Ind AS Research Articles

INTERNATIONAL FINANCIAL REPOTING STANDARDS & IT’S CONVERGENCE IN INDIA 1.

In order to improve financial statemet comparability, accountability, and transparency, the adoption and convergence of International Financial Reporting Standards (IFRS) have become essential components of financial reporting on a global scale. This study examines the development and effects of IFRS convergence in India, focusing on the corporate, regulatory, and financial ecosystem consequences. Financial reporting procedures have undergone major changes as a result of the gradual implementation of the Indian Accounting Standards (Ind AS), which are convergent with IFRS, across a number of sectors. The present study scrutinizes the advantages of implementing IFRS, such as enhanced investor trust and global comparability, in conjunction with the obstacles encountered by Indian enterprises, such as escalated compliance expenses and the intricacy of novel standards. The study also explores the role regulatory organizations play in promoting the convergence process, including the Securities and Exchange Board of India (SEBI) and the Institute of Chartered Accountants of India (ICAI). This study offers insights into the efficacy of IFRS convergence in India by a thorough analysis of the body of research, case studies, and empirical data. It highlights significant areas of success as well as persistent challenges. The results indicate that although convergence has helped India's standing in the international financial sphere, ongoing work is still needed to resolve implementation problems and guarantee the smooth adoption of IFRS in the Indian setting. Keywords: Finance, Financial Report, IFRS.

Impact of Indian Accounting Standards (IND AS) on Financial Statements

The adoption and implementation of accounting standards play a pivotal role in shaping the financial reporting landscape of a country, influencing how businesses communicate their financial performance and position to stakeholders. In the case of India, the transition from Generally Accepted Accounting Principles (GAAP) to Indian Accounting Standards (Ind-AS) marked a significant paradigm shift in the accounting framework. The move was aimed at aligning Indian accounting practices with global standards, fostering transparency, comparability, and international investment. Historically, India had been following its own set of accounting standards, which sometimes diverged from international norms, leading to challenges in cross-border financial analysis and investment decisions. Recognizing the need for convergence with International Financial Reporting Standards (IFRS), the Ministry of Corporate Affairs (MCA) in India mandated the adoption of Ind-AS for certain classes of companies, primarily listed entities and large unlisted companies. The adoption of Ind-AS was a phased process, with the first set of companies transitioning in the financial year 2016-17. The primary objective was to enhance the quality and reliability of financial reporting, making it more comparable and relevant on a global scale. Ind-AS aimed to bring about consistency in accounting treatments, disclosures, and presentation of financial statements, fostering a more transparent and investor-friendly environment. One of the key motivations behind the shift to Ind-AS was to facilitate easier access to global capital markets for Indian companies. By adhering to internationally recognized accounting standards, Indian businesses sought to attract foreign investment and broaden their investor base. This move was particularly crucial as India aimed to position itself as a global economic player, attracting multinational corporations and fostering cross-border investments. The implementation of Ind-AS introduced changes in various aspects of financial reporting, affecting balance sheets, income statements, and disclosure practices. Companies faced the challenge of adapting to new measurement criteria, recognition principles, and disclosure requirements. The impact of these changes extended beyond mere compliance; it influenced how companies assessed their assets, liabilities, and overall financial performance. Additionally, the adoption of Ind-AS prompted companies to reevaluate their internal control mechanisms, financial policies, and governance structures. The transition required a robust framework for training and educating financial professionals, auditors, and other stakeholders to ensure a smooth and accurate implementation of the new standards.

A COMPARATIVE STUDY ON FINANCIAL REPORTING OF SELECT NIFTY FIFTY COMPANIES USING GRAY’S COMPARABILITY INDEX

The Institute of Chartered Accountants of India (ICAI) plays a crucial role in promoting globally recognized accounting standards in the Indian context. In this endeavor, ICAI has introduced the Indian Accounting Standards (Ind AS) to align with the International Financial Reporting Standards (IFRS). We aim to assess the impact of implementing the new accounting standards compared to the pre-existing standards. To achieve this, we employed Grays comparability index model on the key items of the consolidated financial statements of selected NIFTY FIFTY companies and examined the outcomes. The analysis reveals significant alterations in the figures of current and non-current liabilities, as well as total income and total expenses. These changes are attributed to various recognition and disclosure criteria introduced by the new accounting standard. KEY WORDS: Ind AS, IGAAP, NIFTY FIFTY, Grays Comparability Index

FINANCIAL REPORTING EVOLUTION: A CASE STUDY OF IND AS IMPLEMENTATION OF INDIAN STEEL COMPANIES

This article investigates the ramifications of the transition from Indian Generally Accepted Accounting Principles (IGAAP) to Indian Accounting Standards (Ind AS) on financial reporting within the Indian steel industry. In an era of global economic interconnectivity, the move towards aligning with international standards, notably International Financial Reporting Standards (IFRS), holds profound implications. The study underscores the paramount importance of transparency and comparability in financial reporting. The study employs the Grays Comparability Index (GCI) to quantitatively assess the conservatism levels in reporting various financial statement items. The findings reveal that while assets, liabilities, and equity exhibit relatively consistent reporting under both standards, Ind AS demonstrates a propensity for greater optimism in the reporting of income, expenses, and financial activities.

