IFRS Convergence in India: History, Current…

IFRS Convergence in India: History, Current Status and What Is Still Pending

By Sai Manikanta Pedamallu (ACCA, CMA US, CSCA US, CGMA, ACMA, Dip IFRS, M.Com, MBA, MA)

Lead Instructor, Global Fin X | www.globalfinx.in/manikanta

India's convergence with IFRS took twenty years from the first serious institutional step to where it stands today, involved one failed attempt, and remains incomplete in one substantial respect.

That last point is worth stating plainly at the start. Scheduled commercial banks in India still do not apply Ind AS. They prepare financial statements under the older framework with RBI's prudential norms layered over it, more than a decade after the original roadmap contemplated their inclusion. Everything else in the convergence project has broadly worked; this part has not.

This post covers how India got here, what the position is now, and what remains outstanding.

Before Convergence

India had a long-established set of Accounting Standards developed by ICAI and notified by the MCA under the prevailing Companies Act framework.

That framework was India-specific and less aligned with IFRS in several structural respects. It relied more heavily on historical cost. It contained narrower requirements in financial instruments, fair value measurement, revenue recognition, and consolidation. Areas that IFRS addressed in detail were either absent or handled at a higher level.

The framework worked adequately for a domestically focused economy. It became a constraint as Indian companies raised capital internationally, acquired overseas businesses, and attracted foreign institutional investment, all of which required financial statements that international users could compare with peers.

The Decision: Convergence, Not Adoption

The Accounting Standards Board formed an IFRS task force in August 2006. Acting on its recommendation, the Council of ICAI decided at its 269th meeting to converge fully with IFRS for accounting periods commencing on or after 1 April 2011.

The choice of convergence rather than adoption was deliberate and, as Post 96 set out, it has permanent consequences.

Adoption would have meant applying IFRS as issued by the IASB. Convergence meant starting from IFRS and departing where Indian company law, sectoral regulation, tax interactions, or market conditions required it.

The rationale was practical. Indian company law prescribes financial statement formats through Schedule III. RBI, SEBI, and IRDAI impose sector-specific requirements. Indian tax law interacts with accounting treatment in ways that differ from other jurisdictions. Full adoption would have required either changing all of that or accepting conflicts between the standards and the statutory framework.

The cost of that choice is that Ind AS financial statements are not IFRS compliant, and roughly thirty carve-outs across the standards must be identified and adjusted by anyone asserting IFRS compliance.

The 2011 Attempt, and Why It Stalled

The MCA issued a press release on 25 February 2011 notifying thirty-five Indian Accounting Standards converged with IFRS.

They were never brought into force on the intended timetable. The notification stated that implementation would proceed in a phased manner after various issues, including tax-related issues, were resolved with the concerned departments.

Those issues were not resolved quickly. The principal obstacles were the interaction between fair value measurement and Indian tax computation, the absence of clarity on how MAT would apply to Ind AS profits, and unresolved questions about how the standards would sit alongside sectoral regulation.

The standards existed on paper for four years without becoming mandatory for anyone.

The episode is instructive rather than merely historical. It demonstrates that notifying a standard is not the same as implementing one, and that in India the constraint is frequently the surrounding legal and tax framework rather than the accounting itself. The same pattern recurs in the sectoral roadmaps discussed below.

The 2015 Restart

On 2 January 2015 the Ministry of Corporate Affairs issued a note outlining the phases in which Ind AS would be implemented, for companies other than banking companies, insurance companies, and non-banking financial companies.

The Companies (Indian Accounting Standards) Rules, 2015 were notified on 16 February 2015, prescribing the standards, the applicability criteria, the transition provisions, and the phased roadmap.

The legal foundation is Section 133 of the Companies Act 2013, which empowers the Central Government to prescribe accounting standards on the recommendation of ICAI and, following its establishment, NFRA.

That statutory sequence, ICAI recommends, NFRA reviews and recommends, MCA notifies, is the mechanism by which every subsequent standard and amendment has entered Indian law, and it explains the lag discussed later in this post.

The Phased Roadmap

Voluntary adoption was permitted from financial years beginning 1 April 2015, with comparatives for the preceding period.

Phase I, mandatory from 1 April 2016, covered companies with a net worth of Rs. 500 crore or more, whether listed or unlisted, together with companies listed or in the process of listing on a stock exchange in or outside India with that net worth.

Phase II, mandatory from 1 April 2017, covered all remaining listed companies, and unlisted companies with a net worth of Rs. 250 crore or more.

The Group Extension Rule

This provision has more practical effect than the thresholds themselves.

