IFRS vs Ind AS: Key Differences Every Indian Business Must Know
Why Ind AS differs from pure IFRS, which carve-outs matter most, and how they affect companies with international operations.
India converged with IFRS rather than adopting it outright — the Ministry of Corporate Affairs kept roughly 90% of the treatment identical but built in around a dozen carve-outs, concentrated in financial instruments, borrowing costs, foreign exchange, and first-time adoption. These carve-outs mean Ind AS financial statements are not IFRS-compliant, and for companies with foreign investors, cross-border listings, or multinational reporting lines, the gap is exactly where numbers diverge from what an IFRS reader expects.
IFRS vs Ind AS is not a comparison between two unrelated frameworks — it is a comparison between the original and its carefully modified Indian adaptation. India did not adopt IFRS; it converged with it. The Ministry of Corporate Affairs reviewed each IFRS standard issued by the International Accounting Standards Board (IASB) and, where Indian company law, tax legislation, or economic conditions warranted a departure, introduced a carve-out — a specific modification that makes Ind AS different from the corresponding IFRS standard.
The result is a framework where approximately 90% of the accounting treatment is identical between IFRS and Ind AS, but the remaining 10% — concentrated in financial instruments, borrowing costs, foreign exchange, and first-time adoption — creates real differences in reported profits, asset values, and equity. For Indian companies with foreign investors, cross-border listings, or multinational group reporting obligations, these carve-outs are not footnotes — they are the exact points where Ind AS financial statements diverge from what a pure IFRS reader expects to see. The Classic Partner provides Ind AS advisory services that include carve-out impact analysis, dual-framework reconciliation, and IFRS conversion support for companies operating across both frameworks.
01 — Convergence vs AdoptionWhat Does "Convergence" Mean and Why Didn't India Just Adopt IFRS?
Adoption means taking IFRS as issued by the IASB and making it the legally binding framework — no modifications, no carve-outs. Over 140 countries have adopted IFRS this way, including the EU (with minor endorsement modifications), Australia, Canada, and most of Asia and Africa. Convergence means building a national standard set aligned with IFRS in substance and structure, but with specific modifications where local conditions require them.
India chose convergence for three interconnected reasons:
- Conflicts with Indian statutes. IFRS 9 prohibits recycling FVOCI equity gains to profit or loss, but Indian companies historically booked realised gains on strategic investments as income, and tax treatment under the Income Tax Act was structured around that practice.
- Rupee volatility. Under pure IFRS (IAS 23/IAS 21), exchange differences on foreign currency borrowings would hit profit or loss entirely — potentially distorting the reported operating performance of infrastructure companies with large dollar-denominated ECBs. The Ind AS carve-out allowing capitalisation was built specifically for this reality.
- The Indian GAAP transition gap. Moving from old Indian GAAP to Ind AS required additional first-time adoption exemptions beyond those available under IFRS 1, to accommodate very different measurement bases.
The practical consequence: Ind AS financial statements are not IFRS-compliant. An Indian company cannot claim compliance with "IFRS as issued by the IASB" based on Ind AS statements, even though the two are substantially similar — which matters for companies filing with foreign regulators or undergoing due diligence by foreign investors. Professional audit and assurance services verify that the correct framework is identified and that no inadvertent claim of IFRS compliance is made.
02 — The Carve-OutsWhat Are the Most Significant Ind AS Carve-Outs and Why Do They Exist?
The carve-outs fall into three thematic categories: financial instruments and investment accounting, foreign exchange and borrowing costs, and transition and first-time adoption.
Theme 1 — Financial Instruments and Investment Accounting
Ind AS 109 vs IFRS 9 — FVOCI equity recycling. This is the most commercially significant carve-out. Under IFRS 9, when a company designates an equity investment at fair value through other comprehensive income (FVOCI) and later sells it, the accumulated gain or loss transfers to retained earnings within equity — it never enters profit or loss. Under Ind AS 109, that same gain can be reclassified (recycled) to retained earnings on disposal. The end destination is the same, but Ind AS routes the gain through a distributable reserve, which has implications for dividend distribution and the computation of book profit under Section 115JB of the Income Tax Act. Companies with significant equity portfolios need corporate finance advisory that accounts for this difference when planning disposals.
