Ind AS Applicability for Private Companies: Thresholds, Triggers

India runs two parallel accounting frameworks for companies. Private unlisted companies below a certain size follow the older Accounting Standards (AS), notified under the Companies (Accounting Standards) Rules, 2021. Companies above the thresholds set by the Ministry of Corporate Affairs (MCA) follow Indian Accounting Standards (Ind AS), notified under the Companies (Indian Accounting Standards) Rules, 2015, which are broadly converged with International Financial Reporting Standards (IFRS). Getting this classification wrong in either direction is expensive: applying Ind AS when you are not required to adds compliance cost and complexity; not applying it when you are required to exposes the company to statutory audit qualifications and MCA action under Section 128 of the Companies Act, 2013. This article covers the full applicability framework for private companies, the correct methodology for computing net worth (including several errors that routinely produce wrong answers), every trigger that can pull a company into scope without crossing any threshold independently, the 2025 and 2026 MCA amendments that affect reporters in scope, the AOC-4 XBRL obligation that attaches on transition, and a practical 12-month workplan under Ind AS 101 for first-time adopters.

Which private companies must mandatorily follow Ind AS?

Ind AS is mandatory for any private (unlisted) company whose net worth equals or exceeds ₹250 crore, calculated on the basis of the most recent audited standalone financial statements prepared under the existing Indian GAAP framework. Companies with net worth of ₹500 crore or more fell into scope from 1 April 2016 (Phase I). Companies with net worth between ₹250 crore and ₹500 crore fell into scope from 1 April 2017 (Phase II). For companies that first crossed either threshold after those initial dates, Ind AS applies from the financial year immediately following the balance sheet date on which the threshold was first crossed, based on audited accounts.

Phase structure of the Ind AS corporate roadmap

The MCA roadmap for non-financial-sector companies operates in two phases, both governed by Rule 4 of the Companies (Indian Accounting Standards) Rules, 2015.

Phase I: applicable from FY 2016-17 (accounting periods beginning on or after 1 April 2016)

• Listed companies (listed on any stock exchange in India or outside India) with net worth of ₹500 crore or more
• Unlisted companies with net worth of ₹500 crore or more
• Holding companies, subsidiaries, joint ventures, and associates of all companies in the above two categories, irrespective of whether those group entities individually meet any net worth threshold

Phase II: applicable from FY 2017-18 (accounting periods beginning on or after 1 April 2017)

• All listed companies not covered in Phase I (regardless of net worth), including companies in the process of listing as of 31 March 2016
• Unlisted companies with net worth of ₹250 crore or more but less than ₹500 crore
• Holding companies, subsidiaries, joint ventures, and associates of all companies in the above two categories

Category	Net worth threshold	Mandatory from
Unlisted company (Phase I)	₹500 crore or more	1 April 2016
Listed company (Phase I)	₹500 crore or more	1 April 2016
Listed company (Phase II)	Any net worth	1 April 2017
Unlisted company (Phase II)	₹250 crore or more, less than ₹500 crore	1 April 2017
Group entity (holding/subsidiary/JV/associate)	No threshold: applies regardless of size	Same phase as parent
SME exchange-listed company	Exempt	Exempt
NBFC with net worth ≥ ₹500 crore	₹500 crore	1 April 2018
NBFC: listed, or net worth ₹250-500 crore	₹250 crore	1 April 2019

For companies that first crossed the thresholds after the initial phase dates, Rule 4(1)(b)(ii) of the 2015 Rules provides that Ind AS applies from the financial year beginning immediately after the financial year in which the threshold was first crossed. A company whose audited net worth first crossed ₹250 crore as at 31 March 2025 is required to follow Ind AS from FY 2025-26 onwards, with 1 April 2024 as the transition date.

Once a company becomes subject to Ind AS, it must continue to follow Ind AS for all subsequent financial statements. There is no mechanism to revert to the older AS framework, whether mandatorily triggered or voluntarily adopted.

How net worth is correctly calculated for Ind AS applicability

Net worth for this purpose is defined under Section 2(57) of the Companies Act, 2013. But the mechanics of the computation have three layers that most self-assessment exercises get wrong.

What is included

Net worth = Paid-up share capital + All reserves created out of profits + Securities premium account minus Accumulated losses minus Deferred expenditure not written off minus Miscellaneous expenditure not written off.

Capital reserves arising from promoters’ contributions and government grants received are included. All other capital reserves are excluded. Revenue reserves (general reserve, profit and loss balance, any other reserve created from profits) are included.

What is excluded

Revaluation reserves are excluded entirely. If a company revalued land in FY 2022-23 and the balance sheet shows a ₹90 crore revaluation reserve, that ₹90 crore does not count. A company with ₹310 crore on the balance sheet but ₹90 crore of revaluation reserve has a net worth of ₹220 crore for applicability purposes and is below the ₹250 crore threshold.

