India’s largest companies are preparing for Ind AS 118, a proposed accounting standard that could change how they present operating profit, classify expenses and explain financial performance to investors. As of October 25, 2026, notification by the Ministry of Corporate Affairs was still awaited, leaving businesses to plan systems and reporting changes without a confirmed implementation framework.
Key Takeaways
- India has proposed an April 1, 2027 start for annual reporting periods, but the timetable is not yet confirmed.
- Expense presentation could require new cost allocations, changes to finance systems and stronger supporting controls.
- Defined profit subtotals could improve comparisons while requiring reviews of analyst models, contracts and incentives.
Table of Contents
- Ind AS 118 timetable remains unsettled
- Expense presentation could drive systems work
- Profit measures face a comparability test
- Preparation can begin before final notification
- Conclusion
Ind AS 118 timetable remains unsettled
The proposed Indian start date is close to the international introduction of IFRS 18, which applies to annual reporting periods beginning on or after January 1, 2027. India’s proposal instead covers periods beginning on or after April 1, 2027.
The Institute of Chartered Accountants of India’s exposure draft notice sets out the proposed April 2027 effective date and explains that Ind AS 118 was formulated on the basis of IFRS 18. That consultation document establishes the proposal, not the standard’s subsequent notification status or a final implementation timetable.
Changes to Schedule III of the Companies Act, which governs financial-statement formats, are also expected. A possible one-year deferral has been discussed, but neither a deferral nor the reported finalisation of the Indian standard has been formally confirmed.
Samir Shah, audit leader at Deloitte Haskins & Sells LLP, said companies have begun discussing transition plans, although preparedness varies. The absence of final rules and formats is making some businesses reluctant to commit to systems changes.
| Item | Details |
|---|---|
| Expenses by nature | Groups costs by type, such as employee benefits and depreciation. |
| Expenses by function | Groups costs by activity, such as cost of sales, distribution, research and development, or administration. |
| Combined presentation | Uses both nature and function where that provides the most useful summary for users. |
Expense presentation could drive systems work
Companies currently report expenses by nature. The proposed standard permits presentation by nature, function or a combination of both, depending on which provides users with the most useful information. It does not mean every company must switch to functional reporting.
For businesses that do change, the work could extend well beyond rearranging financial-statement lines. Employee benefits and depreciation may need to be allocated across activities, supported by consistent allocation principles and evidence.
Abhishek Rara, partner at Price Waterhouse LLP, said functional presentation could require significant modifications to processes and enterprise resource planning systems. Companies whose cost centres do not support those allocations may need finance, technology, human resources and operating teams to work together.
Profit measures face a comparability test
The proposed framework introduces defined categories and subtotals, including operating profit and profit before financing and income taxes, alongside disclosures about management-defined performance measures. The aim is to make performance easier to compare when companies currently use similar labels for differently calculated measures.
For investors, a change in presentation could require adjustments to financial models and historical comparisons. A different reported subtotal would need to be understood in terms of its definition and expense classification rather than automatically treated as a change in underlying business performance.
Contracts and incentive plans may also need attention. Sudhir Soni, head of audit at BSR & Co LLP, said arrangements linked to existing self-defined subtotals such as operating profit could require contractual amendments and discussions with counterparties.
Preparation can begin before final notification
Companies can map existing statement lines to the proposed categories, identify management-defined performance measures and assess gaps in data, systems and internal controls while awaiting final requirements.
The transition also depends on the wider reporting framework. Alongside expected Schedule III changes, sector-specific formats and disclosures may need consideration by SEBI, the Reserve Bank of India and the Insurance Regulatory and Development Authority of India.
That makes coordinated regulatory notifications important: companies need both the accounting requirements and the applicable reporting formats to complete implementation with confidence.
Conclusion
The next milestone for Ind AS 118 is formal notification and clarity on the implementation timetable, followed by the related reporting-format changes. Until then, companies can assess their data and reporting gaps without assuming that the proposed April 2027 start is settled.
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