Once a company is covered under the roadmap, its holding company, subsidiaries, associates, and joint ventures are also covered, irrespective of their own net worth.

A small subsidiary of a large listed parent applies Ind AS regardless of its own size. The framework attaches to the group, not to the individual entity.

Two further consequences.

Ind AS applies to both consolidated and standalone financial statements. As Post 53 explained, Section 129 requires Indian companies to prepare standalone financial statements in addition to consolidated ones, and both are on the Ind AS basis.

Overseas group entities must provide Ind AS adjusted information. A foreign subsidiary is not required to prepare standalone Ind AS financial statements, but it must produce Ind AS adjusted financial information sufficient to enable consolidation by the Indian parent.

Irreversibility

Once a company applies Ind AS, whether mandatorily or voluntarily, it must continue to do so. There is no route back to the older framework, even if the company subsequently falls below the net worth threshold.

The Sectoral Roadmaps

Banks, insurers, and NBFCs were carved out of the main roadmap and given separate timetables, on the basis that their reporting is governed by sector regulators with their own frameworks. The three have progressed very differently.

NBFCs: Complete

Non-banking financial companies adopted Ind AS on a phased basis, with larger NBFCs from financial year 2018-19 and the remainder from 2019-20, subject to the applicable net worth criteria.

The transition was substantially completed and NBFCs have been reporting under Ind AS 109, including the expected credit loss model, for several reporting cycles. As Post 20 covered, they apply ECL alongside RBI's prudential norms, with the higher provision recognised and any excess of the regulatory requirement over ECL routed to an impairment reserve.

Insurers: Recently Completed

Insurance companies transitioned under a roadmap determined by IRDAI rather than the MCA, as Post 73 set out.

Ind AS 117 was notified by the MCA in August 2024, but insurer adoption followed the IRDAI timetable, with a transition date of 1 April 2026 and financial year 2026-27 as the first reporting year, alongside simultaneous adoption of Ind AS 109. Dual reporting under both the new Schedule IIA format and the previous Schedule II basis applies during the initial transition period.

This is the most recent completed piece of the convergence project.

Banks: Not Complete

Scheduled commercial banks were originally scheduled to adopt Ind AS from financial year 2018-19. RBI deferred implementation in April 2018 and deferred it again in March 2019, without setting a revised date.

The stated reasons were the readiness of banks' data infrastructure and credit risk modelling capability, the absence of the necessary legislative amendments to the Banking Regulation Act to accommodate the required financial statement formats, and concern about the capital impact of moving from IRAC-based provisioning to expected credit losses across the banking system.

The position today is that scheduled commercial banks continue to prepare financial statements under the older framework, with RBI's prudential norms governing income recognition, asset classification, and provisioning.

What is changing is narrower than full convergence. As Post 20 covered, RBI issued final directions in April 2026 introducing expected credit loss provisioning for scheduled commercial banks, effective 1 April 2027, with a transition glide path extending to March 2031.

Expected credit loss provisioning is not the same as Ind AS adoption. The ECL framework brings the most significant single element of Ind AS 109 into Indian banking, with RBI-specified prudential floors layered on top. It does not bring banks onto Ind AS for classification and measurement of financial instruments generally, for leases, for revenue, for employee benefits, or for financial statement presentation.

The honest characterisation is that Indian banking is receiving the most important part of one standard, nine years after the original adoption date, while remaining outside the framework as a whole.

Current Status

Approximately forty Ind AS are notified, covering the substantive areas of financial reporting: presentation, revenue, leases, financial instruments, consolidation, fair value measurement, business combinations, employee benefits, income taxes, and insurance contracts.

The framework applies to listed companies, unlisted companies meeting the net worth thresholds, and all entities within their groups, together with NBFCs and, from 2026-27, insurers.

It does not apply to scheduled commercial banks, to companies outside the roadmap thresholds, which continue on the Accounting Standards framework, or to non-company entities including LLPs, which follow separate ICAI guidance.

Approximately thirty carve-outs exist across the standards, of which the most significant, as the rewritten Post 35 explained, is Ind AS 40's prohibition of the fair value model for investment property.

What Is Pending: Ind AS 118

The immediate outstanding item is India's convergence with IFRS 18, the new presentation and disclosure standard covered in Posts 4 through 6.

The sequence to date:

6 January 2025. ICAI issued the Exposure Draft of Ind AS 118, proposing an effective date of 1 April 2027 with retrospective application.

January 2026. NFRA recommended its adoption.

Current position. The MCA notification remains pending.

