IFRS Conversion for Indian Subsidiaries of Foreign Companies
When a foreign group sets up or acquires a company in India, two reporting worlds meet. The parent consolidates its results under IFRS (or another group framework), while the Indian subsidiary must prepare statutory financial statements under Indian law. Finance teams in India are then asked for “IFRS numbers” every month or quarter, often with tight group deadlines and limited guidance on what has to change.
This guide explains what IFRS conversion for Indian subsidiaries actually involves, why it does not replace Indian statutory accounts, the main adjustments from Indian standards to IFRS, and how to set up a reliable reporting process.
Do Indian Subsidiaries of Foreign Companies Need to Prepare IFRS Accounts?
Not as their statutory accounts. Under the Companies Act, 2013, an Indian subsidiary prepares its statutory financial statements under Indian Accounting Standards (Ind AS) or the Accounting Standards (AS), depending on which framework applies to it. Separately, it usually prepares an IFRS reporting package for the foreign parent’s consolidation, using a mapping of adjustments from its Indian books to IFRS group policies.
Two Sets of Requirements, One Set of Books
| Requirement | Framework | Who uses it |
|---|---|---|
| Statutory financial statements | Ind AS or AS, as notified under the Companies Act | Shareholders, MCA filings, statutory auditor, tax authorities, Indian lenders |
| Group reporting package | IFRS (or the parent’s framework) and group accounting policies | The foreign parent for consolidation; group auditors |
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Most companies keep one set of books under the Indian framework and maintain a structured set of adjustments, a “GAAP bridge,” to produce IFRS figures. The aim is not two separate accounting systems, but a documented, repeatable conversion.
Is Your Subsidiary on Ind AS or AS?
Ind AS applies to listed companies, unlisted companies with net worth of ₹250 crore or more, and the holding, subsidiary, joint venture and associate companies of those Indian companies, with separate roadmaps for NBFCs and deferrals for banks and insurers. Other companies follow the Accounting Standards under the Companies (Accounting Standards) Rules, 2021. Any eligible company may adopt Ind AS voluntarily, but once adopted it cannot go back.
The foreign parent’s own listing or size does not usually bring an Indian subsidiary within the Ind AS roadmap by itself; the test is based on the Indian company’s own position and its Indian group relationships. Confirm the position for your entity. Our comparison of Ind AS vs IFRS vs IGAAP covers the roadmap in detail.
Which Subsidiaries Have the Easier Conversion?
- Ind AS subsidiaries: Ind AS is converged with IFRS, so differences are limited to carve-outs, carve-ins and policy choices. The bridge is usually short.
- AS (IGAAP) subsidiaries: AS differs from IFRS in many areas, so the bridge is longer and needs more data, especially for leases, financial instruments and deferred tax.
Some AS subsidiaries choose to adopt Ind AS voluntarily to shorten the bridge. Because the choice is irrevocable and changes statutory reporting, it should be decided with the group and the statutory auditor.
Common Adjustments From Indian AS to IFRS
| Area | Indian AS (typical position) | IFRS |
|---|---|---|
| Leases | Operating leases expensed (AS 19) | Most leases on balance sheet as right-of-use asset and lease liability (IFRS 16) |
| Revenue | Risks-and-rewards and completion-based guidance (AS 9, AS 7) | Five-step model with performance obligations (IFRS 15) |
| Financial assets and impairment | Incurred-loss provisioning | Expected credit loss model (IFRS 9) |
| Financial instruments measurement | Largely cost-based | Amortised cost or fair value classifications (IFRS 9) |
| Deferred tax | Timing differences approach (AS 22) | Temporary differences, balance sheet approach (IAS 12) |
| Employee benefits | Actuarial gains and losses in profit or loss (AS 15) | Remeasurements in other comprehensive income (IAS 19) |
| Share-based payments | Guidance-based; intrinsic value sometimes used | Fair value of grants, including group share plans (IFRS 2) |
| Foreign currency | No functional currency concept (AS 11) | Functional currency determination (IAS 21) |
| Property, plant and equipment | Component approach and depreciation per Schedule II | Component accounting and useful lives per group policy (IAS 16) |
| Presentation | Schedule III format | Group chart of accounts and IFRS presentation |
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This is a general summary; actual adjustments depend on the subsidiary’s transactions and the group’s accounting policies. For Ind AS subsidiaries, typical differences relate to Indian carve-outs, such as the cost model only for investment property and certain classification differences, and to group policy choices.
Group-Specific Requirements
- Group accounting policies, such as capitalisation thresholds, useful lives, provisioning and revenue policies, which may be stricter than the standards.
- Group chart of accounts and reporting templates, often in a consolidation system.
- Intercompany reconciliation of balances and transactions with other group entities.
