Which Companies Must Convert Their Financial Statements as per Ind AS? Applicability Criteria Explained (FY 2025-26)

When we think about Indian Accounting Standards (Ind AS), we think it applies to Listed companies only. Not always!

In reality, many unlisted companies are also required to convert their financial statements once they satisfy the applicability criteria.

This Ind AS applicability guide explains which companies are required to adopt Ind AS, the net worth thresholds, group applicability rules and what happens once mandatory Ind AS adoption applies.

Is Ind AS Mandatory?

Yes. A company must adopt Indian Accounting Standards (Ind AS) if it meets the applicability criteria under the Companies (Indian Accounting Standards) Rules, 2015. Companies covered under Ind AS include listed companies, in process of listing and unlisted companies with a net worth of ₹ 250 crore or more, along with their holding, subsidiary, associate and joint venture companies. It also applies to listed NBFCs or unlisted NBFCs with a net worth of ₹ 250 crore or more, mutual funds and to specified insurance companies from 1 April 2026. Applicability of Ind AS to Banks is deferred.

What is Ind AS?

Indian Accounting Standards (Ind AS) are accounting standards prescribed under Section 133 of the Companies Act, 2013 and notified through the Companies (Indian Accounting Standards) Rules, 2015 by the Ministry of Corporate Affairs (MCA). 

They are converged with International Financial Reporting Standards (IFRS).

Companies reporting under Ind AS prepare financial statements in accordance with Division II of Schedule III to the Companies Act, 2013, while Ind AS-compliant NBFCs follow Division III.

Know more in Ultimate Ind AS Guide.

Ind AS Applicability Criteria (FY 2025-26)

Company	Requirement to Adopt Ind AS	Effective From
Listed companies (or companies in the process of listing equity or debt securities in India or outside India, excluding companies listed on SME Exchanges) with net worth ₹ 500 crores and more	Mandatory	1 April 2016(Phase 1)
All Listed companies (or companies in the process of listing equity or debt securities in India or outside India, excluding companies listed on SME Exchanges)	Mandatory	1 April 2017(Phase 2)
Unlisted companies having net worth of ₹ 500 crore or more	Mandatory	1 April 2016(Phase 1)
Unlisted companies having net worth of ₹ 250 crore or more	Mandatory	1 April 2017(Phase 2)
Holding, subsidiary, associate and joint venture companies of the above entities	Mandatory	–
NBFCs having net worth of ₹ 500 crore or more	Mandatory	1 April 2018(Phase 1)
Listed NBFCs (or in the process of listing) below ₹ 500 crore and unlisted NBFCs having net worth of ₹ 250 crore or more	Mandatory	1 April 2019(Phase 2)
Insurance companies	Mandatory for specified co.	1 April 2026
Mutual Funds	Mandatory	1 April 2023
Banking companies	Deferred	–

Ind AS Applicability for Companies

MCA introduced the mandatory Ind AS adoption roadmap in phases as follows:

Phase I – from 1 April 2016

Mandatory for:

1. Listed companies or companies in the process of listing on any recognised stock exchange in India or outside India and having a net worth of ₹ 500 crore or more.
2. Unlisted companies having a net worth of ₹ 500 crore or more.
3. Their holding, subsidiary, joint venture and associate companies.

Phase II – from 1 April 2017

Mandatory for:

1. Listed companies (or companies in the process of listing) having a net worth of less than ₹ 500 crore, excluding companies listed on SME Exchanges.
2. Unlisted companies having a net worth of ₹ 250 crore or more but less than ₹ 500 crore.
3. Their holding, subsidiary, joint venture and associate companies.

Listed includes equity or debt securities listed or in the process of listing for Ind AS applicability. 

