Financial Statements – A key to Company’s Locks

Financial statements serve as a means of communication between a company and its stakeholders, enabling stakeholders to gain insight into the company’s financial position and performance. To facilitate meaningful comparisons of financial performance, capital structure, and liquidity among different companies—whether for the purpose of granting loans or making investments—it is essential that financial statements are prepared in accordance with consistent principles. Accounting Standards provide this uniform framework for all businesses to conduct their accounting, ensuring that financial statements are comparable.

The Need for Convergence of AS & IFRS

As Indian businesses increasingly expand globally, they attract substantial foreign investments, facilitated by the government’s progressive liberalization of foreign investment policies. Indian companies have become attractive options for foreign investors, successfully raising capital overseas and accessing international financial markets.

Informed investment decisions require a comprehensive analysis of a company’s financial performance and financial position, which is done by examining a company’s financial statements. However, international investors often exhibited reluctance to place trust in the financial statements of Indian companies due to their limited familiarity with Indian Generally Accepted Accounting Principles (GAAP). These investors insisted that companies present financial information in compliance with International Financial Reporting Standards (IFRS).

The conversion of financial statements from the Indian accounting framework to international Standards whether for raising capital or for consolidation purposes represented a laborious and cost-intensive endeavor for companies.

This led to the need of converging IFRS with AS and the Birth of Ind-AS.

Applicability of Ind AS

In February 2015, MCA notified the Companies (Indian Accounting Standards) Rules, 2015 which were then implemented in phased manner from 2016 till 2019.

Ind AS is not identical to IFRS; rather, it is a distinct accounting framework based on IFRS but includes certain carve-outs to accommodate the specific characteristics of Indian businesses.

Benefits of Adopting Ind AS

The adoption of Ind AS, while mandatory for entities as notified by MCA, also offers several other benefits if adopted voluntarily like –

• Facilitation of cross-border capital flow leading to economic efficiency.
• Support for global listings.
• Enhancement of global comparability of financial statements.
• Improvement of investors’ ability to make global investment comparisons, simplifying global investments for capital market stakeholders.
• Augmentation of transparency, accountability, and efficiency in financial markets worldwide.
• Reduction of capital costs for businesses and a decrease in international reporting expenses.
• Simplification of information consolidation for companies operating in multiple countries, enabling efficient tracking of operational key performance indicators, and reducing the complexities of managing different reporting systems.

Strategies for Successful Implementation of Ind AS

Key factors that businesses should consider when implementing Ind AS (Indian Accounting Standards):

1. Consider seeking expert advisory services for specific aspects of Ind AS implementation, such as mergers, consolidations, financial instruments, hedge accounting, revenue recognition, and leases.
2. Plan and execute the transition to Ind AS meticulously to ensure a smooth adoption process.
3. Assess how the organization’s activities are managed and align them with the requirements of Ind AS.
4. Develop new policies and procedures tailored to align with Ind AS, if required.
5. Provide training to staff members on Ind AS concepts.
6. Identify and analyze various tax consequences that may result from the application of Ind AS.
7. Review and revise annual financial statements to ensure compliance with Ind AS standards.
8. Continuously monitor and address any issues related to the implementation of Ind AS.
9. Re-evaluate contracts and concluded negotiations with various parties to align them with the requirements of Ind AS.
10. Evaluate whether you want to establish an in-house dedicated team of experts specializing in Ind AS or opt to outsource the implementation process.

How can Master Brains Make Ind AS Implementation easier for you….?

Outsourcing such implementation to experts is an economically efficient idea. Master Brains, offers comprehensive services for conversion of AS-compliant financial statements to Ind-AS compliant financial statements, Preparation of Ind-AS Compliant Financial Statements, Review of financial statements or contracts or transactions to ensure compliance with Ind-AS.

Master Brains facilitates a smooth transition for companies embracing Ind AS by statute or voluntarily because anything ‘new is scary’. Master Brains will hand-hold your organization and staff through your Ind AS Implementation. WhatsApp at +91-8595867402 or send inquiries at https://masterbrains.co.in/client-registration/