The Indian Accounting Standards (Ind AS) and the International Financial Reporting Standards (IFRS) are both frameworks for preparing financial statements, aimed at enhancing transparency, consistency, and comparability in financial reporting. Ind AS are largely converged with IFRS, but there are notable differences due to regulatory, economic, and business-specific conditions unique to India. Below is a comparison of the key differences between IFRS and Ind AS.

1. Conceptual Differences

• Convergence vs. Adoption:
  • IFRS: IFRS are globally recognized standards and are followed as issued by the International Accounting Standards Board (IASB).
  • Ind AS: Ind AS are not an adoption of IFRS but are largely converged with IFRS, incorporating modifications to fit India’s regulatory and economic environment.
• Governing Body:
  • IFRS: Issued by the International Accounting Standards Board (IASB).
  • Ind AS: Issued by the Ministry of Corporate Affairs (MCA) in India, based on IFRS with adaptations by the Institute of Chartered Accountants of India (ICAI).

2. Financial Instruments (Ind AS 109 vs. IFRS 9)

• Expected Credit Loss (ECL) Model:
  • IFRS: IFRS 9 mandates an expected credit loss model that requires entities to recognize ECL for all financial assets from the date of initial recognition.
  • Ind AS: While Ind AS 109 also follows the ECL model, certain modifications exist in its application for Indian companies due to specific banking regulations and market differences.
• Equity Instruments:
  • IFRS: Equity investments are generally measured at fair value, with an option to recognize changes in fair value through other comprehensive income (OCI) without reclassification to profit and loss upon sale.
  • Ind AS: Similar treatment as IFRS, but companies must elect this option irrevocably at initial recognition and cannot reclassify gains or losses.

3. Property, Plant, and Equipment (Ind AS 16 vs. IAS 16)

• Revaluation Model:
  • IFRS: IFRS allows the revaluation model, under which assets can be periodically revalued to fair value, with gains recognized in OCI.
  • Ind AS: While Ind AS 16 allows revaluation, it is less commonly practiced in India due to tax implications and complexities in valuation. Many Indian companies use the cost model.
• Capitalization of Borrowing Costs:
  • IFRS: Allows the capitalization of borrowing costs directly attributable to the construction of qualifying assets.
  • Ind AS: Ind AS 23 also allows capitalization, but certain regulatory limits may apply in India, especially for public sector companies.

4. Revenue Recognition (Ind AS 115 vs. IFRS 15)

• Contracts with Customers:
  • IFRS: IFRS 15 uses a five-step model to recognize revenue from contracts with customers and is based on the transfer of control.
  • Ind AS: Ind AS 115 follows the same five-step model but may involve different interpretations, particularly in industries like real estate and telecommunications due to regulatory guidance in India.
• Right to Refund:
  • IFRS: IFRS provides specific guidelines on recognizing a right of return asset and a refund liability.
  • Ind AS: Ind AS provides similar guidelines but includes additional considerations for refund liabilities in cases like government subsidies.

5. Leases (Ind AS 116 vs. IFRS 16)

• Lease Payments and Discount Rates:
  • IFRS: IFRS 16 requires lessees to recognize almost all leases on the balance sheet as both assets and liabilities. The discount rate applied is generally the interest rate implicit in the lease or the lessee’s incremental borrowing rate.
  • Ind AS: Ind AS 116 follows the same principle, but certain exemptions and practical expedients are provided specifically for smaller companies or certain lease types (e.g., leases in the public sector).
• Treatment of Leasehold Land:
  • IFRS: IFRS 16 does not differentiate leasehold land from other leases.
  • Ind AS: In India, land lease contracts with long-term periods (usually more than 99 years) are often classified as operating leases due to the legal treatment of land ownership, even though they may meet the finance lease criteria.

6. Consolidation (Ind AS 110 vs. IFRS 10)

• Control Definition and Voting Rights:
  • IFRS: IFRS 10 defines control based on power, exposure to variable returns, and the ability to use power to affect those returns, typically through voting rights.
  • Ind AS: Ind AS 110 also defines control similarly, but due to India’s specific requirements (such as holding company structures and sectoral restrictions), interpretation can vary slightly.
• Deferred Taxes in Consolidation:
  • IFRS: Requires recognition of deferred tax liabilities for temporary differences in business combinations.
  • Ind AS: While Ind AS 12 allows deferred taxes in consolidation, adjustments are often necessary based on Indian tax rules and treatment of assets and liabilities acquired in a business combination.

7. Presentation of Financial Statements (Ind AS 1 vs. IAS 1)

• OCI Classification:
  • IFRS: OCI is classified into items that will or will not be reclassified to profit and loss in the future.
  • Ind AS: Ind AS 1 allows for a similar classification, but some reclassification requirements (e.g., gains or losses on defined benefit plans) are adapted to Indian-specific regulatory guidelines.
• Balance Sheet Terminology:
  • IFRS: Terms like “Statement of Financial Position” are commonly used.
  • Ind AS: Uses terms like “Balance Sheet” and “Statement of Profit and Loss,” which are familiar to Indian users.

8. Business Combinations (Ind AS 103 vs. IFRS 3)

• Accounting for Common Control Transactions:
  • IFRS: IFRS 3 does not provide specific guidance on accounting for business combinations under common control.
  • Ind AS: Ind AS 103 includes specific provisions for common control transactions, requiring pooling of interest method, which is frequently used in India for transactions between entities under common control (e.g., family-owned businesses).
• Bargain Purchase Gains:
  • IFRS: Requires immediate recognition of bargain purchase gains in profit and loss.
  • Ind AS: Recognizes bargain purchase gains as capital reserves instead of recognizing them directly in profit and loss.

9. Fair Value Measurement (Ind AS 113 vs. IFRS 13)

• Fair Value Hierarchy and Disclosures:
  • IFRS: IFRS 13 prescribes a fair value hierarchy and detailed disclosure requirements.
  • Ind AS: Ind AS 113 follows similar guidance but may include modified disclosures tailored to the Indian regulatory environment.
• Valuation Techniques:
  • IFRS: Uses valuation techniques based on exit price, market, cost, or income approaches.
  • Ind AS: Generally similar but often incorporates additional guidance for industries like real estate and financial services due to India’s regulatory requirements.

10. Agriculture (Ind AS 41 vs. IAS 41)

• Recognition of Agricultural Produce:
  • IFRS: IAS 41 requires biological assets to be measured at fair value less costs to sell, with changes recognized in profit and loss.
  • Ind AS: Ind AS 41 allows fair value but has additional guidance to address practical challenges in measuring agricultural produce in India, particularly for small and medium-sized agricultural businesses.

11. Intangible Assets (Ind AS 38 vs. IAS 38)

• Research and Development Costs:
  • IFRS: Costs in the development phase of intangible assets can be capitalized if specific criteria are met.
  • Ind AS: Similar to IFRS, but due to Indian tax laws and regulatory guidance, more specific disclosures may be required for certain industries.
• Amortization and Useful Life:
  • IFRS: IAS 38 provides guidance on the amortization and indefinite useful life of intangibles.
  • Ind AS: Ind AS 38 has similar guidance, but regulatory guidance may affect amortization treatment in sectors like pharmaceuticals and software in India.

Conclusion

While Ind AS and IFRS share a common foundation and aim to provide consistency in financial reporting, Ind AS includes specific modifications to address India’s economic, regulatory, and business environment. Key differences exist in areas like the treatment of common control transactions, government grants, and financial instruments, which are shaped by India’s distinct financial and regulatory requirements. As Ind AS continues to evolve, further alignment with IFRS is anticipated, but some differences will likely remain to accommodate India’s unique needs.