Business Finance · Regulation of financial reporting of incorporated entities

Accounting Standards and Ind AS Convergence in India

Updated 11 October 2026 · Fact-checked

Accounting Standards (AS) are the older Indian rules for company accounts. Ind AS are Indian Accounting Standards converged with IFRS. A company follows Ind AS or AS depending on listing status and net worth thresholds. ICAI develops the standards, and the Government notifies them on the advice of NFRA. To solve a question, test applicability first.

Understand Accounting Standards and Ind AS Convergence

Accounting standards are rules that tell a company how to recognise, measure and present items in its accounts. They make accounts comparable across companies and years. Without them, each company could choose its own method and profits would be hard to compare.

India has two sets. Accounting Standards (AS) are the older set, notified under the Companies (Accounting Standards) Rules, 2021. Ind AS are Indian Accounting Standards, notified under the Companies (Indian Accounting Standards) Rules, 2015. Ind AS are based on, and largely aligned with, IFRS issued by the IASB. This is called convergence. Convergence is not the same as adoption. India kept some carve-outs where it chose to differ from IFRS.

Who follows which set depends on the company. Ind AS applies in phases. Broadly, it is mandatory for listed companies and for companies with net worth of ₹250 crore or more, plus their holding, subsidiary, joint venture and associate companies. Some listed companies on SME exchanges are outside this. Companies below these limits follow AS. A company that is not required to use Ind AS may choose to adopt it voluntarily. Once it does, it cannot go back. Check the current rules in your study material, as thresholds can change.

The roles are split. ICAI (Institute of Chartered Accountants of India) develops draft standards through its Accounting Standards Board and recommends them. NFRA (National Financial Reporting Authority) is the statutory body under the Companies Act 2013. It recommends accounting and auditing standards to the Central Government and oversees audit quality for specified companies. The Central Government (Ministry of Corporate Affairs) notifies the standards, which gives them legal force.

For an actuarial student, the point is simple. Reported profit, net worth and ratios depend on which standards were applied. Ind AS tends to use more fair value measurement than AS, so figures can differ for the same business.

Key rules to remember

Net worth test for Ind AS: Net worth ≥ ₹250 crore → Ind AS mandatory; Applies to companies not already covered by the listing rule. Holding, subsidiary, joint venture and associate companies of a covered company also follow Ind AS. Check the latest rules.
Listing rule: Listed (or in process of listing) on a recognised stock exchange, other than SME exchanges → Ind AS; Listing status brings the company in regardless of net worth. SME exchange listing alone does not.
Voluntary adoption rule: Voluntary Ind AS adoption → must continue; no return to AS; The choice is one-way. Once adopted, Ind AS applies to all later periods.
Standard-setting chain: ICAI / NFRA → recommend → Central Government (MCA) → notifies; Standards have legal force under the Companies Act 2013 only after notification.

How to solve Accounting Standards and Ind AS Convergence questions

Use this method for any question on which standards apply or who sets them.

1Identify the entity: is it a company under the Companies Act 2013, and is it listed or going to be listed?
2Check the exchange. Main board or other recognised exchange points to Ind AS. SME exchange alone does not.
3If unlisted, test net worth against the ₹250 crore threshold, as set by the current rules.
4Check group links. A holding, subsidiary, joint venture or associate of an Ind AS company also follows Ind AS.
5Conclude Ind AS or AS, and state that voluntary adoption is allowed but irreversible.
6If the question asks about roles, name ICAI as developer, NFRA as recommender and oversight body, and the Central Government as the notifying authority.
7If asked about differences, link them to convergence with IFRS and mention fair value and carve-outs.

Quickest way: Three-question applicability check

When to use it: Use it for MCQs that give a short company profile and ask which standards apply.

Listed or about to list on a non-SME exchange? If yes, Ind AS.
Net worth at or above ₹250 crore? If yes, Ind AS.
Part of a group with an Ind AS company? If yes, Ind AS. Otherwise AS.

Common mistakes in Accounting Standards and Ind AS Convergence

Saying NFRA notifies accounting standards.
NFRA is a high-profile regulator, so students assume it has the final say.
Fix: NFRA recommends. The Central Government notifies. ICAI develops draft standards.
Treating Ind AS as identical to IFRS.
The words converged and adopted sound alike.
Fix: Say Ind AS is converged with IFRS, with some carve-outs where India differs.
Applying Ind AS to a company only because it is large in turnover.
Students mix up turnover with net worth.
Fix: The test is net worth, not turnover or profit.
Forgetting group companies.
Students check only the company itself.
Fix: Always check whether its holding, subsidiary, joint venture or associate is covered.
Saying a company can switch back from Ind AS to AS.
Voluntary adoption seems like an optional choice that can be reversed.
Fix: Adoption is irreversible once made.

Worked examples

Example 1

An unlisted company has net worth of ₹180 crore. Its holding company is listed. Which standards must it follow? Give reasons.

Show the solution

The company is unlisted, so the listing rule does not apply to it directly.
Its net worth of ₹180 crore is below ₹250 crore, so the net worth test does not bring it in.
Its holding company is listed, so the holding company follows Ind AS.
A subsidiary of an Ind AS company must also follow Ind AS.

Answer: The company must follow Ind AS because its holding company is covered, even though its own net worth is below ₹250 crore.

Example 2

Explain who sets accounting standards in India and how they become binding on companies.

Show the solution

ICAI, through its Accounting Standards Board, develops draft standards, often based on IFRS for Ind AS.
NFRA, a statutory body under the Companies Act 2013, recommends accounting standards to the Central Government.
The Central Government, through the Ministry of Corporate Affairs, notifies the standards as rules under the Companies Act 2013.
Once notified, companies must follow them. This is why the Government, not ICAI, gives them legal force.

Answer: ICAI develops, NFRA recommends and the Central Government notifies. Notification makes the standards binding on companies.

Exam tips

Write the applicability test in order: listing, net worth, group link. Examiners award marks for each test.
Name each body with one verb: ICAI develops, NFRA recommends, Government notifies.
In written answers, mention carve-outs when you say convergence, to show you know it is not full adoption.
If the question gives numbers, quote the ₹250 crore threshold and note that it is net worth, not turnover.
Check the latest rules in your study material, since IAI may test the current position.

Practice questions from Regulation of financial reporting of incorporated entities

Accounting Standards and Ind AS Convergence in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Accounting Standards and Ind AS Convergence: frequently asked questions

What is the difference between Ind AS and AS in India?

AS are the older Indian standards. Ind AS are converged with IFRS and use more fair value measurement. A company's listing status, net worth and group links decide which set applies.

Does Ind AS apply if net worth is ₹250 crore?

Yes. Net worth of ₹250 crore or more brings a company under mandatory Ind AS. Its holding, subsidiary, joint venture and associate companies also follow Ind AS. Check the latest rules for any change.

What is the role of ICAI in setting accounting standards?

ICAI develops draft accounting standards through its Accounting Standards Board. It does not make them binding by itself. The Central Government notifies them, after NFRA's recommendation.

What does NFRA do?

NFRA is a statutory body under the Companies Act 2013. It recommends accounting and auditing standards to the Central Government. It also oversees audit quality for specified companies.