IndAS 118: What India’s New Accounting Standard Means for You
India will adopt IndAS 118 from April 2027, aligning local practices with IFRS 18, the global benchmark for presenting financial performance. This shift is set to overhaul how Indian companies report income and expenses—aimed at better transparency for investors and stakeholders.
Why Is IndAS 118 Being Introduced?
The Ministry of Corporate Affairs (MCA) issued the roadmap for IndAS 118 in early 2025 to:
- Enhance comparability between Indian and global firms
- Offer more useful data to investors, analysts, and regulators
- Bring consistency in performance metrics
This standard replaces IndAS 1 (Presentation of Financial Statements), a move that reflects the IFRS 18 issued by the IASB.
What Changes Under IndAS 118?
Here’s how IndAS 118 reshapes financial statements:
| Aspect | IndAS 1 (Current) | IndAS 118 (New) |
|---|---|---|
| Income & Expense Reporting | No fixed categorisation | Split into Operating, Investing, Financing |
| Company-defined Subtotals | Optional or inconsistent | Mandatory, with investor relevance checks |
| Performance Metrics | Disclosed outside audited FS | Now part of audited statements |
| Operating Profit Definition | Varies across industries | Standardised definition |
Who Will Be Affected?
IndAS 118 will be mandatory from FY 2027–28 for:
- All listed companies
- Large unlisted companies (net worth over ₹250 crore)
Smaller entities may voluntarily adopt it, subject to MCA and ICAI guidelines.
Benefits of IndAS 118
- Better decision-making for investors through consistent metrics
- Improved audit clarity, reducing ambiguities in reported earnings
- Greater comparability across industries and geographies
Legal & Regulatory Reference
- MCA Roadmap Notification (2025) [link to official PDF when live]
- IFRS 18 summary by IASB: https://www.ifrs.org
- ICAI exposure draft on IndAS 118 (2025) – currently under stakeholder review
Expert View
“IndAS 118 is not just cosmetic. It forces companies to define how they perform—and own that definition in their audited books,” says a senior partner at a Big 4 audit firm.
This shift will likely trigger changes in accounting systems, staff training, and investor communication frameworks.
Compliance Checklist for CFOs & Finance Teams
✅ Classify all income/expenses by activity type
✅ Define company-specific performance subtotals
✅ Update reporting templates and ERP systems
✅ Review ICAI and MCA transitional provisions