Until the MCA notifies the standard, it is not law. The proposed effective date of 1 April 2027 sits twelve months after the international effective date, and the final notified standard may differ from the Exposure Draft.

For Indian insurers, the timing is particularly demanding. As Post 73 noted, they transitioned to Ind AS 117 with effect from 1 April 2026 and would face Ind AS 118 from 1 April 2027, two consecutive years of substantial reporting change.

The Structural Pending Items

Beyond Ind AS 118, four items remain outstanding, and they are structural rather than scheduled.

Banks. The largest unfinished element, as set out above.

The amendment lag. Every IFRS amendment must pass through ICAI, NFRA, and MCA before it becomes effective in India, and each step takes time. The consequence, as Post 96 noted, is periods during which an Indian entity and an IFRS reporter account for identical transactions differently, purely because of adoption timing.

The carve-outs. These are permanent by design rather than pending, but they mean Ind AS financial statements will not become IFRS compliant through the passage of time. Convergence has an endpoint short of identity, and India has reached most of it.

The two-framework reality. Ind AS and the older Accounting Standards framework coexist indefinitely. India has not adopted IFRS for SMEs, as Post 97 covered, so entities below the thresholds continue on AS. That is a settled position rather than a transitional one.

What Convergence Achieved

Four things, stated without inflation.

Comparability improved substantially for the entities within scope. An Indian listed company's financial statements can now be read alongside those of an international peer with adjustments that are identifiable and limited, rather than requiring wholesale reconstruction.

Fair value measurement, financial instruments, consolidation, revenue, and leases were brought to international standards in areas where the previous framework was materially thinner.

Reporting quality rose. Requirements for disclosure of judgments, estimates, sensitivities, and risk exposures are substantially more demanding than under the previous framework, and they give users information that did not previously exist.

The regulatory infrastructure developed alongside. NFRA was established, inspection programmes were built, and enforcement began. As Posts 82 and 95 covered, findings are published, specific, and recurring. Standards alone do not produce quality reporting; the oversight built around them contributes as much.

What Convergence Did Not Achieve

Three things, equally without inflation.

IFRS compliance. Ind AS statements are not IFRS statements. The carve-outs are deliberate and permanent.

Coverage of the banking system. The largest and most systemically significant part of the Indian financial sector remains outside the framework, and expected credit loss provisioning from 2027 does not change that.

A single framework. Two frameworks coexist, and an entity's reporting basis depends on thresholds that produce genuinely different financial statements for economically similar businesses on either side of the line.

What Comes Next

Ind AS 118 notification, expected to follow NFRA's recommendation, with a proposed effective date of 1 April 2027.

Bank ECL implementation from 1 April 2027 under the ACPIR framework, with the transitional capital adjustment phased to March 2031.

Continued amendment adoption, tracking IFRS with the structural lag.

Whether banks eventually move to full Ind AS remains open. RBI has not set a date, the legislative amendments to accommodate Ind AS financial statement formats for banks have not been made, and the ECL framework may prove to be the practical settlement rather than a step toward full adoption.

FAQ

Why did India converge rather than adopt IFRS?

To accommodate Indian company law, sectoral regulation by RBI, SEBI and IRDAI, and tax law interactions. Full adoption would have required either amending that framework substantially or accepting conflicts between the standards and Indian statutory requirements.

Why did the 2011 notification not take effect?

Because implementation was made conditional on resolving tax and other issues with the relevant departments, and those issues were not resolved. Thirty-five standards were notified in February 2011 and did not become mandatory for any entity on that basis.

Do Indian banks apply Ind AS?

No. Scheduled commercial banks continue under the older framework with RBI prudential norms. Expected credit loss provisioning applies from 1 April 2027 under the ACPIR framework, which brings the most significant element of Ind AS 109 into banking without bringing banks onto Ind AS generally.

What happens if a company falls below the net worth threshold after adopting Ind AS?

It continues to apply Ind AS. Adoption is irreversible, whether it was mandatory or voluntary.

Why does an Indian subsidiary of a small foreign group have to apply Ind AS?

Because the framework attaches to the group. Once any company in the group is covered by the roadmap, its holding company, subsidiaries, associates, and joint ventures are covered regardless of their own net worth.

When will Ind AS 118 apply?

The Exposure Draft proposes 1 April 2027 and NFRA has recommended adoption, but the MCA notification is pending. Until notification, it is not law, and the final standard may differ from the Exposure Draft.

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This is Post 99 of the Global Fin X IFRS Series. Previous: How to Read an IFRS Annual Report. Next: Post 100: Dip IFRS Exam Prep: Which Standards Are Tested Most and How.

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