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Roadmap drawn up for IFRS convergence of Indian banks and insurers

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19 Jan 2016

The Indian Ministry of Corporate Affairs (MCA) has released a roadmap for the adoption of Indian Accounting Standards (Ind AS), which are largely converged with International Financial Reporting Standards (IFRSs), by Indian banking, insurance and non-banking finance companies. These companies were exempt from the general roadmap announced in January 2015.

In January 2015, the MCA released a roadmap requiring that companies with a net worth of Rs. 500 crore or more will have to mandatorily follow Ind AS from 1 April 2016. Corporates having a net worth of less than Rs. 500 crore but are listed, or in the process of getting listed, and companies with a net worth of Rs. 250 crore or more will have to follow the new norms from 1 April 2017. For banking, insurance and non-banking finance companies, which were exempt from the general roadmap, a separate one has now been drawn up that will see a phased approach with Ind AS adoption beginning from 1 April 2018. The details of the new road map are:

  • Banks and insurers:
    • Scheduled commercial banks (excluding regional rural banks) and insurance companies will be required to prepare Ind AS based financial statements for accounting periods beginning from 1 April 2018 onwards. Ind AS will be applicable to both consolidated and individual financial statements. 
    • Holdings, subsidiaries, joint ventures or associate companies of scheduled commercial banks (excluding regional rural banks) will be required to prepare Ind AS based financial statements for accounting periods beginning from 1 April 2018 onwards.
    • Urban cooperative banks and regional rural banks are not required to apply Ind AS and will continue to comply with the current accounting standards applicable to them.
  • Non-banking financial companies:
    • Phase I companies required to prepare Ind AS based financial statements for accounting periods beginning from 1 April 2018 onwards (consolidated and individual financial statements) are:
      • non-banking financial companies having net worth of Rs. 500 crores or more; and
      • holdings, subsidiaries, joint ventures or associate companies of the companies above other than those companies already covered under the general corporate roadmap.
    • Phase II companies required to prepare Ind AS based financial statements for accounting periods beginning from 1 April 2019 onwards (consolidated and individual financial statements) are:
      • non-banking financial companies whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth less than Rs .500 crores;
      • non-banking financial companies that are unlisted companies, having net worth of Rs. 250 crores or more but less than Rs. 500 crores; and
      • holdings, subsidiaries, joint ventures or associate companies of the companies above other than those companies already covered under the general corporate roadmap.
    • Non-banking financial companies having net worth below Rs. 250 crores and not covered under the above provisions shall continue to apply the current accounting standards applicable to them.

The roadmap also notes that only the banks, insurance companies, and non-banking financial companies coming under this roadmap may apply Ind AS, there is no voluntary adoption. However, Ind AS compliant financial statement data may of course be produced for the purposes of the preparation of consolidated financial statements by the parent/investor, as required by the parent/investor to comply with the existing requirements of law.

Please click to access the full MCA press release.

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