Ind AS Applicability: Criteria, Net Worth Limits, Roadmap & Practical Examples

1. What is Ind AS?

Indian Accounting Standards, commonly known as Ind AS, are accounting standards notified by the Ministry of Corporate Affairs (MCA) under Section 133 of the Companies Act, 2013.

Ind AS are substantially converged with IFRS, with certain modifications considering Indian legal and economic requirements.

Companies covered by the Ind AS roadmap prepare their financial statements in accordance with Ind AS. Companies outside the Ind AS framework generally follow the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2021.

2. Legal Framework for Ind AS Applicability

The primary framework for determining applicability is contained in Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015, as amended from time to time.

Rule 4 broadly provides for:

• voluntary adoption of Ind AS;
• mandatory applicability based on listing status and net worth;
• applicability to specified holding, subsidiary, associate and joint venture companies; and
• a separate roadmap for Non-Banking Financial Companies (NBFCs).

3. Ind AS Applicability to Companies other than NBFCs, Banks and Insurance Companies

The applicability position for ordinary companies can broadly be understood as follows:

*The proviso to Rule 4(1) contains specific exceptions for companies whose securities are listed or are in the process of being listed on an SME Exchange and for the Institutional Trading Platform without an initial public offering, as referred to in the SEBI ICDR framework specified in the Rules.

For a company covered by the main listed-company roadmap, net worth below ₹250 crore does not by itself take the company outside Ind AS.

4. Mandatory Ind AS Roadmap

Ind AS was introduced on a phased basis under Rule 4(1) of the Companies (Indian Accounting Standards) Rules, 2015.

Phase I – From 1 April 2016

Under Rule 4(1)(ii), Ind AS became mandatory for:

• companies whose equity or debt securities are listed or are in the process of listing in India or outside India and having net worth of ₹500 crore or more;
• other companies having net worth of ₹500 crore or more; and
• their holding, subsidiary, joint venture and associate companies.

Phase II – From 1 April 2017

Under Rule 4(1)(iii), Ind AS became mandatory for:

• listed companies or companies in the process of listing having net worth below ₹500 crore;
• unlisted companies having net worth of ₹250 crore or more but less than ₹500 crore; and
• their holding, subsidiary, joint venture and associate companies.

Therefore, Ind AS applicability is not restricted to the company that directly satisfies the listing or net worth criteria.

5. Holding, Subsidiary, Associate and Joint Venture Companies

The group-company rule is an important part of the Ind AS roadmap.

Rule 4(1)(ii)(c) and Rule 4(1)(iii)(c) extend the mandatory roadmap to the holding company, subsidiary, joint venture and associate company of companies covered by the respective phases.

A company may therefore be required to follow Ind AS even though:

• it is unlisted;
• its own net worth is below ₹250 crore; and
• it would not independently meet the normal net worth criteria.

Therefore, Ind AS applicability should not be checked solely on the basis of a company’s own net worth. Its relationship with other companies in the group must also be examined.

6. How is Net Worth Determined for Ind AS Applicability?

Rule 4(2) prescribes the principles for determining net worth for companies covered by the general corporate roadmap.

Net worth is determined using the company’s standalone financial statements.

For companies existing on 31 March 2014, the original roadmap referred to standalone financial statements as on 31 March 2014 or the first audited financial statements for an accounting period ending after that date.

For a company that meets the prescribed threshold for the first time after 31 March 2014, net worth is determined on the basis of the first audited financial statements in which the relevant threshold is met.

First-time Adoption

Ind AS 101 – First-time Adoption of Indian Accounting Standards becomes relevant when the company transitions to Ind AS.

Accordingly, the company prepares its opening Ind AS Balance Sheet as at 1 April 2026 and presents the required comparative information for FY 2026-27 in accordance with Ind AS.

This is why companies approaching the Ind AS threshold should plan for transition well before the first mandatory reporting year.

7. What is Included in Net Worth?

For this purpose, reference should be made to the definition of “net worth” under Section 2(57) of the Companies Act, 2013.

Certain reserves created out of revaluation of assets, write-back of depreciation and amalgamation are excluded in accordance with the statutory definition.

The following should therefore not be confused with net worth:

• turnover;
• total assets;
• revenue;
• market capitalisation; or
• enterprise value.

For Ind AS applicability, the prescribed net worth test must be applied.

8. Once Ind AS Becomes Applicable, Can the Company Go Back to AS?

No. Merely falling below the original applicability threshold does not permit a company to return to AS.

Rule 4 provides that once Ind AS becomes applicable, the company must continue to follow Ind AS in its subsequent financial statements even if the criteria that originally triggered applicability subsequently cease to apply.

9. Voluntary Adoption of Ind AS

Under Rule 4(1)(i), a company may voluntarily adopt Ind AS along with its holding, subsidiary, joint venture or associate company in accordance with the Rule.