Reserves created by writing back depreciation are excluded. Miscellaneous expenditure pending write-off and deferred revenue expenditure not yet written off are deducted.

Which framework governs the calculation

This is the error that surprises most finance teams. Net worth for the applicability test is computed under the existing accounting framework in use at the time of assessment, which is typically Indian GAAP, not Ind AS. The assessment must precede adoption, and the company does not yet follow Ind AS when it is determining whether Ind AS is required.

This matters because a company nearing the threshold that has made Ind AS-style estimates in its management accounts (for example, treating operating leases as right-of-use assets, or computing gratuity under the projected unit credit method) may compute a materially different net worth figure than the legally correct one. The legally correct figure is from the audited standalone Indian GAAP accounts. No adjustments to simulate Ind AS treatment are made at the applicability testing stage.

Standalone, never consolidated

Net worth is assessed on the standalone accounts of the company, not consolidated accounts. A company whose standalone net worth is ₹220 crore but whose consolidated net worth (including subsidiaries) exceeds ₹400 crore has not crossed the ₹250 crore threshold for its own standalone Ind AS obligation. Consolidated net worth is irrelevant to the applicability test. (The subsidiary or associate may separately be in scope through the group extension rule, discussed below.)

The “once, always” principle: net worth can drop, Ind AS obligation cannot

Once the net worth threshold is crossed and Ind AS becomes applicable, the obligation is permanent. A subsequent fall in net worth below ₹250 crore or ₹500 crore does not suspend or remove the Ind AS requirement.

A private company with net worth of ₹260 crore in FY 2024-25 must adopt Ind AS from FY 2025-26. If losses in FY 2025-26 reduce the net worth to ₹230 crore, the company still reports under Ind AS in FY 2026-27. There is no provision in the Rules for discontinuation of Ind AS on grounds of a subsequent net worth reduction.

This has a direct consequence for companies that are growing rapidly but also have volatile P&L. Triggering the threshold in one profitable year locks in Ind AS permanently, even if the company subsequently posts losses that erode net worth.

Mid-year capital infusion: why it does not accelerate the trigger date

Does a large equity infusion during the year push Ind AS applicability to the current year?

No. The net worth test is always conducted on the audited standalone accounts as at the balance sheet date (31 March for most Indian companies). The test is not conducted intra-year, and projections of expected net worth are irrelevant. Only the audited figure at year-end counts.

A company that received a ₹800 crore equity infusion in October 2025 does not become subject to Ind AS during FY 2025-26. The test is applied to audited accounts as at 31 March 2026. If that balance sheet shows net worth of ₹900 crore, Ind AS applies from FY 2026-27. The infusion has no effect on the current-year obligation.

This is not merely academic. Several growing companies receive large pre-IPO funding rounds mid-year and assume the infusion has moved them into Ind AS immediately. It has not. The next annual audit is the trigger date.

What the infusion does is make it highly likely that the threshold will be crossed at the next balance sheet date, which is why the correct response is to start transition preparation immediately after the infusion, rather than waiting for the audit.

The “in the process of listing” trigger: a precise but underappreciated rule

The MCA roadmap applies Ind AS not only to listed companies but also to companies that are “in the process of listing” on any stock exchange in India or outside India. This phrase is not defined in the Companies (Indian Accounting Standards) Rules, 2015, but the standard interpretation among practitioners and consistent with SEBI’s regulatory framework is that a company is in the process of listing when it has filed a Draft Red Herring Prospectus (DRHP) with SEBI or has received in-principle approval from a stock exchange.

The practical consequence: a private unlisted company that files a DRHP in January 2026 for a Main Board IPO becomes subject to Ind AS from the financial year in which the DRHP is filed, regardless of its net worth. Because SEBI already requires IPO financials to be Ind AS-compliant for the DRHP, this rule is largely aligned with the actual regulatory need. But companies that file a DRHP without having prepared for Ind AS transition face a very compressed timeline.

What happens if the company withdraws the DRHP or the IPO does not proceed?

If a company files a DRHP and then withdraws it, or SEBI observations expire without the company proceeding to listing, the company is no longer “in the process of listing.” If the company’s net worth is also below the ₹250 crore threshold, it can revert to the AS framework for the period after withdrawal, provided it had not yet issued its first Ind AS financial statements. Once the first Ind AS financial statements have been issued, reverting is not permitted.

If the company had already issued financial statements under Ind AS during the DRHP period, the irreversibility principle applies and the company remains an Ind AS reporter even after the IPO process ends. The practical implication: a company that voluntarily or obligatorily transitions to Ind AS in anticipation of a listing that does not materialise is permanently locked into Ind AS.

The subsidiary drag-in rule: how a small private company is pulled in without crossing any threshold

Rule 4(2) of the Companies (Indian Accounting Standards) Rules, 2015 provides that once a company falls within the Ind AS roadmap, all its holding companies, subsidiary companies, joint ventures, and associates are also required to follow Ind AS from the same phase. This applies even if those group entities have zero net worth.