Ind AS Roadmap for NBFCs

Ind AS implementation roadmap for NBFCs was: 

Phase I – from 1 April 2018

Mandatory for:

1. NBFCs having a net worth of ₹ 500 crore or more.
2. Their holding, subsidiary, joint venture and associate companies.

Phase II – from 1 April 2019

Mandatory for:

1. Listed NBFCs (or NBFCs in the process of listing) having a net worth below ₹ 500 crore.
2. Unlisted NBFCs having a net worth of ₹ 250 crore or more but below ₹ 500 crore.
3. Their holding, subsidiary, joint venture and associate companies.

Voluntary adoption by NBFCs is not allowed.

An NBFC subsidiary, associate or joint venture of an Ind AS-compliant non-NBFC parent shall continue Indian GAAP unless separately covered under NBFC Ind AS criteria. Conversely, if an Ind AS-compliant NBFC is the Parent, its non-NBFC subsidiaries/associates/JVs must adopt Ind AS.

Ind AS Roadmap for Insurance Companies

IRDAI has notified the Ind AS implementation roadmap for insurance companies (via circular IRDAI/IFRS/CIR/MISC/45/4/2026) from 1 April 2026.

Ind AS applies to:

1. Life Insurance Companies
2. General Insurance Companies
3. Standalone Health Insurance Companies
4. Reinsurance Companies

The IRDAI roadmap also provides a one-year forbearance for eligible insurers along with parallel reporting. Ind AS 117 is a new insurance accounting standard in India.

Ind AS Roadmap for Banking Companies

RBI originally proposed implementing Ind AS for scheduled commercial banks from 1 April 2018. However, the implementation has been deferred and no revised mandatory date has been notified.

Until then, banks continue under the RBI-prescribed accounting framework.

Ind AS Applicability for Mutual Funds

Mutual funds are required to prepare their financial statements using Ind AS. SEBI issued the Guidelines on Accounting with respect to Ind AS through its SEBI circular dated 4 February 2022, requiring mutual fund schemes to adopt Ind AS from 1 April 2023.

Net Worth Criteria for Ind AS Applicability

Net worth follows the definition in Section 2(57) of the Companies Act, 2013:

Net worth = Paid-up share capital + all reserves created out of profits + securities premium account − accumulated losses − deferred expenditure not written off − miscellaneous expenditure not written off

Net worth for Ind AS applicability excludes:

1. Revaluation Reserves
2. Write-backs arising from asset revaluation 
3. Amalgamation reserves that do not represent realised profits 

Which Financial Statements are Considered for Determining Net Worth?

Net worth is determined based on the audited standalone financial statements as at 31^st March of the immediately preceding financial year. If the company’s net worth crosses the threshold in those audited financial statements, Ind AS becomes applicable from the following financial year.

Example: If an unlisted company’s audited standalone financial statements as at 31 March 2026 show a net worth exceeding ₹ 250 crore, Ind AS will become applicable from FY 2026-27 with comparative financial statements that must also be prepared for FY 2025-26 with an opening Ind AS balance sheet as at 1^st April 2025.

Applicability to Holding, Subsidiary, Associate and Joint Venture Companies

Once a company is covered under Ind AS, the requirement ordinarily extends to its (except foreign companies):

1. Holding
2. Subsidiary
3. Associate 
4. Joint venture

This applies irrespective of whether those entities independently satisfy the net worth threshold.

Illustration

ABC Limited is an unlisted company with a net worth of ₹ 320 crore and is therefore required to adopt Ind AS.

ABC Limited owns 100% of XYZ Private Limited, whose net worth is only ₹ 18 crore.

Although XYZ Private Limited does not independently meet the ₹ 250 crore threshold, it must also prepare financial statements under Ind AS because it is a subsidiary of an Ind AS company. The same rule generally applies to holding, associate and joint venture companies of ABC Limited.

Ind AS Applicability for Foreign Companies

Foreign companies are not directly governed by the Companies (Indian Accounting Standards) Rules, 2015 (unless they are incorporated under the Companies Act in India). However, overseas holding companies, subsidiaries or other group entities may need to provide financial information to the Indian group company in a format compatible with Ind AS for group consolidation.

