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Financial Reporting · Introduction to Indian Accounting Standards

Applicability of Ind AS to Companies

Updated 5 October 2026

Ind AS applies by listing, net worth and group links under the Companies (Indian Accounting Standards) Rules, 2015. From 1 April 2016: listed or in-process-of-listing companies with net worth of ₹500 crore or more. From 1 April 2017: other listed or in-process-of-listing companies (not SME exchange) and unlisted companies with net worth of ₹250 crore or more.

Understand Applicability of Ind AS to Companies

Ind AS are not applied by every company. The Ministry of Corporate Affairs decided which companies must follow them through a phased roadmap in the Companies (Indian Accounting Standards) Rules, 2015. Companies outside the roadmap follow the Accounting Standards under the Companies (Accounting Standards) Rules, 2021.

The roadmap rests on three tests: listing status, net worth, and group relationship. Listing asks whether equity or debt securities are listed, or in the process of listing, on any stock exchange in India or outside. Net worth is the size test. Group relationship pulls in the holding, subsidiary, joint venture and associate companies of a company that is covered.

For companies other than NBFCs, the roadmap had two phases. In the first phase, from 1 April 2016, listed or in-process-of-listing companies with net worth of ₹500 crore or more were covered. In the second phase, from 1 April 2017, all other listed or in-process-of-listing companies and unlisted companies with net worth of ₹250 crore or more were covered. In each phase, the holding, subsidiary, joint venture and associate companies of the companies covered in that phase were also covered in that phase. Companies listed only on an SME exchange are not required to adopt Ind AS.

NBFCs have their own, later roadmap. Phase I from 1 April 2018 covered NBFCs with net worth of ₹500 crore or more. Phase II from 1 April 2019 covered listed or in-process-of-listing NBFCs with net worth below ₹500 crore and unlisted NBFCs with net worth of ₹250 crore or more but below ₹500 crore. Unlisted NBFCs below ₹250 crore continue with Accounting Standards. Banks and insurers are governed by arrangements from their own regulators, so do not apply the company roadmap to them without a stated rule.

Adoption can also be voluntary. Any company not covered by the mandatory roadmap may choose Ind AS for accounting periods beginning on or after 1 April 2015. Once a company applies Ind AS, mandatorily or voluntarily, Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015 requires it to follow Ind AS for all subsequent financial statements. This holds even if the criteria later cease to apply to it, for example when its net worth falls below the threshold.

Key rules to remember

Net worth (Section 2(57), Companies Act, 2013)
Net worth = Paid-up share capital + Reserves created out of profits + Securities premium − Accumulated losses − Deferred expenditure − Miscellaneous expenditure not written off
Reserves from revaluation of assets, write-back of depreciation and amalgamation are excluded. Use standalone figures.
Net worth testing date
Original phases (Phase I and Phase II): standalone net worth as on 31 March 2014, or as per the first audited financial statements for an accounting period ending on or after that date. Company not covered earlier that later crosses the threshold: standalone net worth as on the last day of the preceding accounting year.
Use the 31 March 2014 or first-audited-statements test for the original phases. Use the preceding-year-end test only for a company that was not covered earlier and later crosses the threshold. Do not test at a date you choose.
Mandatory – non-NBFC, Phase I (from 1 April 2016)
Listed or in process of listing and net worth ≥ ₹500 crore, plus its holding, subsidiary, JV and associate companies (covered in the same phase)
Voluntary adopters from 1 April 2015 are a separate category.
Mandatory – non-NBFC, Phase II (from 1 April 2017)
(a) All other listed or to-be-listed companies (not on SME exchange), (b) unlisted companies with net worth ≥ ₹250 crore, (c) holding, subsidiary, JV and associate companies of (a) and (b)
Unlisted below ₹250 crore with no group link stays on Accounting Standards unless it opts in.
Mandatory – NBFCs
From 1 April 2018: net worth ≥ ₹500 crore. From 1 April 2019: listed or in-process-of-listing NBFCs with net worth < ₹500 crore; unlisted NBFCs with net worth ≥ ₹250 crore but < ₹500 crore
Group companies (holding, subsidiary, JV, associate) of covered NBFCs are also covered. Unlisted NBFCs below ₹250 crore stay on AS.
Voluntary adoption and continuity
Voluntary: accounting periods beginning on or after 1 April 2015. Once a company is covered, mandatorily or voluntarily, Ind AS continues for all subsequent financial statements (Rule 4, Companies (Indian Accounting Standards) Rules, 2015)
There is no switch back to Accounting Standards, even if net worth later falls or the original criteria cease to apply.