How “associate” is defined for this purpose

An associate is an entity over which the investor company has significant influence. Under Ind AS 28, significant influence is presumed when the investor holds 20% or more of the voting power of the investee, unless it can be clearly demonstrated that significant influence does not exist. A private company in which a PE fund (that is itself in scope) holds 20% or more of equity is presumed to be an associate of the PE fund. The startup’s Ind AS obligation derives from the fund’s position in the roadmap.

The threshold is 20% of voting power, not of economic interest. Preference shares that are non-voting may not count. Ordinary equity shares count in full. Warrants and options to subscribe do not generally count until exercised.

Why this matters specifically in PE-backed structures

A PE fund structured as a company (rather than as an AIF or trust) with net worth above ₹250 crore is itself subject to Ind AS. If that fund holds 20% or more of voting equity in a portfolio company, the portfolio company is an associate of the fund and is drawn into the roadmap. The portfolio company may have a standalone net worth of ₹30 crore and annual revenue of ₹15 crore. It is nonetheless required to provide Ind AS-adjusted numbers for the PE fund’s consolidated accounts, and depending on the structure, may be required to produce standalone Ind AS financials.

Whether the portfolio company must produce standalone Ind AS financials (as opposed to merely providing Ind AS conversion workings for group consolidation) depends on whether it independently crosses the threshold or is a subsidiary. An associate that is not a subsidiary and is below the threshold independently does not have a standalone Ind AS obligation; it needs only to supply Ind AS adjustments to the investing entity. A wholly-owned subsidiary is different: as a subsidiary of an in-scope parent, it has a standalone Ind AS obligation regardless of its own size.

In practice, PE fund documentation increasingly requires portfolio companies to maintain Ind AS-compatible books even where there is no standalone obligation, because the fund’s consolidation team needs this information for its own financial statements.

The December 2025 small company revision and its Ind AS intersection

The MCA, by notification dated 1 December 2025 (amending Rule 2(1)(t) of the Companies (Specification of Definition Details) Amendment Rules, 2025), raised the small company thresholds under Section 2(85) of the Companies Act, 2013. From 1 December 2025, a private company qualifies as a small company if its paid-up share capital does not exceed ₹10 crore (up from ₹4 crore) and its turnover does not exceed ₹100 crore (up from ₹40 crore).

Small company status carries meaningful compliance benefits: exemption from the mandatory cash flow statement requirement, reduced secretarial audit obligations, simplified board report requirements, and reduced CARO applicability. These are real savings for smaller private companies.

However, small company status does not create any exemption from the Ind AS net worth threshold under Rule 4. The two tests use different metrics. Ind AS applicability turns on net worth (computed from Section 2(57)). Small company status turns on paid-up capital and turnover. They are independent assessments. A company could simultaneously qualify as a small company (paid-up capital ₹8 crore, turnover ₹70 crore) and be subject to Ind AS (net worth ₹280 crore due to accumulated retained earnings and securities premium). The small company exemptions apply to that company for every compliance requirement to which they are relevant, but they do not displace the Ind AS obligation.

Also note: holding companies, subsidiary companies, and Section 8 companies cannot qualify as small companies regardless of their paid-up capital and turnover. A wholly-owned subsidiary of a listed company therefore cannot use small company status as a shield against Ind AS obligations arising from the subsidiary drag-in rule.

Companies and sectors outside the Ind AS roadmap

Banking companies follow Ind AS under a separate RBI-administered roadmap. Scheduled commercial banks (excluding regional rural banks) were originally scheduled for Ind AS adoption from 1 April 2018, deferred to 1 April 2019, and then deferred indefinitely by the RBI via notification dated 22 March 2019. As of July 2026, banks have not implemented Ind AS and continue on Indian GAAP. This is a significant unresolved gap in India’s convergence story.

Insurance companies follow IRDAI’s roadmap. Ind AS 117 (insurance contracts) replaced Ind AS 104 for entities within scope from FY 2024-25.

NBFCs follow a separate two-phase roadmap. Phase I (from 1 April 2018) covered NBFCs with net worth of ₹500 crore or more. Phase II (from 1 April 2019) covered listed NBFCs with net worth below ₹500 crore and unlisted NBFCs with net worth between ₹250 crore and ₹500 crore. NBFCs with net worth below ₹250 crore are not required to adopt Ind AS and critically, cannot voluntarily adopt it. Voluntary adoption of Ind AS is not available for NBFCs; adoption follows the RBI-aligned roadmap irrespective of company preference.

SME exchange-listed companies are expressly excluded from the Ind AS obligation. Companies listed exclusively on SME exchanges (as defined under SEBI ICDR Regulations Chapter XB) continue to follow AS regardless of net worth.

LLPs and partnership firms are outside the Companies (Indian Accounting Standards) Rules, 2015 entirely. Ind AS applies only to companies under the Companies Act, 2013 or 1956.