Many companies realise they should have adopted Ind AS only after it’s too late.

Our Ind AS Consultancy Services can help you be ahead with Ind AS compliance.

Which Entities Are Not Required to Adopt Ind AS?

1. Unlisted companies below the ₹ 250 crore net worth threshold (unless covered under group applicability)
2. Companies listed only on SME Exchanges (unless covered under net worth threshold and group applicability)
3. Banking companies, until RBI notifies
4. Sole proprietorships, partnership firms and LLPs

Can a Company Voluntarily Adopt Ind AS?

A company that is not mandatorily covered under the notified roadmap can voluntarily adopt Ind AS.

A few reasons for voluntary adoption of Ind AS can be:

1. Raising capital
2. IPO or debt listing
3. Joining multinational groups
4. Transparency and comparability of financial statements

Once adopted, the company must continue reporting under the Ind AS framework in subsequent years. Voluntary adoption is not allowed for NBFCs.

What is Ind AS 101?

Ind AS 101 First-time Adoption of Indian Accounting Standards provides the framework that every first-time adopter must follow to transition from previous Indian GAAP to Ind AS.

Preparing the Opening Ind AS Balance Sheet

Under Ind AS 101, first-time adopters must prepare an opening Ind AS Balance Sheet at the beginning of the earliest comparative period (1 year) {transition date}. This serves as the starting point for all future Ind AS financial statements. 

It involves applying the mandatory exceptions and optional exemptions on assets and liabilities under Ind AS 101. It may also involve fair value measurements and support from Valuation Services for determining asset and liability values.

Comparative Financial Statements Under Ind AS

The first Ind AS financial statements must include comparative financial information (preceding 1 year) prepared in accordance with Ind AS by restating the previous year’s financial statements.

This is the most time-consuming aspect of an Ind AS implementation, especially with multiple subsidiaries and complex financial instruments.

Step-by-Step Ind AS Implementation Process

Indian GAAP to Ind AS Conversion Process

1. Conversion Roadmap and Planning

The process starts with understanding the company’s business model, transactions and group structure to determine Ind AS applicability, transition date and reporting requirements.

2. Ind AS Gap Review

Existing accounting policies and financial practices are reviewed against Ind AS requirements. This assessment identifies conversion areas, including financial instruments, leases (Ind AS 116 foundation & Ind AS 116 accounting), revenue recognition (Ind AS 115), fixed assets and deferred tax.

3. Evaluate Accounting Impact

Calculations, supporting documents and management assumptions are reviewed to measure the impact on assets, liabilities, profit and equity.

4. Transition Adjustments and Opening Balance Sheet

Based on the impact assessment, Ind AS transition entries are prepared. The company’s opening balance sheet is converted as per Ind AS 101, including consideration of exemptions and exceptions.

5. Financial Reporting Conversion

Prepare the first Ind AS financial statements as per Division II of Schedule III to the Companies Act, 2013 (NBFCs-Division III).

6. Audit Support and Implementation

Audit support is provided for conversion and the company completes implementation of the transition to Ind AS.

Does Ind AS Applicability Trigger XBRL/AOC-4 Filing?

Yes. Under the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, the moment a company becomes subject to Ind AS, it automatically attracts a mandatory obligation to file its annual financial statements in  XBRL format via Form AOC-4 XBRL. 

Ind AS vs IFRS – What Are the India-specific Carve-outs? 

Ind AS is converged with IFRS but is not identical. Certain “Carve Ins” “Carve-outs” are modified by the MCA and ICAI to suit local business, tax and economic realities of India. 

Examples of IFRS carve ins include- Ind AS mandates recognition of dividends declared after the reporting period as a liability, reflecting a legal obligation under Indian law that IFRS does not impose. And examples of carve out include differences in the treatment of bargain purchase gains in business combinations (Ind AS 103), Loan Covenant Breach (Ind AS 1), classification of foreign currency convertible bonds (Ind AS 32), etc.