How to solve Applicability of Ind AS to Companies questions

Use the same sequence for any applicability question. It stops you missing group links and the NBFC track.

  1. 1Identify the entity type: ordinary company, NBFC, bank or insurer. Apply the NBFC roadmap only to NBFCs, and note that banks and insurers follow their regulators.
  2. 2Check listing status: are equity or debt securities listed or in process of listing in India or abroad? Note if the listing is only on an SME exchange.
  3. 3Compute net worth from standalone figures using the Section 2(57) definition. Exclude revaluation reserve, and deduct accumulated losses and deferred or miscellaneous expenditure not written off.
  4. 4Compare with the thresholds for the correct track: ₹500 crore and ₹250 crore, and map the result to the phase and the date.
  5. 5Check group links: is the company a holding, subsidiary, joint venture or associate of a covered company? If yes, it is covered whatever its own size.
  6. 6Check for earlier adoption or continuity: has the company already adopted Ind AS, voluntarily or mandatorily? If yes, it stays on Ind AS even if net worth has fallen.
  7. 7If no mandatory rule applies, state that the company follows Accounting Standards but may adopt Ind AS voluntarily, with no return to AS.
  8. 8Write the conclusion with the reason: the rule, the facts and the answer, and name the Rules and the applicable date.

Quickest way: Four-question ladder

When to use it: Use this for case-scenario MCQs where you have about a minute per question.

  1. Already on Ind AS (voluntary or mandatory)? If yes, answer: Ind AS continues.
  2. Is any group company covered (holding, subsidiary, JV, associate)? If yes, answer: covered.
  3. Is it listed, outside SME exchange? If yes, covered. If unlisted, is net worth ≥ ₹250 crore? If yes, covered.
  4. For an NBFC, use the NBFC thresholds (₹500 crore and ₹250 crore) instead. If nothing applies, answer: Accounting Standards, with voluntary Ind AS possible.

Common mistakes in Applicability of Ind AS to Companies

  • Including revaluation reserve in net worth.

    Students add all reserves shown in the balance sheet.

    Fix: Include only reserves created out of profits and securities premium. Exclude revaluation reserve, write-back of depreciation and amalgamation reserves.

  • Saying a small subsidiary is exempt because its own net worth is below ₹250 crore.

    Students apply the size test to every company alone.

    Fix: Check the group test first. A holding, subsidiary, JV or associate of a covered company must also adopt Ind AS.

  • Saying a company can revert to Accounting Standards after its net worth falls below the threshold.

    Students treat the threshold as an annual test.

    Fix: Once Ind AS applies, it applies to all subsequent periods. The threshold decides entry, not exit.

  • Applying the general company thresholds to NBFCs.

    The ₹500 crore and ₹250 crore figures look the same, so the dates get mixed up.

    Fix: Keep two tracks. Companies: 2016-17 and 2017-18 phases. NBFCs: 2018-19 and 2019-20 phases, with different listed and unlisted conditions. NBFC Phase II covers listed or in-process-of-listing NBFCs with net worth below ₹500 crore, and unlisted NBFCs with net worth of ₹250 crore or more but below ₹500 crore.

  • Treating SME-exchange-listed companies as mandatorily covered.

    Students stop at the word listed.

    Fix: Companies listed only on an SME exchange are not required to adopt Ind AS. Check which exchange the case names.

  • Confusing voluntary adoption with a free choice of standards.

    Students think the company can pick individual Ind AS.

    Fix: Voluntary adoption means adopting all applicable Ind AS, not selected standards, and the choice cannot be reversed.

Worked examples

Example 1

Alpha Ltd is unlisted and has no holding, subsidiary, JV or associate that follows Ind AS. Its standalone figures: paid-up share capital ₹120 crore, reserves created out of profits ₹90 crore, securities premium ₹40 crore, revaluation reserve ₹30 crore, accumulated losses ₹25 crore, deferred expenditure not written off ₹5 crore. Is Ind AS mandatory for Alpha Ltd?

Show the solution
  1. Entity type: an ordinary company, unlisted. The relevant test is the ₹250 crore net worth test.
  2. Compute net worth using Section 2(57), from standalone figures at the relevant testing date: 120 + 90 + 40 = 250.
  3. Deduct accumulated losses and deferred expenditure: 250 − 25 − 5 = 220. Revaluation reserve of ₹30 crore is excluded.
  4. Compare: ₹220 crore is below ₹250 crore.
  5. Group check: no covered group company, and no prior adoption of Ind AS.

