Financial Accounting · Introduction to Accounting Standards (GAAP, AS and Convergence to Ind AS)

Convergence to Ind AS in India: Roadmap and Applicability

Q: What is the difference between convergence and adoption of IFRS?

Adoption means using IFRS exactly as issued. Convergence means aligning your national standards with IFRS but keeping changes needed for local conditions. India followed convergence, so Ind AS contain carve-outs.

Q: Who must follow Ind AS under the roadmap?

Companies in the roadmap phases follow Ind AS. These are companies with net worth of ₹500 crore or more, listed companies, and unlisted companies with net worth of ₹250 crore or more, along with their holding, subsidiary, associate and joint venture companies. Banks, insurers and NBFCs follow separate roadmaps.

Q: What do companies outside the Ind AS roadmap follow?

They follow the Accounting Standards notified in the Companies (Accounting Standards) Rules, 2021. Non-SMCs comply in full. SMCs get relaxations, with AS 17 not applicable to them at all.

Q: Why does net worth matter for Ind AS?

India phased in Ind AS so that larger companies moved first and smaller ones got more time. Net worth is the size test the MCA used for unlisted companies. Listed companies are covered by the roadmap whatever their net worth, except those listed only on SME exchanges.

Updated 10 October 2026 · Fact-checked

Convergence to Ind AS means India aligned its accounting standards with IFRS but kept changes for Indian conditions, instead of copying IFRS word for word. Ind AS applies in phases, based on listing status and net worth thresholds of ₹250 crore and ₹500 crore. Other companies follow AS. To solve questions, test listing, net worth, group links and entity type.

Understand Convergence to Ind AS in India

India has two sets of standards for companies. Companies that are not covered by the Ind AS roadmap follow the Accounting Standards (AS) notified in the Companies (Accounting Standards) Rules, 2021. Companies covered by the roadmap follow the Indian Accounting Standards (Ind AS), which are based on IFRS.

Convergence means bringing your national standards close to IFRS so that financial statements are comparable worldwide, while allowing changes where Indian law, regulation or conditions need them. These changes are called carve-outs or carve-ins. Adoption means taking IFRS as issued, with no change. India chose convergence, not adoption. Ind AS are therefore similar to IFRS but not identical.

India did not switch every company on one date. The Ministry of Corporate Affairs (MCA) set a roadmap in phases. The test is mainly listing status and net worth. Phase I began in the year 2016-17 (voluntary from 2015-16): companies with net worth of ₹500 crore or more, plus listed companies and unlisted companies in their groups as holding, subsidiary, associate or joint venture. Phase II began in 2017-18: all other listed or soon-to-be-listed companies (not on SME exchanges), and unlisted companies with net worth of ₹250 crore or more but below ₹500 crore, with their group entities. Banks, insurance companies and NBFCs have separate roadmaps set by their regulators and the MCA. Learn the exact thresholds as taught in your ICMAI study material.

Companies outside the roadmap continue with AS. Within AS, the Companies (Accounting Standards) Rules, 2021 give relief to a Small and Medium Sized Company (SMC). An SMC is not listed or in the process of listing, is not a bank, financial institution or insurance company, has turnover (excluding other income) not above ₹250 crore and borrowings not above ₹50 crore in the immediately preceding accounting year, and is not a holding or subsidiary of a company that is not an SMC. Companies that are not SMCs are Non-SMCs and must comply in full. AS 17 Segment Reporting does not apply to SMCs, and AS 15, 19, 20, 28 and 29 carry partial relaxations.

Why does this matter for your accounts? Ind AS lean towards fair value and economic substance. AS lean towards historical cost and legal form. The ICAI Framework also notes that compliance with standards, including disclosure of accounting policies, helps comparability (paragraph 40). The Framework (paragraphs 105 and 106) explains that profit is the amount over and above what is needed to maintain capital, whether physical or financial capital maintenance is used. Ind AS and AS both build on this Framework.