The Role of Implications of Ind AS towards the Profitability of Pharmaceutical Companies through E-Pharmacy: A Study of Post Implications of Ind AS in India

In the view of the present scenario, the implications of Ind AS in India has opened numerous gates to reach to the market. The online pharma industries have emerged as new platform of e-commerce. Pharma industries has given so many facilities like, online consultation by reputed doctors across India and door to door delivery of medicines. Due to this facility, pharmaceutical industries have made huge profits. The paper reveals the recent upward shifts in the profitability of this industry due to the change in the standards. The data reflects that Pharma has earned double the profit in past few years.
 There are around 20 companies those are providing E- Pharmacy services in India, but a few companies are popular in market. In the same contest, it analyses the performance of these companies in Indian market. The data presented will show a significant change in the preferences of customers for buying medicines online along with . The customer has changed their perception towards the online trading of medicines due to huge margins, convenience for purchasing through online mode and receiving the medicines at doorstep.

A Study of the Effect of Fair Value Measurement on the Financial Performances of Selected NSE-Listed Companies

In recent years, fair value measurement has become an important concept in accounting terminology. A significant development has been observed when the measurement of assets and liabilities has been made through fair value while preparing the financial statement of an entity. The importance of which is entirely related to transparency, reliability, and comparability of the statements of affairs of business entities. The question of transparency in accounting arose as the number of stakeholders in business entities increased. In India, fair value measurement is based on Ind AS 113, and it has had an enormous impact on the financial performances of companies listed on the NSE. This paper dwells upon the fact regarding the impact of fair value measurement on financial performances of the top 12 NSE-listed companies of two sectors, namely, automobile and metal, by means of the Fair Value Index (FVI) and by content analysis technique to show the trend through the ratio of these two sectors and whether these companies’ financial position has been improving by implementing FVM in their reporting. The data has been collected from secondary sources, and the research is basically an exploratory in nature. The results show that none of the companies under these two sectors perform very poorly after disclosures under FVM; rather, these companies are trying to improve their financial recording by implementing proper disclosures and nomenclatures.

Does the Ind AS moderate the relationship between capital structure and firm performance?

AbstractIn line with the wide implementation of IFRS around the globe, the significant shift in the Indian accounting system appertained to the Ind AS is expected to have a substantial impact on the firm‐level information environment. Nevertheless, the question of whether the adoption of such standards moderates the relationship between leverage and firm performance remains unanswered. In this backdrop, we aim to close this research gap employing 3120 firm‐year observations from 401 Indian non‐financial firms for a period from 2013 to 2022. Notably, we found that the leverage among Indian firms discourages profitability. Further, the adoption of Ind AS negatively moderates the leverage and firm performance association. The findings suggest that the enhanced transparency and the firm's reporting quality dissuade risk‐averse investors from investing in highly levered companies. As a result, investors avoid risky investments, and firms must strive to foster their trust and motivation. The conclusion of the present research draws significant implications for management and policymakers while also contributing to the ongoing debate on capital structure and firm performance.

Convergence Of Ind AS: Challenges and Benefits in Implication of Accounting Standards

Purpose: The aim of this study is to Examine the awareness level of challenges and benefits among qualified Chartered Accountants and accounting professionals
 
 Theoretical reference: The theoretical framework for the study is to analyse the awareness level of Chartered Accountants towards the benefits and challenges of Ind AS.
 
 Method: The structured questionnaire of 5 levels Likert scale has been used in June 2023 for the collection of data. The hypotheses were tested by measurement model and structural equation model using Smart PLS 4.0 Software.
 
 Results and conclusion: The findings reveal that there is an awareness among Audit practitioners and accounting professionals through experiencing the benefits and challenges after the conversion with Ind AS.
 
 Implications of research: The study allows the auditors and Chartered Accountants to educate themselves towards the level of contribution, challenges, benefits and the new changes occurring around them
 
 Originality/value: The article contains awareness-creating content that allows audit practitioners and chartered accountants to get aware of the benefits and challenges on and after adoption of New Accounting Standards in India.

