In-AS transition sees 500 cos' profit dipping 6.2% since FY16

Adoption of the Ind-AS of accounting standards since FY16 has led to a 6.2 per cent decline in profit for the 500 listed companies but positively impacted their networth, said a study.
The study has analysed 500 listed companies' performance and has found that their profit declined by Rs 13,680 crore over the previous year under the older system of calculation, which is a decline of 6.2 per cent.
However, the networth of these companies has improved by 1.7 per, Grant Thornton, the professional services firm that conducted the study, said today.
The rise in networth "reflects the net result of certain accounting policy choices made by these companies upon transition to the Ind-AS", it said.

Companies in the construction, engineering and infrastructure sectors have been hit the worst with a negative 117.5 per cent impact on their profitability due to the transition, it added.
The manufacturing sector, which accounted for 40 per cent of the companies in the study, had an adverse impact of 42 per cent in profit, it said.

However, logistics, telecom and real estate sectors witnessed a positive impact on their profitability due to transition to the new accounting system, it added.
"Financial instruments, property, plant and equipment and revenue recognition have had a considerable impact on profitability and networth of all sectors, warranting several decision-making points by financial statements prepared to reflect the true commercial substance and business rationale," said Grant Thornton partner Siddharth Talwar.

While fair valuation of financial instruments and property, plant and equipment and intangible assets has increased the networth substantially, the recognition of revenue from contracts with customers as per Ind-AS had a negative impact, the study said.