Requirement to follow Accounting Standards / Ind-As

[Brainstorming Queries]

Whether all the persons, business entities or companies are required to follow the Accounting Standards prescribed by the ICAI or MCA? There are various kinds of standards as prescribed. Which one is to be followed for an entity.

[Charu Tyagi]

There are 2 types of standards on Accounting as prescribed by MCA and recognised by ICAI

1. Accounting Standards (Indian GAAP)
2. Indian Accounting Standards as notified by MCA in 2015

For the purpose of application of above mentioned standards one has to check net worth of the entity/companies

For more clarification refer Manuals on Indian Accounting Standard

[Charu Tyagi]

• Any assesee who needs to maintain books of account on mercantile basis should follow accounting standards (Indian GAAP) irrespective of their Net Worth and
• Assessee whose net worth exceeds the limits as per the Phase I & Phase II has to follow Indian Accounting Standards (IndAS).

AI Summary

Accounting Standards applicability: mercantile-basis entities follow Indian GAAP; net worth thresholds trigger Ind AS adoption. Two recognised frameworks apply: Accounting Standards (Indian GAAP) and Indian Accounting Standards (Ind AS). Entities maintaining books on a mercantile basis must follow Accounting Standards (Indian GAAP) regardless of net worth. Entities whose net worth exceeds prescribed phase-based thresholds must follow Ind AS. Determination requires assessing mercantile accounting practice and applicable net worth thresholds; consult Indian Accounting Standards guidance for details.