Segment reporting practices: A study on select listed NBFCS in the light of implementation of ‘IND AS’

Segment reporting practices: A study on select listed NBFCS in the light of implementation of ‘IND AS’

Influence of redox condition and inoculum on micropollutant biodegradation by soil and activated sludge communities

Micropollutant biodegradation is selected by the interplay among environmental conditions and microbial community composition. This study investigated how different electron acceptors, and different inocula with varying microbial diversity, pre-exposed to distinct redox conditions and micropollutants, affect micropollutant biodegradation. Four tested inocula comprised of agricultural soil (Soil), sediment from a ditch in an agricultural field (Ditch), activated sludge from a municipal WWTP (Mun AS), and activated sludge from an industrial WWTP (Ind AS). Removal of 16 micropollutants was investigated for each inoculum under aerobic, nitrate reducing, iron reducing, sulfate reducing, and methanogenic conditions. Micropollutant biodegradation was highest under aerobic conditions with removal of 12 micropollutants. Most micropollutants were biodegraded by Soil (n = 11) and Mun AS inocula (n = 10). A positive correlation was observed between inoculum community richness and the number of different micropollutants a microbial community initially degraded. The redox conditions to which a microbial community had been exposed appeared to positively affect micropollutant biodegradation performance more than pre-exposure to micropollutants. Additionally, depletion of the organic carbon present in the inocula resulted in lower micropollutant biodegradation and overall microbial activities, suggesting that i) an additional carbon source is needed to promote micropollutant biodegradation; and ii) overall microbial activity can be a good indirect indicator for micropollutant biodegradation activity. These results could help to develop novel micropollutant removal strategies.

Do IFRS convergence affects firm performance? Picturing Indian-listed manufacturing firms

PurposeThe study has endeavored to assay the nexus between the converged version of the International Financial Reporting Standards (IFRS) on the performance of the Indian-listed manufacturing firms.Design/methodology/approachThe study has randomly accessed the data of the Bombay Stock Exchange (BSE) listed Indian manufacturing firms using the Prowess IQ database. It has covered 2014–2016 as pre-IFRS and 2017–2020 as the post-IFRS convergence period. Moreover, the study has followed a longitudinal research design with cross-sectional time-series data and has used the difference-in-difference (DiD) technique to assess the effect of the IFRS convergence on firm performance (FP).FindingsThe results have indicated that the adoption of the Indian Accounting Standards (Ind AS) has unlikely reported better FP. It has concurred policy implications as full adoption rather than convergence could reap the benefits of the IFRS.Originality/valueIt has contributed to the existing body of knowledge by assaying the effect of the IFRS convergence on FP in developing economies like India using the DiD methodology. The study is an original piece of research and is free from plagiarism.

Does the adoption of Ind AS affect the performance of firms in India?

The increasing prevalence of IFRS adoption has resulted in enhanced transparency, accounting quality, and comparability of financial information among firms, especially in emerging markets worldwide, including India. Nonetheless, the question of whether the adoption of IFRS has led to improved firm performance persists. To address this question, this study examines the impact of transitioning from India’s GAAP-based accounting standards to IFRS-converged standards (Ind AS) on non-financial firms’ performance from 2013 to 2022. The empirical findings reveal that the convergence of Indian accounting standards with IFRS significantly improves firm performance, as demonstrated by a positive coefficient of 0.0166 for Ind AS in the fixed-effect model. The study also validates the original empirical findings using the return on equity (ROE) measure of firm performance, which yielded a coefficient of 0.0197, further confirming that the adoption of Ind AS leads to an increase in the performance of Indian firms. These results contribute new insights to the existing IFRS literature and have implications for policymakers and managers.

Value relevance of financial information: A comparative study of pre- and post- implementation of Indian accounting standards

In 2016, India implemented new accounting standards, Ind AS, aligning with IFRS to increase transparency in the financial reporting of Indian companies. This study examines the value relevance of financial information in India before and after the adoption of Indian accounting standards (Ind AS) by comparing the published financial statements in pre- and post-Ind AS periods and determines the influence of financial information on the market price of shares. The study period is for twelve years, from 2011 to 2022, divided into 2011–2016 (pre-Ind AS period) and 2017–2022 (post-Ind AS period). To evaluate the value relevance of financial information, the Ohlson pricing model is employed on the panel data of the blue-chip companies listed in the Nifty 50 Index. The results from the Least Squares regression reveal that the net cash from investing activities, profit-after-tax, and book-value-per-share were relevant for investment decisions prior to the adoption of the Ind AS. In contrast, the profit-after-tax had no explanatory power during the post-Ind AS period. However, the net cash from investing activities and the book-value-per-share significantly influenced the market price of equity since the implementation of Ind AS. The value relevance of the accounting statements was superior in the pre-Ind AS period compared to the post-Ind AS.

