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Net Worth of the Companies – For Application of IndAS - Ind AS - Indian Accounting Standards - Companies LawExtract Net Worth of the Companies For Application of IndAS Based on the stand-alone financial statements of the company as on 31 st March, 2014 or the first audited financial statements for accounting period which ends after that date; For companies which are not in existence on 31 st March, 2014 or an existing company falling under any of thresholds for the first time after 31 st March, 2014, the net worth shall be calculated on the basis of the first audited financial statement ending after that date in respect of which it meets threshold. Case I: Before Phase-I the net worth of company is ₹ 200 cr as on 31 st March, 2014 and it crossed ₹ 500 crore on 31 st March, 2015 It will fall in Phase I and prepare Ind AS financials from 1 St April, 2016 onwards. Case II : Before Phase-I, net worth of the company ids ₹ 600 crore as on 31 st march, 2014 and it went down to ₹ 200 crore in the subsequent years Even though the net worth reduced subsequently, as it complied as 31 st March, 2014, it will fall in Phase I and prepare IndAS financials from 1 st April, 2016 onwards. Paid up share capital XXX All reserves created out of profits XXX Security Premium account XXX Less: Accumulated Losses XXX Less: Deferred expenditure XXX Less: Miscellaneous expenditure not written off XXX Net Worth XXX Standards once required to be complied with in accordance with these rules, shall apply to both stand-alone and consolidated financial statements (CFS). Companies to which IndAS are applicable as specified in these rules shall prepare their first set of financial statements in accordance with IndAS effective at the end of its first IndAS reporting period. Overseas subsidiary, associate, Joint venture and other similar entities of an Indian company may prepare its standalone financial statements in accordance with the requirements of the specific jurisdiction provided that such Indian company shall prepare its CFS in accordance with the IndAS. Indian Companies which is subsidiary, associate, joint venture and other similar entities of a foreign company shall prepare its financial statements in accordance with the IndAS either voluntarily or mandatorily. Once the IndAS are applied voluntarily, it shall be irrevocable. Once the IndAS are applied voluntarily or mandatorily, it shall be required to follow the IndAs for all the subsequent financial statements even if any of the criteria specified in this rule does not subsequently apply to it. Illustration Company M Ltd. And Company N Ltd. Having net worth of ₹ 600 crore and ₹ 200 crore respectively are subsidiaries of a Foreign company viz., XYZ Inc., which has net worth of ₹ 500 crore in the financial year 2015-16. Whether Company M Ltd. And N Ltd. Are required to comply with IndAS from the FY 2016-17 on the basis of the net worth of the parent Foreign Company or on the basis of their net worth? Answer As per the above discussed rules, Company M having net worth of ₹ 600 crores in the year 2015-16, would be required to prepare its financial statements for the accounting periods commencing from 1 st April, 2016, as per the Companies (Indian ASs) Riles, 2015. Company N Ltd. Having net worth of ₹ 200 crore in the year 2015-16, would be required to prepare the financial statements as per the Companies (Ass) Rules, 2006. Since, the Foreign Company XYZ Inc. is not a company incorporated under Companies Act, 2013 or the earlier Companies Act, 1956, It is not required to prepare its financial statements as per the Companies (Indian Accounting Standards) rules, 2015. As the Foreign Company is not required to prepare financial statements based on the IndAS, the net worth of the Foreign Company XYZ would not be the basis for deciding whether Indian Subsidiary Company M Ltd. And Company N Ltd. Are required to prepare financial statements based on IndAs.
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