Theme 2 — Foreign Exchange and Borrowing Costs
Ind AS 23 vs IAS 23 — exchange differences as borrowing costs. Under IAS 23, capitalisable borrowing costs include interest, discount/premium amortisation, and ancillary costs — but not exchange differences on foreign currency borrowings. Under Ind AS 23, exchange differences on foreign currency borrowings are included in borrowing costs to the extent they're regarded as an adjustment to interest costs. This lets Indian companies capitalise exchange losses on ECBs as part of the cost of qualifying assets — typically power plants, roads, and ports — instead of expensing them.
Ind AS 21 paragraph 46A — long-term foreign currency monetary items. Unique to Ind AS, this permits capitalising exchange differences on long-term foreign currency loans relating to depreciable capital assets, with the capitalised amount then depreciated over the asset's remaining life. Carried forward from old Indian GAAP (AS 11), it exists because infrastructure, real estate, and manufacturing companies borrowed heavily in foreign currency, and rupee volatility would otherwise have severely distorted operating results. Tax advisory teams must account for the deferred tax implications, since deductibility arises through future depreciation rather than an immediate expense.
Theme 3 — Transition and First-Time Adoption
Ind AS 101 vs IFRS 1 — additional transition exemptions. Ind AS 101 offers several voluntary exemptions beyond IFRS 1: using previous Indian GAAP carrying values as deemed cost for PP&E and intangibles at transition, specific relief for service concession arrangements common in Indian infrastructure, and different treatment for government grants. These exist because the gap between old Indian GAAP and Ind AS was wider than the gap between most other local GAAPs and IFRS — full retrospective application would have been operationally impractical.
The MCA reviews each new or amended IFRS standard before incorporating it into Ind AS. When the IASB issues something like the forthcoming IFRS 18, the MCA evaluates whether a carve-out is needed for the Indian version — meaning the number of carve-outs can rise or fall over time. Companies benefit from Ind AS advisory that monitors IASB developments and their potential impact on the Indian framework.
03 — Real NumbersHow Do These Carve-Outs Affect Financial Statements in Practice?
These differences are not theoretical — they produce materially different numbers wherever a carve-out applies.
Impact on reported profit — the borrowing cost example
An Indian infrastructure company holds a USD 200 million ECB for a highway project. During FY 2025–26 the rupee depreciates from ₹83 to ₹87. Exchange loss = USD 200 million × ₹4 = ₹800 crore.
Under Ind AS 23, this ₹800 crore is capitalised into the highway's cost — profit or loss is unaffected in the current year. Under pure IFRS (IAS 23), the entire ₹800 crore hits profit or loss, cutting pre-tax profit by that amount — large enough to swing the company from profit to loss, or halve reported earnings. This is why infrastructure companies, NBFCs, and real estate developers with large foreign currency borrowings feel this carve-out most.
Impact on equity — the FVOCI recycling example
An Indian conglomerate holds a strategic equity investment acquired for ₹100 crore, now worth ₹350 crore — an unrealised ₹250 crore gain sitting in OCI. On sale, that ₹250 crore moves from OCI to retained earnings under both frameworks, but the path differs: under Ind AS 109 it passes through the reclassification mechanism into a distributable reserve directly; under IFRS 9 it's locked in a non-distributable equity reserve permanently. For dividend policy, capital adequacy, and merger accounting, that distinction matters.
Impact on asset values — the deemed cost example
An Indian manufacturer transitioning to Ind AS in 2016 carried land and buildings at ₹50 crore under old Indian GAAP; fair value at transition was ₹300 crore. Under Ind AS 101, the company elected to use previous GAAP carrying values as deemed cost — recording ₹50 crore in the opening Ind AS balance sheet. Under IFRS 1 the same exemption exists but with different conditions, and fair value as deemed cost might have been required instead. That ₹250 crore difference cascades into depreciation, return on assets, and net asset value per share for years afterward. Companies undergoing transfer pricing assessments must ensure the asset base reflects the correct framework's values.
Indian companies filing with foreign regulators — the SEC, HMRC, or regulators in Singapore, Hong Kong, or the UAE — cannot use Ind AS statements as a substitute for IFRS statements. However small the carve-outs, they make Ind AS a distinct framework. If a foreign regulator requires IFRS compliance, the company must prepare a separate IFRS statement set or a detailed reconciliation. Claiming IFRS compliance while reporting under Ind AS is a misrepresentation that can trigger regulatory sanctions.
