Implementation of Indian Accounting Standards (Ind AS)

It is advised that scheduled commercial banks (excluding RRBs) shall follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, with effect from April 1, 2018 onwards, with comparatives for the periods ending March 31, 2018 or thereafter. Ind AS shall be applicable to both standalone financial statements and consolidated financial statements.

Banks are advised to set up a Steering Committee headed by an Executive Director (or equivalent) comprising members from cross-functional areas to immediately initiate the implementation process. The Audit Committee of the Board shall oversee the progress of the Ind AS implementation process and report to the Board at quarterly intervals. The critical issues which need to be factored in the Ind AS implementation plan include the following:

a)   Ind AS Technical Requirements: Diagnostic analysis of differences between the current accounting framework and Ind AS, significant accounting policy decisions impacting financials, drafting accounting policies, preparation of disclosures, documentation, preparation of proforma Ind AS financial statements, timing the changeover to Ind AS, and dry-run of accounting systems and end-to-end reporting process before the actual conversion.

b)  Systems and processes: Evaluate system changes - assessment of processes requiring changes, issues having significant impact on information systems (including IT systems), and develop/strengthen data capture system, where required.

c)   Business Impact: Profit planning and budgeting, taxation, capital planning, and impact on capital adequacy.

d)  People - Evaluation of resources: Adequate and fully dedicated internal staff for implementation, comprehensive training strategy and program.

e)   Project management: Managing the entire process-holistic approach to planning and execution by ensuring that all linkages are established between accounting, systems, people and business, besides effective communication strategies to stakeholders.

Banks shall assess the impact of the Ind AS implementation on their financial position including the adequacy of capital, taking into account the Basel III capital requirements and place quarterly progress reports to their Boards. Banks also need to be in preparedness to submit proforma Ind AS financial statements to the Reserve Bank from the half-year ended September 30, 2016, onwards.

From April 2016, the Reserve Bank shall hold periodic meetings with banks and issue necessary guidelines on relevant aspects as and when required.

Banks shall disclose in the Annual Report, the strategy for Ind AS implementation, including the progress made in this regard from the year 2016-17.

The Boards of the banks shall have the ultimate responsibility in determining the Ind AS direction and strategy and in overseeing the development and execution of the Ind AS implementation plan.

Based on RBI Circular dt 11/02/16. Please visit www.rbi.org.in for any further clarification if required…..       Poppy