Once Ind AS is adopted, the company is required to follow Ind AS for its subsequent financial statements.

10. SME Exchange Companies

The proviso to Rule 4(1) contains a specific exception from the mandatory roadmap for companies whose securities are listed or are in the process of being listed on an SME Exchange.

The Rules define SME Exchange by reference to the applicable SEBI ICDR framework specified in the Rules.

The proviso also refers to companies whose securities are listed or are in the process of being listed on the Institutional Trading Platform without an initial public offering, under the SEBI ICDR framework referred to in the Rules.

Importantly, the proviso excludes Rule 4(1)(i) from this exception. Therefore, the voluntary adoption provision remains available.

11. Applicability of Ind AS to NBFCs

NBFCs have a separate roadmap under Rule 4(1)(iv).

Phase I – From 1 April 2018

Under Rule 4(1)(iv)(a), Ind AS became mandatory for:

• NBFCs having net worth of ₹500 crore or more; and
• specified holding, subsidiary, joint venture and associate companies covered by the provision.

Phase II – From 1 April 2019

Under Rule 4(1)(iv)(b), Ind AS became mandatory for:

• listed or in-process-of-listing NBFCs having net worth below ₹500 crore;
• unlisted NBFCs having net worth of ₹250 crore or more but less than ₹500 crore; and
• specified holding, subsidiary, joint venture and associate companies covered by the provision.

For NBFCs, Rule 4(2A) contains separate provisions for determining net worth, including the use of standalone financial statements.

Rule 4 also contains specific provisions for groups containing both NBFC and non-NBFC entities. Such mixed-group situations should therefore be examined under the specific NBFC provisions of Rule 4.

12. What About Banks?

Banks are subject to a separate regulatory framework.

The Reserve Bank of India had earlier proposed implementation of Ind AS for Scheduled Commercial Banks.

However, through Circular RBI/2018-19/146, DBR.BP.BC.No.29/21.07.001/2018-19 dated 22 March 2019, RBI deferred implementation of Ind AS for Scheduled Commercial Banks, excluding Regional Rural Banks (RRBs), till further notice.

Therefore, the general ₹250 crore / ₹500 crore corporate roadmap should not be directly applied to determine the accounting framework of a banking company.

The latest RBI regulatory directions should be checked while determining the applicable position.

13. What About Insurance Companies?

Insurance companies are also governed through a separate regulatory framework.

IRDAI had earlier proposed implementation of Ind AS in the insurance sector. However, the implementation timeline was reconsidered in view of developments relating to IFRS 17 – Insurance Contracts and related implementation issues.

Through Circular No. IRDAI/F&A/CIR/ACTS/023/01/2020 dated 21 January 2020, IRDAI deferred implementation of Ind AS in the insurance sector until further notice.

Accordingly, the general corporate ₹250 crore / ₹500 crore thresholds should not be directly applied to determine the accounting framework of an insurance company.

The latest IRDAI and MCA directions should be checked for the current regulatory position.

14. Practical Examples

15. Quick Ind AS Applicability Checklist

• Identify the entity: Is it an ordinary company, NBFC, bank or insurance company?
• Check listing status: Is its equity or debt listed or in the process of listing? If yes, check whether it is a main-board or SME Exchange listing.
• Check net worth: For an ordinary unlisted company, determine whether net worth is ₹500 crore or more, ₹250 crore or more but below ₹500 crore, or below ₹250 crore.
• Check group relationships: Determine whether the company is a holding company, subsidiary, associate or joint venture of a company covered by the Ind AS roadmap.
• Check previous adoption: Determine whether the company has already adopted Ind AS voluntarily or mandatorily.
• Check sector-specific requirements: For NBFCs, banks and insurance companies, examine the relevant provisions separately.

16. Ind AS vs Accounting Standards (AS)

Determining the correct accounting framework is important because Ind AS and Accounting Standards can differ significantly in recognition, measurement, presentation and disclosure requirements.

17. Frequently Asked Questions

18. Conclusion

Ind AS applicability cannot be determined merely by checking whether a company’s net worth exceeds ₹250 crore or ₹500 crore.

A proper assessment requires consideration of the company’s listing status, net worth, group relationships, nature of business and previous adoption of Ind AS.

For ordinary unlisted companies, ₹250 crore is the key minimum net worth threshold under the mandatory roadmap. For main-board listed companies covered by the roadmap, the ₹250 crore minimum threshold does not apply.

Holding companies, subsidiaries, associates and joint ventures can also be brought within the Ind AS framework because of their relationship with a covered company.

SME Exchange companies have a specific exception from the mandatory roadmap, while NBFCs have a separate roadmap under Rule 4. Banks and insurance companies require consideration of their respective regulatory frameworks.

Most importantly, once a company validly starts following Ind AS—whether mandatorily or through voluntary adoption—it continues to follow Ind AS in subsequent financial statements even if the original applicability criteria later cease to exist.