04 — Since LiberalisationHow Did India's Relationship With IFRS Evolve From Resistance to Convergence?
1990s–2007 — the debate over direct adoption. After liberalisation, Indian regulators and the ICAI debated whether to adopt IFRS directly. Large multinational-facing companies like Infosys and Tata Steel favoured alignment for global credibility, while smaller domestic companies worried about implementation cost and fair value accounting. Insurance, banking, and real estate raised sector-specific concerns. The debate ran for over a decade.
2007–2015 — the convergence decision and the long road to notification. In 2007 the ICAI announced a roadmap targeting April 2011 for Phase 1 companies. The timeline slipped repeatedly — to 2013, then 2015, then finally 2016 — driven by genuine complexity: interactions with the Income Tax Act needing legislative amendment, the banking sector's readiness for expected credit loss provisioning under Ind AS 109 lagging, and training and software infrastructure needing time to mature. The Companies (Indian Accounting Standards) Rules, 2015 finally established 39 Ind AS standards, mandatory from 1 April 2016 for Phase 1 (listed entities and companies with net worth ₹500 crore or more).
Ind AS was never meant to be IFRS with an Indian accent — it was built to survive contact with Indian tax law.
2016 to present — implementation, refinement, and ongoing carve-out management. Phase 2 (net worth ₹250 crore or more) took effect from April 2017; banks and NBFCs above specified thresholds followed. The MCA continues updating Ind AS as the IASB issues new standards, reviewing each time whether carve-outs should be retained, modified, or dropped. The NFRA, established in 2018, added enforcement — audit quality reviews now check whether companies correctly apply Ind AS carve-outs rather than inadvertently applying pure IFRS. Companies approaching the applicability threshold benefit from early engagement with accounting services that prepare the reporting infrastructure ahead of mandatory adoption.
05 — Managing the GapWhat Steps Should a Company Take to Identify and Manage These Differences?
- Map every carve-out against your specific transactions and balances. A services company with no foreign currency borrowings or equity portfolio may have zero applicable carve-outs. A bank, NBFC, or infrastructure company with ECBs, strategic equity holdings, and service concession arrangements may have four or five, each producing material differences.
- Quantify the financial impact of each applicable carve-out. For borrowing costs, compute the exchange differences capitalised under Ind AS 23 against what would have been expensed under IAS 23. For FVOCI, quantify the difference in distributable reserves. For paragraph 46A, compute the impact on depreciation and asset carrying values — for the current year and every comparative period presented.
- Prepare a reconciliation bridge between Ind AS and IFRS. A columnar schedule starting from the Ind AS balance sheet, income statement, and equity, showing each carve-out adjustment, arriving at the pure IFRS equivalent — the document foreign investors and group reporting teams actually review.
- Maintain a single policy manual covering both frameworks. Document the Ind AS policy, the corresponding IFRS policy, the specific carve-out creating the difference, and the quantification methodology — supporting both statutory audit and group auditor review. Companies pursuing business registration for entities with international reporting requirements should build this from incorporation.
- Train finance teams on the carve-outs relevant to the business. A treasury analyst managing the ECB portfolio needs to understand why exchange differences are capitalised under Ind AS 23 but expensed under IAS 23 — that knowledge determines whether a new instrument type falls within scope. Targeted training beats general Ind AS training.
- Monitor MCA notifications and IASB updates for changes to carve-outs. Carve-outs aren't permanent — the MCA can modify or eliminate them. If one is eliminated, companies must adjust from the effective date; new carve-outs may also be introduced for new standards.
06 — Pure IFRSWhen Does a Company Need Pure IFRS Financial Statements Instead?
| Scenario | What's required |
|---|---|
| Foreign stock exchange listing | Companies listed on the LSE, SGX, HKEX, or any IFRS-accepting exchange must file IFRS-compliant statements. Ind AS with a reconciliation note is not accepted as a substitute on most exchanges. |
| Multinational group consolidation under IFRS | Indian subsidiaries of foreign IFRS-reporting parents convert Ind AS books to IFRS by reversing carve-out treatments — expensing capitalised exchange differences, locking FVOCI gains without recycling, adjusting transition values. |
| International fundraising and cross-border M&A | Due diligence teams evaluate statements against IFRS benchmarks. A quality-of-earnings analysis routinely includes an IFRS adjustment schedule restating Ind AS profit and equity, with carve-out impacts as the primary reconciling items. |
FAQFrequently Asked Questions About IFRS vs Ind AS
Why did India choose convergence with IFRS instead of direct adoption?
