Choosing a Reporting Framework: Ind AS, AS, and the New Rules for LLPs and Firms
Which accounting framework applies to your entity is rarely a choice. It is a consequence of your legal form, your net worth, whether you are listed, and who your parent is. What changed in 2026 is that entities which previously had no prescribed format at all, limited liability partnerships and other non-corporate entities, now do.
- The Ind AS road map and the thresholds that trigger it
- Accounting standards for everyone else, and the 2026 amendment
- The change that reaches limited liability partnerships and firms
- What a framework change actually costs
The road map, and the cascade nobody expects
The Indian Accounting Standards apply under rule 4 of the Companies (Indian Accounting Standards) Rules 2015 on a phased road map. Phase one applied from FY 2016-17 to listed or in-process-of-listing companies and to unlisted companies with net worth of ₹500 crore or more, together with their holding, subsidiary, joint venture and associate companies. Phase two applied from FY 2017-18 to listed or in-process-of-listing companies below that net worth and to unlisted companies with net worth of ₹250 crore or more but below ₹500 crore, again extending to those group companies. Companies listed only on a small and medium enterprise exchange are outside the mandate. There is a separate road map for non-banking financial companies from FY 2018-19 and FY 2019-20. These thresholds are unchanged as at August 2026.
The two features that surprise people
First, the framework cascades. Once a company is in, its holding, subsidiary, joint venture and associate companies come in with it, regardless of their own size. A small subsidiary of a large group does not get to stay on the simpler framework. Second, adoption is irreversible. A company that crosses a threshold and adopts does not revert if it later falls below it.
For companies outside the Ind AS road map
Companies outside the road map apply the standards notified under the Companies (Accounting Standards) Rules 2021. Those rules were amended in March 2026 by G.S.R. 169(E), which changed AS 22, the standard on accounting for taxes on income.
The AS 22 amendment applies to Pillar Two income taxes and reaches FY 2025-26 annual financial statements. It is relevant where a company has exposure to Pillar Two legislation, including through membership of an affected multinational group. It introduces a mandatory exception for Pillar Two deferred taxes and related disclosures. Qualifying Small and Medium-sized Companies may omit the exposure disclosures in paragraphs 32C-32D; the requirements to disclose application of the exception and any related current tax expense or income remain applicable. Ordinary AS 22 accounting for timing differences is unchanged. Companies with no Pillar Two exposure have no change to their tax accounting from this amendment.
Note that a Small and Medium-sized Company here is the classification under the Accounting Standards Rules. It is not the same test as a small company under section 2(85) of the Companies Act, and qualifying as one does not carry across to the other.
The practical differences between the two frameworks are not cosmetic. Revenue recognition, leases, financial instruments, business combinations and fair value measurement are all treated differently, and a move from one to the other is a project with a transition date and a restated comparative, not a change of template.
Limited liability partnerships and firms get a format
This is the change most likely to affect an accounts outsourcing client and least likely to have been noticed, because it did not come from the government at all.
Historically no statutory accounting standards applied to limited liability partnerships, partnership firms or proprietorships, and their financial statements took whatever form the preparer chose. The Institute of Chartered Accountants of India issued guidance notes on the financial statements of non-corporate entities and of limited liability partnerships in August 2023, and in March 2026 made them mandatory in phases.
| Phase | Accounting periods beginning on or after | Entities |
|---|---|---|
| One | 1 April 2025 | Entities with turnover exceeding ₹5 crore |
| Two | 1 April 2026 | All such entities |
Source: the ICAI Accounting Standards Board announcement of 31 March 2026, read directly on 18 August 2026.
The consequence is concrete. A limited liability partnership above ₹5 crore of turnover preparing accounts for a period that began on or after 1 April 2025 has a prescribed format now, and from the following year every entity in scope does. If your accounts are produced from a template that predates this, they need rebuilding.
Before you cross a threshold
The comparative year
A framework change requires a transition date a full year before the reporting date and a restated comparative. The work starts a year earlier than the year in which the new framework first applies, which is the single most common planning error.
The systems
Different frameworks need different data. Lease terms, expected credit loss inputs, fair value evidence and contract-level revenue data are frequently not captured at all under a simpler framework, and cannot be reconstructed retrospectively from a ledger.
The knock-on effects
Reported net worth, distributable profit, covenant compliance and tax computations all move. The accounting change is usually the easy part; explaining the resulting numbers to a lender is not.
Where to go next
Accounts Outsourcing
Back to the main page: what we run, how a handover works, and how to reach us.
What an Outsourced Finance Function Actually Covers
Where the boundary sits between bookkeeping, controllership and finance leadership, what a handover looks like in practice, and the three failure modes that make outsourced finance go wrong.
Books of Account, the Audit Trail Rule and Where Your Data Must Live
What the Companies Act requires you to keep and for how long, the audit trail obligation and how your auditor reports on it, and the requirement that electronic books be backed up daily on servers physically in India.
The Compliance Calendar: Withholding, Goods and Services Tax, and What Changed
The monthly, quarterly and annual filing rhythm an outsourced finance function actually runs, with the 2025 and 2026 changes that break an older calendar: new section numbers, new form numbers, a rebuilt rate structure, and corrections that now have to be made upstream of the summary return.
Paying Suppliers: the MSME Payment Rule and What It Costs
The disallowance that turns a late supplier payment into a tax cost with no way back, the revised classification thresholds, the half-yearly return, and how to build accounts payable so the rule does not bite.
Send an enquiry
If you are near a threshold, or you are a limited liability partnership above ₹5 crore of turnover, the useful conversation is about timing: what has to happen a year before the framework applies, and what can wait.
Position as at 16 September 2026. Reviewed every six months.
This page is general information, not professional advice. Indian financial reporting and tax compliance moved substantially between September 2025 and June 2026. The Income-tax Act 2025 replaced the 1961 Act on 1 April 2026 and renumbered every section and every form; the goods and services tax rate structure was rebuilt on 22 September 2025; the small company definition changed on 1 December 2025; and prescribed financial statement formats began to apply to limited liability partnerships and other non-corporate entities. Take professional advice before acting on anything on this page. We are happy to be that adviser, but we do not act on a web page, ours or anyone else's, without one.