Corporate Accounting and Financial Management · Introduction to Accounting

Accounting Standards and Ind AS Framework in India

Updated 11 October 2026 · Fact-checked

Accounting standards are written rules that tell companies how to recognise, measure and disclose transactions in financial statements. In India, ICAI develops them and NFRA recommends them to the Central Government, which notifies them. Ind AS are converged with IFRS and apply to specified companies; others follow AS. To answer questions, identify the company class first.

Understand Accounting Standards and Ind AS Framework

Accounting standards are the rule book for preparing financial statements. Without them, two companies could report the same transaction in different ways, and you could not compare their results. Standards bring uniformity, comparability and reliability to reported numbers.

In India, the Institute of Chartered Accountants of India (ICAI) formulates the standards. The National Financial Reporting Authority (NFRA) is a body set up under the Companies Act, 2013. It recommends accounting and auditing standards to the Central Government and oversees the quality of audit for specified classes of companies. The Central Government then notifies the standards under the Companies Act, which gives them legal force for companies.

India has two sets of standards. The first is Accounting Standards (AS), the older set, numbered AS 1, AS 2 and so on. The second is Indian Accounting Standards (Ind AS), numbered Ind AS 1, Ind AS 2 and so on. Ind AS are converged with International Financial Reporting Standards (IFRS) issued by the IASB. Converged means they follow IFRS closely, with some changes for Indian conditions. It does not mean they are identical to IFRS.

Which set applies depends on the company. Ind AS are mandatory for specified companies, mainly based on listing status and net worth thresholds, and also for their holding, subsidiary, joint venture and associate companies. Companies outside these classes follow AS. Always check the class of company stated in the question before choosing the standard.

A key difference in approach: AS is generally more rule-based and leans on historical cost. Ind AS places greater weight on substance over form and uses fair value measurement in many areas. Ind AS also covers topics that AS does not, such as fair value measurement and financial instruments in detail.

Key rules to remember

Who issues and who notifies: ICAI formulates → NFRA recommends → Central Government notifies; Standards apply to companies under the Companies Act only after notification. Remember the chain in this order.
Which set applies: Specified companies (and their holding, subsidiary, JV, associate) → Ind AS; all other companies → AS; The Ind AS test depends on listing and net worth thresholds in the rules. Do not quote threshold figures unless you are sure of them.
Meaning of convergence: Ind AS = IFRS adapted for Indian conditions (not a word-for-word adoption); Use the word converged, not adopted, when describing Ind AS.
Numbering: AS 1, AS 2 ... versus Ind AS 1, Ind AS 2 ...; Numbers do not always match for the same subject. Ind AS 2 is Inventories, as is AS 2, but cash flows is AS 3 and Ind AS 7.

How to solve Accounting Standards and Ind AS Framework questions

Use this method for any theory or application question on accounting standards and the Ind AS framework.

1Read the question and mark what is asked: role of standards, the authorities, AS versus Ind AS, or applicability to a given company.
2Start your answer with a one-line definition or the purpose of the standard or body in question.
3If the question names a company, classify it: is it a specified company for Ind AS, a subsidiary or holding of one, or another company that follows AS?
4State the authority chain where relevant: ICAI formulates, NFRA recommends, Central Government notifies under the Companies Act.
5For comparison questions, use clear points: basis, approach, measurement, scope and applicability. Give one line for AS and one for Ind AS on each point.
6Mention IFRS convergence in one sentence when Ind AS is involved.
7End with a clear conclusion that answers the exact question, such as which set the company must follow.

Quickest way: Three-check shortcut

When to use it: Use when you have only a few minutes for a short-note or applicability question.

Check 1: Who? Name ICAI, NFRA and the Central Government with one line each.
Check 2: Which set? Decide AS or Ind AS from the company's class.
Check 3: Why? Add one reason such as comparability, or convergence with IFRS, and then write the conclusion.