India chose convergence over adoption because direct adoption of IFRS would have created conflicts with Indian company law, tax statutes, and regulatory requirements. The Companies Act, 2013, the Income Tax Act, 1961, and the RBI's regulatory framework all contain provisions that influence how financial transactions are accounted for. Full IFRS adoption would have required either changing these laws to align with IFRS or accepting inconsistencies between accounting standards and legal requirements. Convergence allowed India to adopt IFRS principles while modifying specific provisions — carve-outs — where Indian legal or economic conditions warranted a different treatment. The result is Ind AS, a framework that is substantially aligned with IFRS but includes approximately a dozen significant carve-outs.
What is the most impactful carve-out in Ind AS compared to IFRS?
The most financially impactful carve-out is in Ind AS 109 (Financial Instruments), which permits entities to reclassify gains or losses on equity instruments designated at fair value through other comprehensive income (FVOCI) to retained earnings on disposal. Under IFRS 9, this recycling is prohibited — the accumulated OCI balance on FVOCI equity instruments remains permanently locked in equity and never enters profit or loss. For Indian companies with large equity investment portfolios — particularly banks, insurance companies, and conglomerates — this carve-out means that realised gains on strategic equity investments can be transferred to distributable reserves under Ind AS, whereas under pure IFRS they cannot.
Can an Indian company use pure IFRS instead of Ind AS?
An Indian company that falls within the Ind AS applicability thresholds must use Ind AS for its statutory Indian financial statements — it cannot voluntarily choose pure IFRS for domestic regulatory compliance. However, an Indian company listed on a foreign stock exchange or filing financial statements with a foreign regulator may be required to prepare separate IFRS-compliant financial statements for that jurisdiction. In such cases, the company maintains dual reporting: Ind AS for Indian statutory purposes and pure IFRS for international regulatory purposes. The differences between the two sets of financial statements must be reconciled and disclosed.
How many carve-outs does Ind AS have from IFRS?
Ind AS contains approximately 12 to 15 significant carve-outs from IFRS as issued by the IASB. The most notable are in Ind AS 109 (FVOCI equity recycling), Ind AS 23 (capitalisation of exchange differences on foreign currency borrowings as borrowing costs), Ind AS 21 (capitalisation of exchange differences on long-term foreign currency monetary items under paragraph 46A), Ind AS 101 (additional transition exemptions), and Ind AS 17/116 (certain lease treatment modifications). The MCA reviews each new or amended IFRS standard before incorporating it into Ind AS and decides whether any carve-out is warranted. The number of carve-outs has remained relatively stable since the initial notification of Ind AS in 2015.
Do IFRS vs Ind AS differences affect tax calculations for Indian companies?
Yes, IFRS vs Ind AS differences affect tax calculations in specific ways. The Income Tax Act, 1961 was amended to accommodate Ind AS — particularly the computation of book profit for Minimum Alternate Tax (MAT) under Section 115JB, which is based on the profit reported in Ind AS financial statements. If a company prepared financial statements under pure IFRS instead of Ind AS, the book profit figure would differ wherever a carve-out applies — for example, the treatment of exchange differences on borrowings or the recycling of FVOCI gains. Since the tax computation is linked to Ind AS (not IFRS), using the wrong framework would produce an incorrect tax liability. Indian companies with international reporting obligations must maintain clear separation between their Ind AS and IFRS outputs.
Need Help With IFRS vs Ind AS Advisory or Dual-Framework Reporting?
The Classic Partner has deep expertise in Ind AS carve-out analysis, IFRS conversion, dual-framework reconciliation, and financial statement preparation under both standards. Whether you're mapping carve-out impacts for a foreign investor, preparing IFRS packages for a multinational parent, or navigating your first Ind AS transition, our team delivers the technical precision both frameworks demand.
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