AS or IND AS – What’s the difference?

Accounting is a process of recording an organization’s financial transactions in order to make important decisions. In accounting, every financial transaction must be recorded in the books following a standard and consistent format.  If there were no common standards, different firms might follow their own rules and formats to record transactions and present financial statements. It might cause problems for others too — like investors, lenders, and regulators. Therefore, we need a common set of standards to bring uniformity and consistency in accounting practices across all firms.

For all finance students, knowing Accounting Standard is important because it shows awareness of how accounting practices are evolving in India. One afternoon, I was sitting in the library when I noticed two students deep in conversation about accounting standards. Just then, a finance professor entered the library for some work. Seeing the opportunity, they quickly turned to him and said Sir, can you explain a bit about accounting standards and how they have evolved over time?

His professor smiled. Alright, let’s start by understanding the concept of accounting standards.”

What is Accounting Standards?

Accounting standards (AS) are a set of principles, standards and guidelines established to ensure that financial statements are consistent, comparable, and transparent.

Who Issues Accounting Standards in India?

The accounting standards are prepared by the Institute of Chartered Accountants of India (ICAI). It is done under the administrative control of the Ministry of Corporate Affairs, Government of India.

Background of Indian Accounting Standards (IND AS)

In recent years, India, one of the fastest growing economies has captured the attention of investors worldwide. Since many foreign companies have set up businesses in India, there’s a need for accounting standards that match global practices and this need has been recognized by the ICAI (Indian Chartered Accountants Institute). In collaboration with the Government of India, the ICAI has decided to not accept and adopt the IFRS the way they are. To align Indian accounting practices with international standards, the existing Accounting Standards were aligned and converged with IFRS. That’s how the Indian Accounting Standards, known as IND AS, came into existence—to make our reporting system match global standards. INDAS helps Indian companies maintain financial statements that are understandable both domestically and internationally.

Accounting Standards (AS) and Indian Accounting Standards (IND AS)

• The older framework of Indian GAAP is the Accounting Standards (AS), which is largely rule-based and is applied to smaller entities.

• Indian Accounting Standards (Ind AS) are principle-based global comparative transparency financial reporting standards that are notified by MCA and are IFRS-converged.

• In short, Accounting Standards (AS) are the traditional Indian guidelines issued by the ICAI, Indian Accounting Standards (IND AS) are modern, globally aligned standards converged with IFRS.

The Story of Hard Soft Ltd.

Now, I’ll tell you a story about a company and you’ll see how accounting standards actually work in practice.

Let’s assume Hard Soft Ltd., a company that just bought a new machinery for Rs. 20,00,000. It has a useful life of 10 years and a scrap value of Rs. 2,00,000.

Now the confusion begins: How should this machinery appear in the books?

Under Old AS 10 (Indian GAAP)

Machinery is recorded at historical cost = Rs. 20,00,000

Depreciation (SLM) = (20,00,000 –2,00,000) / 10 = Rs.1,80,000 per year.

After 1 year, Balance Sheet shows the asset at Rs. 18,20,000

Straightforward and rule-based

Under Ind AS 16 (IFRS-aligned)

At first, machinery is recorded at Rs. 20,00,000

But Ind AS gives a choice: Cost Model (same as AS) OR Revaluation Model.

Suppose fair value at year-end is Rs. 22,00,000

Balance Sheet shows Rs. 22,00,000

Depreciation for next year = (22,00,000 – 2,00,000) /9 = Rs. 2,22,222

The extra Rs. 2,00,000 gain is not in profit—it is transferred to Other Comprehensive Income (OCI).

Professor said, now you understand: the same machinery shows different profits and net worth just because of the accounting framework!

AS vs Ind AS – At a Glance

Basis	AS (Indian GAAP)	Ind AS (IFRS-aligned)
Approach	Rule-based	Principle-based
Standards Set by	ICAI (Accounting Standards)	MCA + ICAI (Ind AS, converged with IFRS)
Structure	Simple,applicable to small and medium-sized companies and certain entities not required	Principle-based, applicable to listed companies and large unlisted companies, as per specified criteria.
Global Use	Only within the country	Enables global comparability
Measurement	Historical cost focus	Fair value plus cost option
Example (Machinery Rs. 20 lakhs, scrap Rs 2 lakhs, life 10 yrs)	Shown at cost Rs. 20 lakhs; depreciation Rs. 1.8 lakhs p.a.	Can be revalued to Rs. 22 lakhs depreciation ₹2. 22 lakhs p.a.; revaluation gain in OCI

Learning outcome

• Accounting Standards make comparable financial statements for companies and industries to assist investors, regulators, and other stakeholders in making informed decisions. 
• AS – Based on Indian GAAP (Generally Accepted Accounting Principles).  More rule-based and less aligned with global practices   

• Ind AS – Converged with International Financial Reporting Standards (IFRS). More principle-based, focusing on fair value measurement and transparency.

As the short discussion came to an end, the professor gathered his notes and was about to leave. The students moved and said with a smile, “Thank you, sir! Now it’s absolutely clear.”
The professor replied warmly, “Good, I’m pleased to hear that.  Alright then, I’ll move on to my finance class and walked out of the library with a gentle smile.