Estimation and Effectiveness of Optimal Hedge Ratios of Cryptocurrencies Based on Static and Dynamic Methodologies

The emergence of cryptocurrencies futures market is an innovative platform for prudent investors to hedge risk contained in their portfolio. However, the dicey environment of cryptocurrencies and mandatory requirement of Ind AS 39 has aroused the need for estimating hedging effectiveness of their futures market. This treatise is an attempt to investigate the hedging effectiveness of Bitcoin, Ethereum, XRP and Bitcoin Cash covering the period from June 2018 to May 2022. The interconnectedness of their spot and futures markets is initially studied using Johansen cointegration test, dynamic conditional correlation model, vector error correction model and block exogeneity Wald test. Their empirical results indicate interconnectedness in these markets having significant long-term relationship; persistent volatility correlations; significant unidirectional long-term causality from futures to spot; and bidirectional short-term causality in all cryptocurrencies. So, investors can hedge their risk by engaging position in cryptocurrencies’ futures. The OLS, VECM, GARCH and TARCH methodologies are applied to estimate static optimal hedge ratios and their estimates indicate that all cryptocurrencies have negative and significant ratios except XRP. The symmetric as well as asymmetric diagonal VECH and diagonal BEKK methodologies are applied to estimate dynamic-hedge ratios and their estimates depict negative mean dynamic-hedge ratios of all cryptocurrencies except XRP. These estimations imply that investors having long position in spot contracts of Bitcoin, Ethereum and Bitcoin Cash should hedge by taking short position in their futures contracts, respectively. However, XRP investors should hedge by taking long position in XRP future contracts. The empirical results clearly indicate the outperformance of static hedge strategies over dynamic hedge strategies as variance reduction framework of Ederington favours static OLS hedge strategy and the risk–return framework of Howard and D’Antonio favours static VECM hedge strategy for all cryptocurrencies. So, the long-run considerations have played a more crucial role as compared to short-run information. These findings may guide investors having different objective functions in understanding the effectiveness of different hedge strategies and their usage for achieving their objective functions. Policymakers, treasurers and auditors may also be benefitted from the insights provided in the present treatise on different estimation methodologies for hedging effectiveness.

THE IMPACT OF ACCOUNTING DISCLOSURE IN THE QUALITY OF FINANCIAL AND NON-FINANCIAL PERFORMANCE

The financial and non-financial performance can be disclosed through the annual reports. Initially before 2007 the non-financial reports were presented by the organisation on demand. The disclosure of nonfinancial reports along with financial reports in the financial statements of the company in the official websites have been started as a good practice to present the overall information about the performance of the organisation. Nonfinancial reporting on environmental challenges, pressure from investors, customers, reputation and trust on the company by the customers, employee wellbeing, competition were specifically asked by the financial institutions or banks to have a better understanding while estimating the reputation of the organisation as specified by Indian Accounting Standards [Ind AS] [1]. The main objectives of the study are to present the exploration on the financial and nonfinancial performances of the organisations in regard with the nation’s political, economic, social conditions, explore the influence of the nonfinancial performance information divulgence affects the financial information of the organisations and To present various financial and nonfinancial information of different organisations with the help of literature review related to the study as a supportive material.

Determinants of goodwill impairment disclosure: the role of audit quality and analysts following

PurposeThe authors investigate the effect of audit quality and analysts' coverage on firms' compliance concerning goodwill impairment testing and disclosure requirements with the Indian Accounting Standard (Ind AS) over the period of 2017–2020.Design/methodology/approachThe authors conduct univariate analysis and employ pooled ordinary least square (POLS) and Fama–MacBeth (FMB) regression techniques for empirical testing.FindingsThe authors report a substantially higher disclosure score (DS) for firms with superior audit quality and for firms with incidence of analysts' coverage. Moreover, the authors show a positive impact of audit quality on the firm's degree of disclosure. This signifies better compliance by the clients of Big-4 audit firms in the enforcement of standard's mandates. Besides, the results on analysts' coverage indicate that the increasing number of analysts discipline managers in terms of appropriate compliance with disclosure requirements, hence favours the monitoring effect hypothesis for Indian firms. The results are robust to the alternate measures of key regressors, set of firm controls and alternate estimation technique.Originality/valueThe study adds to the knowledge concerning the economic consequences of mandatory disclosures and is possibly the first to investigate compliance related to goodwill impairment disclosure regime under the new Ind AS.