Branch offices of foreign companies in India are an extension of the foreign parent and are not incorporated Indian companies. They are not subject to the Ind AS roadmap. They file their annual activity certificate under FEMA 22(R)/2016 but are not required to produce standalone Ind AS financial statements.

One Person Companies (OPCs) are companies under the Companies Act, 2013. They are subject to the Ind AS roadmap if they independently cross the net worth threshold or if they are subsidiaries of entities in scope. In practice, OPCs rarely accumulate net worth at ₹250 crore because of the structural constraints on their ownership, but there is no OPC-specific exemption in the Rules.

Overseas subsidiaries of Indian parents may continue to prepare standalone financials under their home jurisdiction. They do not produce standalone Ind AS financial statements. But they must provide Ind AS-adjusted numbers to the Indian parent for consolidation.

The 2025 MCA amendment notifications: what changes for reporters from FY 2025-26

Amendment 1: G.S.R. 291(E) dated 7 May 2025 (Ind AS 21 amendment)

This notification amended Ind AS 21 to address currencies that are not freely exchangeable. When a company cannot obtain another currency at a quoted spot rate because the currency is blocked or restricted, the amendment provides explicit guidance on estimating a substitute spot rate and introduces mandatory disclosures on the estimation methodology and the impact of non-exchangeability. Applicable from annual periods beginning on or after 1 April 2025 (FY 2025-26). Private companies with transactions in restricted currencies (for example, certain African markets, specific jurisdictions with capital controls) need to review whether existing exchange rate policies comply.

Amendment 2: G.S.R. 549(E) dated 13 August 2025 (Second Amendment Rules, 2025)

This notification amended several Ind AS, all applicable from FY 2025-26 (with specific paragraphs from FY 2026-27):

Ind AS 1: Revised classification guidance for liabilities as current or non-current, specifically addressing covenant breaches waived by the lender before financial statements are authorised. A company with a term loan breach waived before board approval of accounts need not classify the loan as current. New disclosure requirements for the waiver terms. Effective April 2025.

Ind AS 7 and Ind AS 107: Mandatory new disclosures for supplier finance arrangements. Companies using reverse factoring, supply chain financing, or dynamic discounting programmes must now disclose the terms of those arrangements, the carrying amounts of trade payables covered, payment due dates, and non-cash changes in related balances. This is a substantive new disclosure that many private companies with supply chain financing have not yet prepared for.

Ind AS 12: A new exception allowing companies to choose not to recognise or disclose deferred tax assets and liabilities arising from Pillar Two income taxes under the OECD global minimum tax framework. Relevant primarily for large multinationals; most Indian private companies are not directly in scope of Pillar Two.

Ind AS 28 and Ind AS 32: Alignment changes removing IFRS 17-specific cross-references.

Ind AS 109: Amendments to time value of money element modification, applicable from FY 2025-26 for certain financial assets.

Companies (Accounting Standards) Amendment Rules, 2026 (MCA notification dated 10 March 2026, published 12 March 2026)

This notification amended the Companies (Accounting Standards) Rules, 2021, which govern companies still on the old AS framework (i.e., companies below the Ind AS threshold). The amendment updated AS 22 (Accounting for Taxes on Income) in the older framework. This is relevant for private companies below ₹250 crore net worth that continue on Indian GAAP; they must apply the revised AS 22 from FY 2026-27 (periods beginning on or after 1 April 2026).

AOC-4 XBRL: the compliance obligation that attaches when Ind AS kicks in

This is a practical layer that almost no Ind AS applicability article discusses. Once a company is subject to Ind AS, it must also assess whether it is required to file its financial statements in XBRL format with the MCA.

Under the Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015, XBRL filing via Form AOC-4 XBRL is mandatory for:

• All listed companies
• Companies with paid-up capital of ₹5 crore or more
• Companies with turnover of ₹100 crore or more

A private company that crosses the ₹250 crore Ind AS net worth threshold almost certainly also has paid-up capital above ₹5 crore or turnover above ₹100 crore. This means the first Ind AS financial statements must be filed using the Ind AS XBRL taxonomy, not the standard AOC-4 form.

This creates two failure modes in practice. First, companies that file regular AOC-4 instead of AOC-4 XBRL. The MCA portal may accept the wrong form, but the filing is treated as defective and attracts penalties under Section 137(3) of the Companies Act, 2013 (₹10,000 plus ₹100 per day, up to ₹5 lakh for the company; officers in default face the same penalty). Second, companies that use the wrong XBRL taxonomy. The Ind AS XBRL taxonomy differs substantially from the AS taxonomy; tagging AS financials using the Ind AS taxonomy produces material errors in the structured data.

For FY 2025-26, the XBRL taxonomy has been updated to reflect the August 2025 Ind AS amendments. Companies filing their first Ind AS XBRL return should verify that their XBRL tool has the current taxonomy version before filing.

