ICAI Considering New Standard with Lower Disclosure Requirements to Save Time and Costs
Unlisted subsidiaries of listed companies and large businesses following globally harmonized Indian accounting standards are on the verge of relief from extensive financial disclosures. The Institute of Chartered Accountants of India (ICAI) is contemplating a new standard that will reduce disclosure requirements for these entities, ultimately saving time and costs, according to President Charanjot Singh Nanda.
The rationale behind this move is straightforward: since the group parent already adheres to global best practices under Indian Accounting Standards (Ind AS) and consolidates the financials of these unlisted subsidiaries, there exists a case for eliminating the elaborate and resource-intensive financial analysis that these subsidiaries, which hold little public interest, currently need to prepare.
To qualify for these relaxed rules, unlisted entities must not have accepted any public deposits. This initiative aims to ease the compliance burden on privately held group entities while ensuring transparency at the group level through consolidated financials.
This relaxation will be part of ICAI’s proposed new accounting standard, Ind AS 119, which is based on International Financial Reporting Standard (IFRS) 19. IFRS 19, issued by the International Accounting Standards Board (IASB) of the IFRS Foundation in May, will come into effect on January 1, 2027. India currently adheres to 39 accounting standards (Ind AS) aligned with IFRS, while publicly listed companies in over 140 countries follow these international standards.
The proposed Ind AS 119 will enable eligible subsidiaries to make disclosures more proportionate to the informational needs of users of their financial statements. Nanda emphasized that this draft is currently under consideration by ICAI’s accounting standards board.
Experts believe this move could greatly benefit many Indian businesses, as large corporations typically have numerous unlisted companies in their groups. For instance, Reliance Industries Ltd.’s annual report for fiscal year 2025 (FY25) listed over 60 private limited companies in India, including subsidiaries, associates, and joint ventures, all of which are consolidated into the parent’s financial statements. Additionally, TCS reported approximately seven Indian unlisted subsidiaries in its FY25 consolidated financial statements.
According to Samir Malik, partner at Grant Thornton Bharat, adoption of Ind AS 119 would have a significant impact. It would allow eligible subsidiaries, particularly unlisted ones of large or listed companies, to prepare standalone financial statements with considerably reduced disclosure requirements. Malik noted that the reduction in disclosure obligations relates to various accounting standards, such as Ind AS 107 (Financial Instruments Disclosures), Ind AS 115 (Revenue from Contracts with Customers), Ind AS 103 (Business Combinations), Ind AS 105 (Operating Segments), and Ind AS 116 (Leases), which are among the most time-consuming and resource-intensive disclosure requirements.
In conclusion, if adopted, Ind AS 119 could represent a transformative shift for the accounting landscape in India, easing the compliance burden on numerous unlisted subsidiaries and fostering a more efficient regulatory environment for businesses.
