In recent years, the use of International Financial Reporting Standards (IFRS) as a common language for financial reporting has gained wide acceptance in almost 142 countries across the globe. On 16 February 2015, the Ministry of Corporate Affairs (MCA) notified the roadmap for Indian Accounting Standards (Ind AS) implementation. Ind AS are substantially converged with IFRS.

The adoption of Ind AS beginning 1 April 2022 is likely to have a significant impact on the financial statements of Indian companies, since Ind AS are relatively more prescriptive and elaborate in many areas compared to the current Indian generally accepted accounting principles (Indian GAAP). The extent of impact can vary across industries such as IT services/technology, pharmaceuticals, infrastructure and telecom.

Further, accounting for mergers and acquisitions, consolidation, share-based payments, financial instruments, revenue recognition, taxes and fair value are some of the topics that are likely to pose interpretation and implementation challenges under Ind AS.

The need for evaluating the impact of Ind AS and preparing for its adoption goes beyond financial reporting, requiring significant organisational changes. Therefore, it is not surprising that Ind AS is the most widely discussed topic across the boardrooms of corporate India today.

In the midst of this critical change, we sought to gather companies’ views on the transition, benefits, challenges and preparedness to implement Ind AS.

Companies will have to follow a step-by-step approach for a smooth transition to Ind AS. The impact of Ind AS adoption cascades beyond accounting. For example, implementing Ind AS is likely to impact key performance metrics, thus requiring thoughtful communication with the board of directors, shareholders and other stakeholders. Internally, Ind AS implementation can have a wide-ranging impact on a company’s budgeting and reporting processes, IT systems, internal control systems, income taxes and contractual arrangements. Other areas to focus on include credit rating, compliance with debt covenants, dividend distribution, employee KPI and incentive programmes, and managerial remuneration.

Successful Ind AS implementation requires a thorough strategic assessment, a robust step-by-step plan, alignment of resources and training, effective project management as well as smooth integration of the various changes into the company’s normal business operations.

Finally, the Ind AS implementation exercise needs to establish sustainable processes to continue to produce meaningful information long after the conversion exercise is completed. At the end, it is important that all changes brought by Ind AS adoption are embedded into the company’s processes and systems. The goal should be to embrace the transformation and achieve a stage of ‘business as usual’ for the company.