting integrity.
Comparative Perspective: Ind AS vs. AS
Ind AS and AS serve different but complementary roles in India’s financial reporting landscape:
- Ind AS: Principles-based, aligned with IFRS, catering to large and listed companies seeking international comparability.
- AS: Rule-based, suited for smaller enterprises with simpler operations and domestic reporting needs.
For example, Ind AS 1 corresponds to AS 1 but provides more detailed guidance aligned with global best practices, while Ind AS 2 aligns with AS 2 but requires additional disclosures for transparency.
Additional Standards and Considerations for CAs
Beyond Ind AS and AS, Chartered Accountants should also be familiar with:
- Generally Accepted Accounting Principles (GAAP): Relevant for clients dealing with US-based transactions.
- Standards on Auditing (SAs): Issued by ICAI to guide audit processes and ensure reliability in financial reporting.
- Industry-Specific Standards: Required for sectors like banking, insurance, and NBFCs, which have additional compliance requirements.
Practical Implications for Chartered Accountants
For CAs, understanding both Ind AS and AS is non-negotiable in today’s regulatory environment. They must:
- Apply Ind AS while preparing financial statements for large, listed, or internationally active clients.
- Use AS for smaller enterprises and for historical financial analysis.
- Ensure subsidiaries and associates adopt consistent standards when the parent company moves to Ind AS.
- Stay updated with ongoing amendments in standards, such as revenue recognition and impairment rules, to maintain compliance and advisory quality.
Conclusion
Accounting standards are not just regulatory requirements but tools for enhancing the transparency, comparability, and reliability of financial statements. As India aligns more closely with global financial practices through Ind AS while retaining AS for smaller enterprises, Chartered Accountants must remain versatile in applying both frameworks.
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