Ind AS vs IFRS: carve-outs that matter for private companies with foreign parent groups

Ind AS is described as “converged” with IFRS, not “adopted.” India retained the right to modify IFRS requirements before incorporating them into Ind AS, resulting in approximately 30 carve-outs across the standards. For a domestic private company reporting purely to Indian stakeholders, the carve-outs are largely invisible. They become significant when the company has a foreign parent or foreign investors reporting under full IFRS.

The most commercially significant carve-outs for private companies are:

Ind AS 101 includes an option not available in IFRS 1: companies can defer exchange differences on long-term foreign currency monetary items at the transition date, carrying forward the previous GAAP policy for a period. IFRS 1 does not provide this. A company using this exemption will report different equity at transition from an IFRS-equivalent balance sheet.

Ind AS 109 (financial instruments) was modified to allow deferral of recognition of some financial liabilities in the context of the government loan carve-out. Below-market government loans are permitted to be carried at previous GAAP values at transition rather than fair valued as IFRS 9 would require.

Ind AS 38 allows revenue-based amortisation for intangible assets arising from service concession arrangements (toll roads, for example). IAS 38 generally prohibits revenue-based amortisation for intangibles. This carve-in affects infrastructure and BOT project companies.

The format of financial statements is governed by Schedule III of the Companies Act, 2013, which imposes a specific presentation format for balance sheet and P&L. IFRS allows more flexibility in presentation. A foreign group comparing an Ind AS Schedule III balance sheet against an IFRS IAS 1 balance sheet will encounter classification and labelling differences even where the underlying numbers are identical.

For private companies preparing Ind AS financials to satisfy a foreign investor’s group reporting requirements, a reconciliation schedule explaining the Ind AS-to-IFRS adjustments is standard practice. It is not large in most cases, but it is not zero.

Merger and demerger: how corporate restructuring affects Ind AS status

When an Indian company undergoes a merger, amalgamation, or demerger under an NCLT-approved scheme under Section 232 of the Companies Act, 2013, the Ind AS status of the entities involved carries across in specific ways.

Merger where the transferee is an AS company absorbing an Ind AS company. The transferee company inherits the assets and liabilities of the transferor at the values determined by the scheme. If the transferor was an Ind AS company, the transferee company should assess whether, after the merger, it independently crosses the ₹250 crore net worth threshold. If yes, Ind AS applies from the next financial year. The merged entity does not automatically inherit the transferor’s Ind AS status; the threshold test is re-applied to the surviving entity.

Demerger where a resulting company is carved out from an Ind AS entity. The resulting company receives a portion of the demerging entity’s assets and liabilities. The resulting company may have a net worth below ₹250 crore at inception if only a portion of the business is carved out. If so, and if it is not a subsidiary of an Ind AS entity post-demerger, the resulting company does not automatically follow Ind AS. It must independently qualify.

Merger where both entities are already in Ind AS. The merged entity continues in Ind AS. No reassessment of threshold is required because both were already obligated.

The accounting treatment of business combinations under Ind AS 103 applies to non-common-control transactions (acquisitions). Common control transactions (mergers between companies under the same ultimate parent) are accounted for on a pooling basis under Appendix C to Ind AS 103, which does not apply fair value measurement.

For a private company in the ₹200-350 crore net worth range that is considering acquiring a business, the acquisition itself may push combined net worth above ₹250 crore for the first time, triggering Ind AS from the next financial year. This is a planning point that should be assessed before any significant acquisition is completed, not after.

Voluntary adoption: when it makes sense and why it is irreversible

A private company below ₹250 crore net worth may choose to voluntarily adopt Ind AS for any accounting period beginning on or after 1 April 2015, under Rule 4(1) of the Companies (Indian Accounting Standards) Rules, 2015. Once adopted voluntarily, reverting to AS is not permitted.

Voluntary adoption makes sense in four specific situations:

Pre-IPO preparation. SEBI requires companies filing an offer document to present five years of historical financials under a uniform accounting policy. A company planning a Main Board IPO in FY 2028-29 and wanting all five disclosed years to be Ind AS-compliant needs to have adopted Ind AS by FY 2023-24 at the latest. Companies that miss this window face a forced restatement of multiple years immediately before listing, when management bandwidth is least available.

Foreign investor term sheet requirements. PE and VC term sheets at growth and late-stage rounds routinely require Ind AS-compliant financial statements as a condition of closing, even for companies below the mandatory threshold. Voluntary adoption before the fundraise is cleaner than a transition triggered by investor pressure during due diligence.

Foreign parent group reporting. Companies that are not subsidiaries of an Ind AS parent but have a foreign IFRS parent may find that Ind AS financials simplify the group consolidation reconciliation substantially compared to AS financials. In some foreign-headquartered group structures, voluntary adoption is required by the parent’s group accounting policy.

Banking and institutional lending. Large bilateral facilities from foreign or development finance institutions sometimes define financial covenants using Ind AS-based metrics. Voluntary adoption improves the accuracy of covenant reporting and eliminates renegotiation cost at each annual review.