Key rules to remember

Convergence vs adoption: Convergence = IFRS-aligned standards with Indian changes; Adoption = IFRS as issued, no change; India followed convergence. Ind AS are not a word-for-word copy of IFRS.
Phase I (Ind AS mandatory from 2016-17): Net worth ≥ ₹500 crore (listed or unlisted) + their holding, subsidiary, associate and JV companies; Voluntary adoption was allowed from 2015-16. Also covers listed companies with net worth of ₹500 crore or more.
Phase II (Ind AS mandatory from 2017-18): All other listed or soon-to-be-listed companies (not on SME exchanges) + unlisted companies with net worth ≥ ₹250 crore but < ₹500 crore + their group entities; Listed companies are covered whatever their net worth, except those listed only on SME exchanges.
Companies outside the roadmap: Follow AS notified in the Companies (Accounting Standards) Rules, 2021; Unlisted companies with net worth below ₹250 crore that are not group entities of an Ind AS company usually come here. Banks, insurers and NBFCs follow their own roadmaps.
SMC test (all five conditions must hold): Not listed or in process of listing; not a bank, financial institution or insurer; turnover (excluding other income) ≤ ₹250 crore; borrowings ≤ ₹50 crore; not holding or subsidiary of a non-SMC; Turnover and borrowings are tested for the immediately preceding accounting year. Conditions are checked as at the end of the relevant accounting period.
AS 17 and SMCs: AS 17 Segment Reporting: not applicable to SMCs in its entirety; Other relaxations for SMCs are partial, for AS 15, 19, 20, 28 and 29.

How to solve Convergence to Ind AS in India questions

Use this order for any question on convergence, applicability or AS versus Ind AS.

1Read the question and mark what is asked: a definition, a roadmap or applicability decision, a comparison, or an SMC test.
2For an applicability question, note the company's listing status, net worth and whether it is a bank, insurer or NBFC, since those follow separate roadmaps.
3Check group links. A holding, subsidiary, associate or joint venture of an Ind AS company must also follow Ind AS.
4Apply the phase thresholds: net worth of ₹500 crore or more points to Phase I; listed companies and net worth of ₹250 crore to below ₹500 crore point to Phase II. If none applies, the company follows AS.
5If the company follows AS, run the five-point SMC test using turnover (excluding other income), borrowings and listing status, and state which relaxations follow.
6For a comparison question, write in a two-column style of points: basis of measurement, financial instruments, leases, revenue, presentation. Give one clear contrast each.
7Finish with a one-line conclusion naming the standards applicable and the reason.

Quickest way: Four-question applicability check

When to use it: Use for MCQs and short applicability cases where you have under two minutes.

Is it a bank, insurer or NBFC? If yes, apply its separate roadmap and stop.
Is it listed (not only on an SME exchange) or in the process of listing? If yes, Ind AS from Phase II at the latest.
Is net worth ₹250 crore or more? ₹500 crore or more is Phase I; ₹250 crore to below ₹500 crore is Phase II.
Is it a holding, subsidiary, associate or JV of an Ind AS company? If yes, Ind AS. If all answers are no, follow AS and test SMC status.

Common mistakes in Convergence to Ind AS in India

Saying India has adopted IFRS.
Ind AS look so close to IFRS that students use the words convergence and adoption as the same thing.
Fix: Write that India converged: Ind AS are aligned with IFRS but contain carve-outs for Indian conditions. Adoption would mean IFRS without any change.
Ignoring group companies when testing Ind AS applicability.
Students test only the company's own net worth.
Fix: Always check whether the entity is a holding, subsidiary, associate or JV of a company that must follow Ind AS.
Treating all listed companies as Phase I.
Students link 'listed' with 'big'.
Fix: Phase I is driven by net worth of ₹500 crore or more. Other listed companies, except SME exchange listings, come under Phase II.
Including other income in the SMC turnover test or using the wrong year.
Students use total income and the current year.
Fix: The text says turnover excluding other income, for the immediately preceding accounting year. Borrowings are tested at any time during that year, with a limit of ₹50 crore.
Saying SMCs are exempt from all Accounting Standards.
The word 'relaxation' is read as 'exemption'.
Fix: Only AS 17 is exempted in its entirety. For AS 15, 19, 20, 28 and 29 the relief is partial. Non-SMCs must comply in full.
Listing AS versus Ind AS differences without a reason.
Students memorise points without the principle.
Fix: Tie every point to the theme: Ind AS are more fair value and substance based, AS more historical cost and form based. Then give a concrete example such as lease accounting.

