SKP Assurance Alert
MCA notifies Ind AS road map for banks, insurance companies and NBFCs

The Ministry of Corporate Affairs (MCA) in consultation with the National Advisory Committee on Accounting Standards (NACAS), on 16 February 2015, notified the corporate road map for the implementation of Indian Accounting Standards (Ind AS) converged with International Financial Reporting Standards (IFRS). As per the corporate road map, insurance companies, banking companies and Non-Banking Financial Companies (NBFCs) were exempt from adopting Ind AS either voluntarily or mandatorily.
 
The MCA has issued a press release dated 18 January 2016 prescribing a road map for the implementation of Ind AS for scheduled commercial banks (excluding Regional Rural Banks (RRBs)), insurers/insurance companies and NBFCs. The final notification will be issued by the MCA, Reserve Bank of India and Insurance Regulatory and Development Authority at a later date.

 

Road map

Timeline Companies/banks/institutions
1 April 2018 onwards
Scheduled commercial banks excluding RRBs
All India term lending refinancing institutions
Insurers/insurance companies
Holding/subsidiary/joint venture/associate companies of scheduled commercial banks excluding RRBs
Note: Even if such companies were covered by the corporate road map, they will have to follow the new timeline.
1 April 2018 onwards
NBFCs with net worth > INR 5 billion
Holding/subsidiary/joint venture/associate companies of the above mentioned NBFCs
Note: If such companies were covered by the corporate road map, they will have to follow the timeline specified in the corporate road map.
 1 April 2019 onwards
NBFCs having a net worth < INR 5 billion and whose equity and/or debt securities are in the process of listing or are listed on any stock exchange in India or outside India.
Unlisted NBFCs having net worth > INR 2.5 billion but net worth < INR 5 billion
Holding/subsidiary/joint venture/associate companies of the above mentioned NBFCs
Note: If such companies were covered by the corporate road map, they will have to follow the timeline specified in the corporate road map.
 
Note
  • Ind AS will be applicable to both, the consolidated financial statements and individual financial statements.
  • Voluntary adoption of Ind AS is not permitted for scheduled commercial banks (excluding RRBs)/NBFCs/insurance companies/insurers. However, this does not preclude an insurer/insurance company/NBFC from providing Ind AS compliant financial statements data for the preparation of consolidated financial statements by its parent/investor.
  • Ind AS shall not be applicable to urban cooperative banks and RRBs. They will have to follow the existing accounting standards.

SKP’s comments

There were several doubts prevailing in the corporate world regarding the timeline and manner of Ind AS applicability for sectors not covered in the corporate road map. This road map has cleared many of those doubts. However, certain issues arise from the reading of the press release. There may be cases where holding/subsidiary/joint venture/associates which were covered under the corporate road map may now have to defer the implementation of Ind AS. Additional clarity shall be required for the smooth implementation of Ind AS for these types of companies.

There is a high possibility that IFRS 4 - Insurance Contracts may be internationally applicable from 2018 or later. In this scenario and as per the road map, it is possible that India would be the first country to adopt the standard on insurance contracts.
 
Although the corporate road map exempted certain companies from adopting Ind AS, these companies were uncertain as to how and when Ind AS will be applicable to them. Now, as a definite timeline has been prescribed, these companies may have to significantly modify their internal processes and controls for the purpose of financial reporting. In the days to come, we hope that additional clarifications are provided by statutory authorities proactively to ensure the smooth implementation of Ind AS.

SKP
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