The downside of voluntary adoption is real. Ind AS requires materially more disclosure, complex fair value measurements under Ind AS 113, right-of-use asset and lease liability recognition under Ind AS 116, full actuarial valuation for defined benefit obligations, and the complete Ind AS 101 transition workplan described below. For a company without a robust finance function, this is a meaningful investment.

The Ind AS 101 transition roadmap: a 12-month workplan for first-time adopters

First-time adoption is governed by Ind AS 101. The standard requires an opening Ind AS balance sheet at the transition date, which is the beginning of the earliest period for which comparative information is presented.

If a private company is required to follow Ind AS from FY 2026-27 (first year of Ind AS reporting: 01/04/2026 to 31/03/2027), the timeline is:

• Transition date: 1 April 2025
• Opening Ind AS balance sheet: as at 1 April 2025
• Comparative period (restated under Ind AS): FY 2025-26 (01/04/2025 to 31/03/2026)
• First Ind AS financial statements: FY 2026-27

Month 1-2: applicability confirmation and scoping

Confirm the net worth calculation using audited standalone Indian GAAP accounts. Confirm whether any group extension trigger applies independently (subsidiary, associate). Run a high-level gap analysis across all Ind AS standards against current accounting policies. Identify the five areas with the largest potential adjustments for the specific company: leases (Ind AS 116), financial instruments (Ind AS 109), revenue recognition (Ind AS 115), employee benefits (Ind AS 19), and deferred taxes (Ind AS 12).

Month 3-4: Ind AS 101 elections

Ind AS 101 offers mandatory exceptions and optional exemptions from full retrospective application. Elections are permanent and must be documented before the opening balance sheet is finalised. The most important optional exemptions for private companies:

Deemed cost for property, plant and equipment: the company can use fair value as the deemed cost of any item of PP&E at the transition date, avoiding a full retrospective reconstruction of historical cost and depreciation. This is typically the highest-value election for asset-heavy companies.

Business combinations: past business combinations need not be restated under Ind AS 103. Previous GAAP carrying amounts are carried forward.

Cumulative foreign currency translation differences: the cumulative balance of translation differences on foreign operations can be reset to zero at transition.

Share-based payments: equity-settled awards vested before the transition date need not be recognised under Ind AS 102.

Month 5-6: data collection

Build the lease inventory from scratch, reviewing every contract with a right to use an identified asset. Build the financial instrument register. Obtain actuarial reports for gratuity and other defined benefit obligations using the projected unit credit method. Assess the ERP system’s capacity to produce Ind AS-compliant output; most older ERP configurations require module changes for deferred tax, lease accounting, and revenue disaggregation.

Month 7-9: opening Ind AS balance sheet

Prepare the balance sheet as at the transition date. Adjustments go to retained earnings or another equity component. They do not flow through the profit and loss account. Common adjustments and their typical directions:

Adjustment area	Typical direction	Impact on equity
ROU assets and lease liabilities (Ind AS 116)	New asset and liability	Broadly neutral at transition; net of discount rate applied
Gratuity remeasurement (Ind AS 19)	Liability increases	Reduction in retained earnings
Deferred tax: balance sheet approach (Ind AS 12)	Often larger deferred tax liability	Reduction in retained earnings
Zero-coupon or below-market loans (Ind AS 109)	Equity component separated	Increases equity; reduces liability
Revenue deferral (Ind AS 115)	Revenue previously recognised may be deferred	Reduction in retained earnings
Proposed dividends (not yet approved by shareholders)	Provision reversed	Increase in retained earnings
PP&E deemed cost (if fair value used)	May increase carrying amounts	Increase in equity through retained earnings

Month 10-11: comparative period restatement

Restate FY 2025-26 under Ind AS. Prepare the reconciliation statements required by Ind AS 101: reconciliation of equity under AS to equity under Ind AS at both the transition date and the end of the comparative period, and reconciliation of profit or loss under AS to profit or loss under Ind AS for the comparative period.

Month 12: first Ind AS financial statements

Finalise FY 2026-27 financial statements. Include all Ind AS 101 reconciliation disclosures. File AOC-4 XBRL using the Ind AS taxonomy. The first Ind AS audit will take longer than a steady-state Ind AS audit; factor in extended timelines for audit fieldwork and management response.

What changes materially on the balance sheet and P&L

EBITDA improves structurally. Under Ind AS 116, operating lease rentals move off the income statement and are replaced by depreciation (on the ROU asset) and interest (on the lease liability). A company spending ₹3 crore per year on office and factory leases will see EBITDA improve by that ₹3 crore, with depreciation increasing by approximately ₹2.5-2.7 crore and finance costs increasing by ₹0.3-0.5 crore. Net profit impact is broadly neutral but the P&L shape changes permanently, and financial ratios based on EBITDA improve.

