Differences Between Indian Accounting Standards (Ind-AS) and IFRS

Every listed company in India eventually runs into the same question: which rulebook decides how profit, assets, and liabilities show up on the balance sheet? For decades, Indian companies had one answer. Today, they often juggle two: Indian Accounting Standards (Ind-AS) and International Financial Reporting Standards (IFRS). They look similar, share numbering patterns, and even claim the same broad goal of transparent financial reporting. Yet they are not identical, and knowing exactly where they diverge is essential for anyone studying financial accounting or planning a career in audit, taxation, or corporate finance.

What Ind-AS and IFRS actually are 🔗

IFRS is issued by the International Accounting Standards Board (IASB), an independent, London-based body whose mandate is to create one common financial reporting language that investors and regulators anywhere in the world can read. Ind-AS, on the other hand, is India’s own set of standards, drafted by the Institute of Chartered Accountants of India (ICAI) and notified by the Ministry of Corporate Affairs (MCA) under Section 133 of the Companies Act, 2013.

The naming pattern itself hints at the relationship. Most Ind-AS carry the same number as their IFRS counterpart, so Ind-AS 115 mirrors IFRS 15 on revenue, and Ind-AS 116 mirrors IFRS 16 on leases. That is by design. India chose to build its standards on the IFRS framework rather than write an entirely new one from scratch.

Convergence, not adoption 🔗

This is the single most important distinction to remember: India has converged with IFRS, not adopted it outright. A handful of countries, along with the European Union, permit or require IFRS to be applied word for word. India took a different route. The MCA and ICAI studied each IFRS, kept most of it intact, and then made deliberate, disclosed modifications called carve-outs (where a rule is changed or removed) and carve-ins (where an India-specific requirement is added).

Why bother with this extra layer instead of simply copying IFRS? A few practical reasons kept surfacing during India’s standard-setting process, and they still shape how Ind-AS is written today:

• Legal and regulatory alignment: Indian company law, tax law, and sector regulators (RBI, SEBI, IRDAI) impose requirements that a generic global standard cannot anticipate.
• Economic conditions: Currency volatility, the scale of foreign-currency borrowing by Indian firms, and the structure of local capital markets called for tailored treatment in specific areas.
• Practical readiness: Fair-value measurement, which IFRS leans on heavily, needed deep, liquid markets to work reliably. India phased in fair-value requirements gradually rather than all at once.

Where Ind-AS and IFRS actually part ways 🔗

Legal form versus economic substance 🔗

IFRS is built on the principle of substance over form: a transaction is accounted for based on its real economic effect, not just its legal wrapper. Ind-AS generally follows the same principle, but in a few specific instruments it leans more on legal form. A commonly cited example is the treatment of foreign currency convertible bonds (FCCBs). Under IFRS, the conversion option in an FCCB is usually treated as a derivative liability and revalued every period because the number of shares or the exercise price is not fixed once currency movements are considered. Ind-AS 32 carves this out, treating the conversion option as equity instead, provided the terms represent a fixed-for-fixed arrangement in substance. That single change removes a source of profit-and-loss volatility that would otherwise appear under IFRS, as detailed in professional commentary on Ind-AS carve-outs.

India-specific carve-outs 🔗

Beyond FCCBs, a few other carve-outs come up repeatedly in coursework and in practice:

• Foreign exchange translation (Ind-AS 21 vs IAS 21): IFRS requires exchange differences on foreign-currency monetary items to flow straight to profit or loss. Ind-AS historically allowed companies with certain long-term foreign-currency borrowings to route unrealised exchange differences through a separate equity reserve and amortise them over the life of the loan, smoothing out reported profit volatility for firms with heavy foreign borrowings.
• Investment property (Ind-AS 40 vs IAS 40): IAS 40 gives companies a choice between the cost model and the fair value model for investment property. Ind-AS 40 removes the fair value option entirely and mandates the cost model, mainly because valuation infrastructure for real estate in India was not considered mature enough to support reliable fair-value estimates.

A detailed side-by-side of these and other modifications is available in PwC’s comparison of Ind-AS with IFRS, which remains a useful reference for understanding how individual standards diverge.

Presentation formats and disclosure requirements 🔗

IFRS is largely principle-based when it comes to presenting financial statements; IAS 1 sets out broad requirements but does not prescribe an exact layout. Ind-AS 1, by contrast, works alongside Schedule III of the Companies Act, 2013, which lays down a fairly detailed, standardised format for balance sheets and profit and loss statements that Indian companies must follow. This gives Ind-AS financial statements a more uniform look across companies, which is useful for comparison within India but can create extra reconciliation work for multinational groups reporting under both frameworks.

On disclosures, Ind-AS tends to be comprehensive and specific, often reflecting what Indian regulators and tax authorities need for oversight, rather than only what global investors are asking for. That means a related-party disclosure, a segment note, or a contingent liability note prepared under Ind-AS may look more detailed procedurally, even where the underlying economic story is the same as it would be under IFRS.

Who actually has to follow Ind-AS 🔗

Not every Indian company is required to use Ind-AS. The MCA rolled out applicability in phases based on listing status and net worth, under the Companies (Indian Accounting Standards) Rules, 2015. The table below summarises the broad roadmap.

Once a parent company crosses the threshold and becomes subject to Ind-AS, its holding, subsidiary, associate, and joint venture companies must follow Ind-AS too, regardless of whether they individually meet the net worth criteria. This “cascade effect” is spelled out in detail in analyses of the applicability rules for Ind-AS. Smaller companies that never cross the threshold continue to prepare financial statements under the older Accounting Standards (commonly called Indian GAAP), which is why India currently runs three parallel reporting frameworks in practice: full Ind-AS, Indian GAAP for smaller entities, and IFRS for group reporting where a foreign parent requires it.

Why this distinction matters beyond the exam 🔗

For students, the practical value of knowing this distinction shows up quickly in the workplace. Auditors working with multinational clients often prepare two sets of adjustments: the Ind-AS financials for Indian statutory filing, and an IFRS conversion for the foreign parent’s consolidation. Getting the carve-outs wrong in that conversion process directly affects reported profit, equity, and key ratios that investors rely on. It is also worth noting that India is not alone in taking this “converged” path rather than a full word-for-word adoption; the IFRS Foundation’s own tracking of global usage shows a wide range of adoption approaches across jurisdictions, from full adoption to convergence to standards that remain only loosely aligned with IFRS.

Understanding Ind-AS versus IFRS, in short, is less about memorising which standard number matches which, and more about understanding why India made specific choices: protecting against currency volatility, working within existing company law, and pacing fair-value adoption to match market readiness. Those choices tell you a lot about how Indian regulators think about the trade-off between global comparability and domestic practicality.

What do you think? If you were designing India’s next round of Ind-AS amendments, would you push to remove more carve-outs to get closer to full IFRS convergence, or keep them to protect Indian companies from reporting volatility? And do you think smaller, unlisted companies should eventually be brought under Ind-AS as well, or is Indian GAAP still the right fit for them?

References

1. https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/accounting-standards.html
2. https://bcajonline.org/journal/carve-outs-under-ind-as/
3. https://www.pwc.in/assets/pdfs/publications-2011/comparison_of_ind_as_with_ifrs.pdf
4. https://www.taxmann.com/post/blog/analysis-ind-as-applicability-for-non-financial-companies
5. https://www.ifrs.org/use-around-the-world/