Worked examples

Example 1

Three companies, none a bank, insurer or NBFC: (a) Rao Textiles Ltd, listed on the main board, net worth ₹120 crore; (b) Mehta Foods Pvt Ltd, unlisted, net worth ₹300 crore, no group links; (c) Sai Packaging Pvt Ltd, unlisted, net worth ₹80 crore, a subsidiary of an Ind AS company. State which standards each follows.

Show the solution

Rao Textiles: it is listed on the main board, so it is not excluded as an SME-exchange company. Net worth is below ₹250 crore, but listed companies are covered by Phase II. It follows Ind AS.
Mehta Foods: unlisted, but net worth of ₹300 crore is ₹250 crore or more and below ₹500 crore. This is Phase II. It follows Ind AS.
Sai Packaging: net worth of ₹80 crore is below the thresholds, but it is a subsidiary of a company that follows Ind AS. Group entities of such companies must also follow Ind AS.

Answer: All three follow Ind AS: Rao Textiles because it is listed, Mehta Foods because net worth is in the ₹250 crore to below ₹500 crore band, and Sai Packaging because it is a subsidiary of an Ind AS company.

Example 2

Explain the difference between convergence and adoption of IFRS, and state two differences between AS and Ind AS.

Show the solution

Define adoption: a country accepts IFRS exactly as issued by the IASB, with no change in wording or options.
Define convergence: the country brings its standards in line with IFRS but modifies them where legal, regulatory or economic conditions need it. India followed this route.
Give an example of a carve-out: under Ind AS 103 a gain on a bargain purchase in a business combination is generally recognised in capital reserve, while IFRS 3 takes it to profit or loss.
Difference 1: measurement. Ind AS use fair value in many areas, including financial instruments under Ind AS 109, while AS mainly use historical cost.
Difference 2: leases. A lessee under Ind AS 116 uses a single right-of-use model for most leases, while AS 19 classifies leases as finance or operating.

Answer: Adoption means IFRS as issued; convergence means IFRS-aligned standards with Indian modifications, which is India's route. Ind AS are more fair value based (for example Ind AS 109) and Ind AS 116 uses a single lessee model, while AS rely on historical cost and AS 19 classifies leases.

Exam tips

For applicability questions, write the test in order: listing, net worth, group links, entity type. Examiners give marks for showing the check, not just for naming Ind AS or AS.
In an MCQ, read the thresholds carefully. ₹500 crore or more is Phase I, ₹250 crore to below ₹500 crore is Phase II, and watch for options that swap them.
For SMC questions, quote the five conditions from the Companies (Accounting Standards) Rules, 2021, and note that conditions are checked as at the end of the relevant accounting period.
Keep a one-line definition of convergence and adoption ready. It fits short notes and 2-mark MCQs.
In a comparison question, give four to six clear points with a reason, such as fair value versus historical cost, instead of a long essay.

Practice questions from Introduction to Accounting Standards (GAAP, AS and Convergence to Ind AS)

Convergence to Ind AS in India in other exams

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

Convergence to Ind AS in India: frequently asked questions

What is the difference between convergence and adoption of IFRS?

Adoption means using IFRS exactly as issued. Convergence means aligning your national standards with IFRS but keeping changes needed for local conditions. India followed convergence, so Ind AS contain carve-outs.

Who must follow Ind AS under the roadmap?

Companies in the roadmap phases follow Ind AS. These are companies with net worth of ₹500 crore or more, listed companies, and unlisted companies with net worth of ₹250 crore or more, along with their holding, subsidiary, associate and joint venture companies. Banks, insurers and NBFCs follow separate roadmaps.

What do companies outside the Ind AS roadmap follow?

They follow the Accounting Standards notified in the Companies (Accounting Standards) Rules, 2021. Non-SMCs comply in full. SMCs get relaxations, with AS 17 not applicable to them at all.

Why does net worth matter for Ind AS?

India phased in Ind AS so that larger companies moved first and smaller ones got more time. Net worth is the size test the MCA used for unlisted companies. Listed companies are covered by the roadmap whatever their net worth, except those listed only on SME exchanges.