- Reporting calendar with monthly, quarterly and year-end deadlines, usually earlier than Indian statutory timelines.
- Different year-ends: Indian companies generally use a 1 April to 31 March financial year. A subsidiary of a foreign company that needs a different year for consolidation outside India may apply to the NCLT under Section 2(41) of the Companies Act to adopt a different financial year.
- New IFRS requirements, such as IFRS 18, which replaces IAS 1 for periods beginning on or after 1 January 2027 and changes how groups present the income statement.
Step-by-Step IFRS Conversion Process
- Confirm the frameworks: the subsidiary’s statutory framework (Ind AS or AS) and the group’s reporting framework and policies.
- Gap analysis: compare Indian policies with group IFRS policies, area by area, and quantify likely adjustments.
- Design the GAAP bridge: define each adjustment, its calculation, data source, owner and frequency.
- Collect data: lease registers, contract details for revenue, receivables ageing for ECL, actuarial reports, share plan data and fixed asset details.
- Opening balances: for a first IFRS package, calculate opening adjustments, applying IFRS 1 principles where the group requires.
- Map to the group chart of accounts and reporting templates.
- Reconcile: Indian statutory profit and equity to IFRS profit and equity, with every adjustment explained.
- Review and sign-off by local finance and the group; support group auditor queries.
- Document the process so it can be repeated each period by different people.
Audit Considerations
The Indian statutory auditor audits the statutory financial statements under the Standards on Auditing. The group auditor may also instruct a component auditor, often the same firm, to perform procedures on the IFRS reporting package. Agree the scope, materiality and timelines early so that one audit team can serve both purposes without duplication.
Common Challenges
| Challenge | Solution |
|---|---|
| Group deadlines earlier than local close | Fast close process and agreed estimates for late items |
| Adjustments recalculated from scratch each period | A standard bridge workbook with rollforwards |
| Missing lease or contract data | Central registers maintained throughout the year |
| Intercompany differences | Monthly intercompany confirmations |
| Key-person dependency | Documented procedures and trained backup |
| Conflicting local and group policies | Clear policy mapping approved by group finance |
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IFRS Reporting Readiness Checklist
- Statutory framework confirmed (Ind AS or AS)
- Group accounting manual and reporting calendar received
- Gap analysis completed and adjustments quantified
- GAAP bridge workbook built with owners and data sources
- Lease, contract, receivables and fixed asset data in place
- Mapping to group chart of accounts completed
- Profit and equity reconciliation prepared
- Intercompany reconciliation process running
- Scope agreed with statutory and group auditors
- Process documented for future periods
Frequently Asked Questions
Can an Indian subsidiary file IFRS financial statements with the MCA?
No. Statutory financial statements must follow the accounting standards notified under the Companies Act (Ind AS or AS). IFRS information can be prepared additionally for the parent.
Does a subsidiary of a listed foreign company have to follow Ind AS?
Not automatically. The Ind AS roadmap is based on the Indian company’s own listing and net worth and its Indian group relationships. Confirm the position for your entity.
What is an IFRS reporting package?
A set of financial information prepared under the parent’s IFRS policies and templates, used by the parent to consolidate the subsidiary’s results.
Should we adopt Ind AS voluntarily to simplify IFRS reporting?
It can shorten the bridge to IFRS, but the decision is irrevocable and affects statutory reporting, so evaluate it with the group and your auditors.
What are the biggest differences between Indian AS and IFRS?
Common areas include lease accounting, revenue recognition, expected credit losses, financial instrument measurement, deferred tax, employee benefits and share-based payments.
Can an Indian subsidiary use the same year-end as its foreign parent?
A subsidiary of a foreign company that needs a different financial year for consolidation outside India may apply to the NCLT to adopt it under Section 2(41).
Who audits the IFRS reporting package?
Usually the group auditor instructs a component auditor, often the Indian statutory auditor, to perform specified procedures on the package.
Does IFRS 18 affect Indian subsidiaries?
It affects IFRS reporting packages for groups applying IFRS from periods beginning on or after 1 January 2027. Whether Ind AS adopts an equivalent depends on Indian notifications.
Build the Bridge Once, Use It Every Period
IFRS reporting for an Indian subsidiary is manageable when it is treated as a process rather than a yearly scramble. Confirm the statutory framework, map the differences to group policies, build a documented bridge, and agree audit scope early.
This article provides general information and is not professional accounting advice. Applicability and adjustments depend on the entity’s facts and group policies.
Need IFRS Reporting for Your Indian Subsidiary?
AAPT & Associates prepares Ind AS, IFRS and IGAAP financial statements and group reporting packages for subsidiaries of foreign companies.
Sources: MCA: Companies (Indian Accounting Standards) Rules, 2015 and Companies (Accounting Standards) Rules, 2021 · IFRS Foundation · ICAI