The relevance of accounting information in the era of Ind AS: Evidence from a Nifty Energy Index

This paper investigates the value relevance of the financial information reported by energy companies included in the NSE Energy Index after the mandatory adoption of the Indian Accounting Standards (Ind AS) for the 2016–2017 accounting year. The fixed-effects model was employed on the panel data of energy companies included in the NSE Energy Index to study the impact of the accounting information on the market price of the shares for the period 2017–2021. The study suggests that a company’s book value consistently explained the variation in the market price across each year individually. Moreover, with the control of time across firms for the study period, book value per share and net cash flow from investing activities have significant explanatory power on the market price of a company’s shares. Profit after tax, which is widely used to determine a firm’s performance, cannot explain the variability in the market price of shares.

Audit Tenure, Audit Fee, and Audit Quality : Evidence from India

This paper examined the relationship between the tenure of the auditor and the audit quality of Indian companies, particularly in the wake of two significant regulations in the financial reporting, the implementation of Ind AS (the IFRS compliant accounting standards) and mandatory auditor rotation. Using Discretionary Accruals as a proxy for audit quality, the study took the data of all the companies listed on the NSE for 11 financial years, from 2009 – 2019 (totaling 8,171 firm-year observations). It deployed panel data regression with a random-effects model. The results showed that audit quality improved up to specific auditors’ tenure, particularly with the IFRS compliance and Big 4 auditors. The higher audit fee is positively significantly associated with lower earnings quality. The study suggested that mandatory auditor rotation might provide the full benefit only along with other regulations on IFRS, auditor reputation, and audit fee. The study provided an impetus to the regulators, audit fraternity, and companies to improve the relevance of financial statements. This is one of the first longitudinal studies examining the interaction effects of different audit regulations. Robustness checks with other proxies of audit quality provided the same results.

Creative Accounting: A Fact or Illusion in Indian Corporate Sector Financial reports are prepared to ensure timely availability of reliable information regarding companies’ state of affairs to its users (ICAI, 2000)

The goal of the present study is “to investigate the concept and techniques of creative accounting, as well as how it is implemented and how it can result in financial crimes”. The procedures that are followed, as well as the individuals who are involved in and victims of such crimes. The means employed to carry out the action and how it is carried out. This study also investigates the workings of “accounting policies” and how “loopholes” in them might be exploited, resulting in a set of games that can be played around them in order to get the desired results in the “preparation of financial statements”. The outcomes of the study show that “creative accounting though legal and acceptable around the world. It provides door to loopholes provided by the acts and laws governing the preparation of financial accounts, resulting in financial crimes and hampered economic growth”. “Creative accounting though not illegal but the excess use of the same has given daunting effects on the financial statements and as a result have resulted into financial frauds and looting of people’s money throughout the world”. The Institute of Chartered Accountants of India (ICAI) along with its members have always played a vital role in ensuring transparency in accounting, still there are many organizations which are try to manipulate the financials. Although creative accounting is not prohibited, its widespread use has had alarming implications on financial accounts, resulting in financial fraud and the looting of people’s money around the world. Investors’ “hard-earned money” is stolen, and there is no way to stop it because the mechanisms and legal bodies are still working to solve the problem, so it is critical to understand about “creative accounting”. Earlier AS were applied in preparation and presentation of financial statements which are shifted to Ind AS for all large companies. Ind AS provides more focus on fair valuation of various items which includes application of judgement and principles. Hence, it becomes more imperative to understand the concept of creative accounting. This research contributes to a better understanding of the rise of “creative accounting” and how it has led to “accounting fraud and financial crimes” in the economy.

The impact of IFRS convergence on key financial indicators of Public Sector Undertakings listed on NSE, India

The study investigates the impact of International Financial Reporting Standards convergence (IFRS) on the key financial ratios and balance sheet figures of public sector units listed in India (adopted IFRS first time in 2016-2017). The study used purposive sampling and selected 18 Public Sector Undertakings (PSUs) grouped under the first phase of mandatory adoption in 2016-2017. The study employed the paired T-test and Wilcoxon signed-rank test to test the significant median differences. The analysis is done in three parts; first, key ratios are compared to identify the significant difference between Indian (GAAP) and Indian (AS). Second, absolute figures from the financial statements were also compared, and lastly compared both outcomes to detect the differences. The findings revealed that a statistically significant impact of convergence to Ind AS is on Total Assets, Total Liabilities, and Tangibles. In contrast, in the case of all the other absolute figures like PAT, TCI, and, more importantly, Equity, the impact of convergence is not statistically significant. The originality of the paper lies in measuring the impact of mandatory adoption of Ind AS on PSUs in India.