Common mistakes in Accounting Standards and Ind AS Framework

Saying NFRA issues accounting standards.
Students merge the roles of ICAI and NFRA because both are linked to standard-setting.
Fix: Write that ICAI formulates, NFRA recommends to the Central Government, and the Central Government notifies.
Writing that Ind AS is the same as IFRS.
The phrase IFRS convergence sounds like full adoption.
Fix: Say Ind AS is converged with IFRS, with changes made for Indian conditions.
Applying Ind AS to every company.
Students assume the newer set replaces the older one for all companies.
Fix: Check the class of company first. Only specified companies and their holding, subsidiary, JV and associate companies follow Ind AS; others follow AS.
Assuming AS and Ind AS numbers match for the same topic.
Both sets start with similar numbering, so students match by number.
Fix: Learn the subject with its number in each set. For example, the cash flow standard is AS 3 but Ind AS 7.
Listing differences without a basis.
Students write loose points such as AS is old and Ind AS is new.
Fix: Compare on named bases such as approach, measurement, scope and applicability, with one line each.

Worked examples

Example 1

Explain the role of ICAI and NFRA in setting accounting standards in India, and state how the standards become binding on companies.

Show the solution

Provision: The Companies Act, 2013 requires companies to follow the accounting standards notified by the Central Government.
ICAI: It is the professional body that formulates accounting standards after study and consultation.
NFRA: It is a body constituted under the Companies Act, 2013. It recommends accounting standards to the Central Government and also oversees audit quality for specified classes of companies.
Notification: The Central Government notifies the standards. Only after this do they bind companies under the Act.
Conclusion: The chain is ICAI formulates, NFRA recommends, and the Central Government notifies.

Answer: ICAI formulates the standards, NFRA recommends them to the Central Government, and they bind companies once the Central Government notifies them under the Companies Act, 2013.

Example 2

Distinguish between AS and Ind AS. Then state which set applies to Sundaram Textiles Ltd, an unlisted company that is not a subsidiary, holding company, joint venture or associate of any company covered by Ind AS, and does not meet the Ind AS net worth threshold.

Show the solution

Meaning: AS are the older Accounting Standards (AS 1 onward). Ind AS are Indian Accounting Standards converged with IFRS.
Approach: AS is more rule-based and leans towards historical cost. Ind AS stresses substance over form and uses fair value in many areas.
Scope: Ind AS covers areas such as fair value measurement and detailed financial instruments that AS addresses only lightly or not at all.
Applicability: Ind AS applies to specified companies by listing and net worth criteria and to their holding, subsidiary, JV and associate companies. All others follow AS.
Application: Sundaram Textiles Ltd is unlisted, meets no net worth threshold and has no link to a covered company. It is outside the Ind AS classes.
Conclusion: It follows Accounting Standards (AS).

Answer: AS and Ind AS differ in approach, measurement, scope and applicability. Sundaram Textiles Ltd is not a specified company and has no covered group link, so it follows AS and not Ind AS.

Exam tips

Learn the authority chain as a single line: ICAI formulates, NFRA recommends, Central Government notifies. Short notes on NFRA often ask for exactly this.
For difference questions, write 4 to 5 points on named bases. Use a clear two-column style with bullet lines if space allows.
In applicability questions, classify the company before you name the standard. Examiners reward the reasoning, not only the final answer.
Use the word converged for Ind AS and IFRS, and avoid claiming they are identical.
Revise the list of AS and Ind AS by subject name with number, since questions may ask for the standard that covers a given topic.

Practice questions from Introduction to Accounting

Accounting Standards and Ind AS Framework 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 Framework: frequently asked questions

What is the difference between AS and Ind AS?

AS are the older Accounting Standards, while Ind AS are converged with IFRS. Ind AS uses fair value more and focuses on substance over form. They also differ in the companies they apply to.

What is NFRA and what does it do?

NFRA is the National Financial Reporting Authority, constituted under the Companies Act, 2013. It recommends accounting and auditing standards to the Central Government and oversees audit quality for specified classes of companies.

Is Ind AS identical to IFRS?

No. Ind AS is converged with IFRS, which means it follows IFRS closely but has changes to suit Indian conditions. Use the word converged in your answer.

Who notifies accounting standards for companies?

The Central Government notifies them under the Companies Act, 2013, after the recommendation of NFRA. ICAI is the body that formulates them.