An Analysis of Impact of Conversion to ‘Ind AS’ from ‘AS’ on Reporting of Financial Performance of Select Listed NBFCs

The transition from erstwhile Accounting Standards (AS) to Indian Accounting Standards (Ind AS) introduced significant changes in the measurement and recognition of financial instruments, including expected credit loss (ECL) provisioning, effective interest rate (EIR)-based recognition and fair valuation, which were expected to reshape the reported profit of Non-Banking Financial Companies (NBFCs). This study examines the impact of Ind AS adoption on the reported profit after tax (PAT) of the top 50 listed NBFCs that transitioned in 2018–2019. Using the Ind AS 101 reconciliation, which reports the same firm-year under both regimes, the study compares PAT for 2017–2018 as reported under AS and as restated under Ind AS, thereby isolating the accounting effect from business changes. Transition adjustments are decomposed, and the difference in PAT is tested using the paired sample t-test and the Wilcoxon signed-rank test. Aggregate PAT decreased by 5.82% under Ind AS, driven mainly by EIR adjustments, fair valuation of ESOPs, ECL-based impairment and fair valuation of investments. However, the difference is not statistically significant, as increases in some NBFCs offset decreases in others. The findings are relevant for regulators, auditors and investors, and offer insights for the forthcoming Ind AS transition of banks and insurance companies. JEL Classification: G23, G32, M41