Impact of Merger/Demerger on Ind AS Applicability

When a corporate restructuring occurs, the resulting or transferee entity must adopt Ind AS if any entity involved in the merger or demerger was already applying Ind AS prior to the transaction.

If restructuring occurs between non-Ind AS entities, the newly formed or surviving company must calculate its combined net worth if it reaches ₹ 250 crore or more, Ind AS applies immediately. Additionally, if a non-Ind AS company becomes a holding, subsidiary, associate or joint venture of an Ind AS entity post-restructuring, it is automatically brought under mandatory Ind AS compliance.

FAQs 

1. What net-worth thresholds make conversion of financial statements to Ind AS mandatory (₹ 500 crore Phase I, ₹ 250 crore Phase II)?

Ind AS became mandatory in two phases. From 1 April 2016, it applied to listed and unlisted companies with a net worth of ₹ 500 crore or more. From 1 April 2017, it was extended to all listed companies and unlisted companies with a net worth of ₹ 250 crore or more.

2. Is net worth tested on a standalone basis or on consolidated group net worth and as of which date?

Net worth is tested for Ind AS applicability based on the audited standalone financial statements of the company, not consolidated financial statements. Companies consider the audited standalone financial statements as at 31 March of the immediately preceding financial year.

3. Once financial statements are converted to Ind AS, can a company ever revert to Indian GAAP (AS)?

No. Once a company adopts Ind AS, whether mandatorily or voluntarily, it is required to continue reporting under Ind AS. Reverting to Indian GAAP is not permitted.

4. Are holding, subsidiary, joint venture and associate companies dragged into conversion automatically?

Yes. When Ind AS becomes applicable to a company, the requirement extends to its holding, subsidiary, associate and joint venture companies, even if those entities do not independently meet the net worth threshold.

5. What does first-time conversion actually involve – Ind AS 101, opening balance sheet and comparatives?

A first-time Ind AS conversion is governed by Ind AS 101. It involves preparing an Opening Ind AS Balance Sheet, identifying differences between Indian GAAP and Ind AS, restating comparative financial statements, updating accounting policies and preparing the first Ind AS-compliant financial statements.

6. Does Ind AS apply to private limited companies?

Yes. Private limited companies must adopt Ind AS if the net worth is ₹ 250 crore or more or they are a holding, subsidiary, associate or joint venture of an Ind AS company. Read more about our Company Law Consultancy Services.

7. How long does a typical Indian GAAP to Ind AS conversion take and can Master Brains manage it end-to-end?

An Indian GAAP to Ind AS conversion can take 4 to 6 months and extends based on the size and complexity of the organisation. At Master Brains, our Ind AS consultants provide Ind AS conversion support, including applicability assessment, accounting adjustments, financial statement conversion, and implementation assistance.

8. What Happens If a Company Fails to Adopt Ind AS When Required?

Failure to adopt Ind AS when it is mandatory can result in non-compliant financial statements, audit qualifications, regulatory scrutiny and issues in statutory filings, fundraising or lending.

Still Unsure about Ind AS?

At Master Brains, our Chartered Accountants assist companies with end-to-end Indian GAAP to Ind AS conversion, including Ind AS applicability assessments, preparing Opening Ind AS Balance Sheet, Ind AS implementation, Ind AS compliance, Ind AS 101 implementation, Schedule III financial statements and audit coordination.

We help businesses achieve Ind AS-compliant financial reporting with minimal disruption.

Call: +91 8595867402

Email: masterbrains.office@gmail.com

References

1. Companies (Indian Accounting Standards) Rules, 2015
2. Section 133, Companies Act, 2013
3. Section 2(57), Companies Act, 2013
4. Ind AS Roadmap for NBFCs
5. IRDAI Circular dated 1 April 2026 for Insurance 
6. SEBI Circular dated 4 February 2022 (Mutual Funds)

Reviewed by CA Neha Agarwal, FCA