The strategic convergence: a comprehensive analysis of the evolution of Indian Accounting Standards (Ind AS) and its legal and financial implications
DOI:
https://doi.org/10.64171/JAES.2.3.53-59Keywords:
International Financial Reporting Standards (IFRS), Indian Accounting Standards (Ind AS), Companies Act, 2013, Ministry of Corporate Affairs (MCA), Institute of Chartered Accountants of India (ICAI)Abstract
The evolution of accounting standards in India, culminating in the convergence with International Financial Reporting Standards (IFRS) through the implementation of Indian Accounting Standards (Ind AS), represents a landmark shift in the nation's financial landscape. This transformation was not a simple adoption of global norms but a strategic process of convergence, meticulously crafted to align with India’s unique legal, economic, and socio-political environment. The primary drivers for this monumental change included the need to enhance the transparency and comparability of financial statements, foster investor confidence, and position India as an attractive destination for foreign capital in an increasingly globalized economy.1
The journey from the older, rules-based Indian Generally Accepted Accounting Principles (Indian GAAP) to the new principles-based Ind AS has been fraught with significant legal and regulatory challenges. A key aspect of this evolution has been the deliberate creation of "carve-outs" and "carve-ins," which are specific modifications made to the IFRS framework to suit local conditions. These legal nuances, sanctioned by the Ministry of Corporate Affairs (MCA) and the Institute of Chartered Accountants of India (ICAI), have had profound accounting implications, fundamentally altering how companies recognize revenue, value assets, and provision for credit losses.4
The transition has introduced transformative changes, such as the shift to a forward-looking Expected Credit Loss (ECL) model for financial instruments and the adoption of fair value measurements for certain assets. While these changes have bolstered the credibility and global comparability of large Indian corporations, they have also created substantial implementation challenges for Small and Medium-sized Enterprises (SMEs), which often struggle with the high costs, technical complexity, and lack of specialized expertise required for a smooth transition. This report provides a detailed analysis of this strategic convergence, examining its historical genesis, legal hurdles, transformative accounting implications, and the ongoing challenges faced by Indian businesses on their path to a globally integrated financial future.
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