Reported debt increases. Lease liabilities under Ind AS 116 are financial liabilities and appear in the balance sheet as debt equivalents. Lenders whose covenant definitions use “total debt” calculated from AS financial statements will see their covenant ratios change materially. This requires proactive renegotiation of covenant definitions before the first Ind AS accounts are finalised.

Revenue may shift across periods. Ind AS 115’s five-step model may require revenue to be deferred that was previously recognised upfront, or accelerated where recognition was being delayed. The transition adjustment is booked to retained earnings, but the ongoing income statement will follow the new recognition policy.

Equity investments get fair valued. Strategic equity investments in unlisted entities, previously carried at cost under AS 13, must be measured at fair value under Ind AS 109. For private companies with significant cross-holdings in unlisted businesses, fair value determination at each reporting date is a recurring valuation exercise.

Tax provisioning changes fundamentally. AS 22 uses a timing difference approach. Ind AS 12 uses a balance sheet approach, recognising deferred tax on every temporary difference between the Ind AS carrying amount and the tax base of each asset and liability. This often produces a materially different deferred tax balance, particularly after Ind AS 116 introduces ROU assets and lease liabilities that have different tax bases.

Treelife practitioner note

In the transition engagements we have run at Treelife for private companies in the ₹200-500 crore net worth range, the pattern we see consistently is that companies underestimate three things.

First, the lease inventory. Most private companies have lease agreements embedded in service contracts, logistics arrangements, co-working spaces, and equipment leases. Ind AS 116 requires a review of every contract that conveys the right to control the use of an identified asset, not just formal real estate leases. Building this inventory from scratch typically takes 4-8 weeks for a company with multiple locations and a mixed asset base. Doing this during audit fieldwork results in late adjustments and audit delays. Starting before the balance sheet date gives the finance team control of the process.

Second, deferred tax under the balance sheet approach. AS 22 is income-statement-driven and most finance teams have an intuitive feel for timing differences. Ind AS 12’s balance sheet approach requires a systematic review of every asset and liability carrying amount against its tax base. For a company that has just recognised ₹20 crore in ROU assets and ₹18 crore in lease liabilities under Ind AS 116, the deferred tax position must be computed on the ROU asset and the lease liability separately. Companies without a purpose-built deferred tax model produce deferred tax positions that do not reconcile and require restatement after the audit.

Third, the AOC-4 XBRL taxonomy. Companies filing their first Ind AS XBRL return often use their existing XBRL tool without verifying that the tool has been updated to the Ind AS taxonomy for the relevant year. Using the AS taxonomy for Ind AS financial statements produces a filing that the MCA portal may accept but that is materially tagged incorrectly.

FAQs

Q: Does Ind AS apply if my private company’s net worth is ₹260 crore but I have no external investors?
A: Yes. The net worth threshold applies to all private unlisted companies regardless of ownership structure.

Q: My company’s net worth crossed ₹250 crore in FY 2024-25. From which year does Ind AS apply?
A: From FY 2025-26. The transition date for the opening Ind AS balance sheet is 1 April 2024. FY 2024-25 is the comparative period that must be restated under Ind AS.

Q: Can I include my revaluation reserve when checking whether I have crossed ₹250 crore?
A: No. Revaluation reserves are excluded from the net worth calculation.

Q: Is the net worth test done on Indian GAAP accounts or Ind AS accounts?
A: Indian GAAP accounts. The applicability test is conducted under the existing framework in use at the time of assessment. Companies should not use Ind AS adjustments in their applicability calculation.

Q: We received a ₹500 crore equity infusion in September 2025. Does Ind AS apply to us from FY 2025-26?
A: No. The net worth test is applied to audited accounts at the 31 March balance sheet date, not intra-year. If your audited accounts as at 31 March 2026 show net worth of ₹500 crore or more, Ind AS applies from FY 2026-27. Start transition preparation immediately, but the obligation does not begin mid-year.

Q: Our company filed a DRHP with SEBI in January 2026 but now we are withdrawing it. Do we stay in Ind AS?
A: If you had already issued financial statements under Ind AS during the DRHP period, reverting is not permitted. If the DRHP is withdrawn before any Ind AS financial statements are issued (and your net worth is below ₹250 crore), you can revert to AS. Once the first Ind AS financials are issued, you are permanently in Ind AS.

Q: Our company has net worth of ₹180 crore. A PE fund with net worth of ₹900 crore holds 25% of our equity. Does Ind AS apply to us?
A: Potentially. If the PE fund is subject to Ind AS and holds more than 20% of your voting equity, your company is presumed to be an associate of the PE fund. As an associate of an in-scope entity, your company must provide Ind AS-adjusted numbers for the fund’s consolidated accounts. Whether you must produce standalone Ind AS financials depends on whether you are also a subsidiary (wholly or majority-owned) of the fund or another in-scope entity. This requires a specific structural assessment.

Q: We are an LLP with ₹400 crore in net worth. Does Ind AS apply?
A: No. The Companies (Indian Accounting Standards) Rules, 2015 apply only to companies under the Companies Act. LLPs are outside scope.