Answer: Net worth is ₹220 crore, which is below ₹250 crore. Ind AS is not mandatory for Alpha Ltd, which follows Accounting Standards. It may adopt Ind AS voluntarily, but if it does, it cannot revert to Accounting Standards.

Example 2

Beta Ltd is listed on the main board of a stock exchange. Its standalone net worth as on 31 March 2014 (the testing date) is ₹320 crore. Its subsidiary Gamma Ltd is unlisted with net worth of ₹40 crore. Its holding company Delta Ltd is unlisted with net worth of ₹30 crore. Which companies must follow Ind AS? Later, after Beta has adopted Ind AS, Beta's net worth falls to ₹200 crore. What is the effect?

Show the solution
  1. Beta Ltd: it is listed on the main board, so it is covered by the roadmap. The net worth does not decide coverage, only the phase. It is tested on standalone figures as on 31 March 2014 (or the first audited financial statements for a period ending on or after that date): ₹320 crore. This is below ₹500 crore, so Beta falls in Phase II (from 1 April 2017), which covers listed companies not covered in Phase I.
  2. Gamma Ltd: its own net worth is below ₹250 crore, but it is a subsidiary of a covered company, so it is covered in the same phase as Beta, Phase II.
  3. Delta Ltd: below ₹250 crore, but it is the holding company of a covered company, so it is covered in the same phase as Beta, Phase II.
  4. Transition: Beta, Gamma and Delta adopt Ind AS for accounting periods beginning on or after 1 April 2017. The first Ind AS reporting period is 2017-18, and Ind AS 101 requires comparative information, so the transition date is 1 April 2016 and 2016-17 comparatives are presented.
  5. Later fall in net worth: the fall to ₹200 crore happens after Beta has adopted Ind AS. It is a later event and does not change the testing at 31 March 2014. Under Rule 4, a company that has adopted Ind AS must continue with it for all subsequent financial statements, so the fall is irrelevant. Beta is also covered anyway because it is listed.

Answer: All three companies, Beta, Gamma and Delta, must follow Ind AS in Phase II, for accounting periods beginning on or after 1 April 2017, with comparatives for 2016-17 under Ind AS 101. Beta is covered because it is listed, and its net worth of ₹320 crore at 31 March 2014 only places it in Phase II. Gamma and Delta are covered through the group link, in the same phase. The later fall to ₹200 crore, which occurs after Beta has adopted Ind AS, has no effect, because once Ind AS applies it continues.

Exam tips

  • Write the rule first, then the facts, then the conclusion. A one-line answer such as covered or not covered loses marks without the reason.
  • In net worth computations, show each add and deduct line. Show that revaluation reserve is excluded, since examiners often plant it as a trap.
  • Always check group links and prior adoption before concluding that a small company is exempt.
  • Keep the company and NBFC roadmaps separate, and state the date from which Ind AS applies in your answer.
  • In MCQs, read whether the listing is on the main board or an SME exchange, and whether the figures are standalone.

Practice questions from Introduction to Indian Accounting Standards

Applicability of Ind AS to Companies: frequently asked questions

Is Ind AS applicable to a company with net worth of ₹250 crore?

For an unlisted company that is not an NBFC, yes. Net worth of ₹250 crore or more brings it under Ind AS. The test uses standalone net worth as on 31 March 2014 or the first audited financial statements for a period ending on or after that date, and the preceding year-end for later cases. Listed companies are covered irrespective of net worth, other than SME exchange listings.

Does Ind AS apply to unlisted NBFCs?

Only above a size. Unlisted NBFCs with net worth of ₹500 crore or more were covered from 1 April 2018, and those with ₹250 crore or more but below ₹500 crore from 1 April 2019. Unlisted NBFCs below ₹250 crore continue with Accounting Standards.

What is the difference between mandatory and voluntary adoption of Ind AS?

Mandatory adoption is triggered by the roadmap: listing, net worth or group links. Voluntary adoption is a choice by a company outside the roadmap, for periods beginning on or after 1 April 2015. In both cases the company must continue with Ind AS and cannot go back to Accounting Standards.

If net worth falls below the limit after adopting Ind AS, can the company stop using it?

No. Once Ind AS applies, it applies to all subsequent financial statements. The net worth threshold works only as an entry condition.

Do subsidiaries of an Ind AS company also need to follow Ind AS?

Yes. Holding, subsidiary, joint venture and associate companies of a covered company must also follow Ind AS, whatever their own size or listing status.