Ind AS for AIFs — the accounting policies that actually matter

Indian Alternative Investment Funds — as investment vehicles — apply Ind AS (Indian Accounting Standards, converged with IFRS) when they cross the applicability thresholds. But most AIFs qualify as "investment entities" under Ind AS 110, which changes how they account for portfolio holdings compared to a normal operating company. Here's what fund administrators, CFOs and auditors most often need to know.

Applicability — when Ind AS kicks in

Ind AS applies to AIFs above the Companies Act / MCA thresholds by net worth and turnover, or where the AIF is a body corporate with Ind AS-mandated parent. In practice, most Category II PE funds and Category III long-short funds of any meaningful size prepare Ind AS financials from year one — driven either by mandatory applicability or by LP requirement.

Investment entity status — Ind AS 110

An AIF typically qualifies as an investment entity under Ind AS 110 because it:

• Obtains funds from investors for investment services.
• Commits to investors that the purpose is to invest for capital appreciation and/or income.
• Measures and evaluates substantially all of its investments on a fair value basis.

Consequence: the AIF does not consolidate its portfolio companies — instead it measures them at fair value through profit or loss (FVTPL). This is fundamentally different from a corporate parent that would consolidate.

Ind AS 113 — fair value measurement

All fair-value measurements follow the Ind AS 113 hierarchy:

• Level 1 — quoted prices in active markets (listed equity, actively traded bonds).
• Level 2 — observable inputs other than quoted prices (matrix pricing, benchmark yields).
• Level 3 — unobservable inputs (DCF, comparable multiples, most private equity holdings).

Category II AIFs typically have most of their portfolio in Level 3, which drives the requirement for independent valuers, documented valuation policy, and enhanced disclosure of unobservable inputs and sensitivity.

Ind AS 109 — financial instruments

• Classification: at fair value through profit or loss (FVTPL) for most AIF holdings.
• Impairment (ECL model): relevant for debt investments held at amortised cost (rare in AIFs).
• Derivatives: FVTPL with mark-to-market on each NAV date.

Ind AS 115 & Ind AS 8 — fees and errors

Management fees are typically recognised over time on a straight-line basis. Performance fees are recognised only when it is highly probable that a significant reversal will not occur — usually at crystallisation. Prior-period errors and changes in accounting estimates follow Ind AS 8, with disclosure implications on the NAV history.

Financial statement structure

An AIF's Ind AS statements typically comprise:

• Balance Sheet — with investments at FVTPL as the dominant asset line.
• Statement of Profit & Loss — with unrealised gains/losses driving the top line.
• Statement of Cash Flows — with investing activities as the largest bucket.
• Notes — including a detailed valuation-hierarchy note, sensitivity analysis, and related-party disclosures.

Where AIFLedger helps

AIFLedger is built for Ind AS-conforming AIF accounting from the ledger up — FVTPL classification at booking, Level-1/2/3 hierarchy tags on every position, independent valuer inputs with full audit trail, and Ind AS-format financials export. Purpose-built AIF fund accounting software India — not a generic accounting system retrofitted.