Q: We qualify as a small company after the December 2025 threshold revision. Does that exempt us from Ind AS?
A: No. Small company status under Section 2(85) is irrelevant to the Ind AS applicability test under Rule 4. The net worth test still applies. You may benefit from other compliance relaxations (no mandatory cash flow statement, reduced secretarial audit requirements) but the Ind AS obligation stands if your net worth crosses ₹250 crore.

Q: Once we adopt Ind AS, can we go back if our net worth drops below ₹250 crore?
A: No. Ind AS applies permanently once triggered, whether mandatorily or voluntarily. A subsequent fall in net worth does not suspend the obligation.

Q: What is the penalty for not following Ind AS when required?
A: Non-compliance is a violation of Sections 128 and 129 of the Companies Act, 2013. The statutory auditor is required to report non-compliance. MCA can initiate action under Section 450. NFRA, under Section 132, has authority to investigate and take action on financial reporting quality. The most immediate consequence is an adverse or qualified audit opinion.

Q: Does Ind AS apply to our Indian branch office of a foreign company?
A: No. A branch office is an extension of the foreign parent, not a company incorporated under the Companies Act, 2013. It is outside the Companies (Indian Accounting Standards) Rules, 2015.

Q: We are a manufacturing company that acquired a business last year. Could that acquisition have triggered Ind AS?
A: Possibly. If the acquisition added assets that pushed your standalone net worth above ₹250 crore as at 31 March of the acquisition year, Ind AS applies from the following financial year. The threshold test is applied to the post-acquisition balance sheet. Plan for this before closing any significant acquisition.

Q: Does Ind AS apply to the same extent to both standalone and consolidated financial statements?
A: Yes. Rule 4(3) of the Companies (Indian Accounting Standards) Rules, 2015 provides that once Ind AS applies to a company, it applies to both standalone financial statements and consolidated financial statements.

Q: We use XBRL for filing. Does anything change when we switch to Ind AS?
A: Yes. You must switch from the AS XBRL taxonomy to the Ind AS taxonomy when filing AOC-4 XBRL. The two taxonomies are substantively different. Filing using the wrong taxonomy produces a formally accepted but materially incorrect structured filing.

Q: Does Ind AS apply if our company is in the process of listing but has net worth below ₹250 crore?
A: Yes. Companies in the process of listing (interpreted as having filed a DRHP with SEBI or received in-principle stock exchange approval) are subject to Ind AS regardless of their net worth. SEBI in any case requires IPO financials to be Ind AS-compliant, so the two obligations are aligned.

Regulatory references:

• Companies (Indian Accounting Standards) Rules, 2015: MCA notification dated 16 February 2015, Rule 4 (applicability roadmap), Rule 4(3) (standalone and consolidated)
• Companies (Indian Accounting Standards) (Amendment) Rules, 2016: NBFC roadmap extension
• Companies (Indian Accounting Standards) Amendment Rules, 2025: MCA notification G.S.R. 291(E) dated 7 May 2025 (Ind AS 21 amendments, FX non-exchangeability)
• Companies (Indian Accounting Standards) Second Amendment Rules, 2025: MCA notification G.S.R. 549(E) dated 13 August 2025 (Ind AS 1, 7, 107, 12, 28, 109 amendments)
• Companies (Accounting Standards) Amendment Rules, 2026: MCA notification dated 10 March 2026, published 12 March 2026 (AS 22 amendment for non-Ind AS companies)
• Companies (Specification of Definition Details) Amendment Rules, 2025: MCA notification dated 1 December 2025 (revised small company thresholds, Section 2(85))
• Companies Act, 2013: Section 2(57) (net worth definition), Section 2(85) (small company), Section 128 (books of account), Section 129 (financial statements), Section 132 (NFRA), Section 133 (accounting standards), Section 137(3) (AOC-4 non-filing penalty), Section 232 (mergers and arrangements), Section 450 (punishment for non-compliance)
• Companies (Filing of Documents and Forms in Extensible Business Reporting Language) Rules, 2015 (XBRL filing obligations)
• Ind AS 101: First-time Adoption of Indian Accounting Standards
• Ind AS 21: The Effects of Changes in Foreign Exchange Rates (amended 2025)
• Ind AS 1: Presentation of Financial Statements (amended 2025)
• Ind AS 116: Leases
• Ind AS 115: Revenue from Contracts with Customers
• Ind AS 109: Financial Instruments (amended 2025)
• Ind AS 12: Income Taxes (amended 2025, Pillar Two exception)
• Ind AS 103: Business Combinations (Appendix C for common control)
• Ind AS 28: Investments in Associates and Joint Ventures
• RBI notification dated 22 March 2019 (indefinite deferral of Ind AS for scheduled commercial banks)
• SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018: Chapter XB (SME exchange definition)
• FEMA 22(R)/2016: Branch office regulations