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IntroductionDear Reader,
Grant Thornton in India presents ‘GAAP Reporter’, a quarterly bulletin that summarises significant accounting,
auditing and related updates. This publication has been compiled to meet the needs of dynamic Indian businesses,
capturing key developments in India and across the globe.
To access the source of information and complete details, you can click the hyperlinked text.
We would be pleased to receive your feedback. Please write to us at [email protected] with your comments, questions
or suggestions.
This edition covers updates for the quarter ended 30 September 2017 along with hot topic. Abbreviations used in the
publication are explained in the Glossary.
ContentsPage
A. Hot Topic
1 Overview of exposure draft of Ind AS 116, Leases 7
B. India updates – Effective
a. Accounting updates
1 ITFG Clarification Bulletins 11
2 Clarifications on computation of book profit for the purposes of levy of MAT under section
115JB of IT Act for Ind AS compliant companies
13
3 Guidance note on Division II - Ind AS Schedule III to the Companies Act, 2013 14
4 Clarification on applicability of Ind AS and rule 4 of the Ind AS Rules to payment banks, small
finance banks which are subsidiaries of corporates
15
5 Publication: Indian Accounting Standards (Ind AS): An Overview (Revised 2017) issued by
ICAI
15
6 Publication: Educational material on Indian Accounting Standard (Ind AS) 18, Revenue
(Revised 2017) issued by ICAI
15
b. Auditing updates
1 Corrigendum and clarification regarding applicability of exemption given to certain private
companies under section 143(3)(i) of the 2013 Act
16
2 Appointment of statutory central auditors - modification of rest period 16
3 Income-Tax (18th Amendment) Rules, 2017 16
4 Technical guide on ICDS 17
3
c. Other regulatory updates
Companies Act, 2013 updates
1 Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 18
2 Amendments to Schedule IV, Code for independent directors of the 2013 Act 18
3Clarification on meaning of joint venture with respect to specific exemption under the
Companies (Appointment and qualification of directors) Rules, 201418
4 Commencement of proviso to clause (87) of section 2 of the 2013 Act 18
5 The Companies (Restriction on number of layers) rules, 2017 18
6 Companies (Meetings of board and its powers) Second Amendment Rules, 2017 19
7 The Companies (Acceptance of deposits) Second Amendment Rules, 2017 20
8 National Company Law Tribunal (Amendment) Rules, 2017 20
9 National Company Law Appellate Tribunal (Amendment) Rules, 2017 20
10 Commencement of provisions of sub-sections (8), (9) and (10) of section 212 of the 2013 Act 21
11Companies (Arrests in connection with investigation by Serious Fraud Investigation Office)
Rules, 201721
SEBI updates
1 SEBI (Issue of capital and disclosure requirements) (Third amendment) Regulations, 2017 22
2 SEBI (Issue of capital and disclosure requirements) (Fourth amendment) Regulations, 2017 22
3Amendments to the SEBI (Infrastructure Investment Trusts) Regulations, 2014 and SEBI
(Real Estate Investment Trusts) Regulations, 201422
4 SEBI (Substantial acquisition of shares and takeovers) (Amendment) Regulations, 2017 23
5Acquisition of ‘control’ under the SEBI (Substantial acquisition of shares and takeovers)
Regulations, 201123
6Amendment to circular regarding schemes of arrangement by listed entities and relaxation
under sub-rule (7) of rule 19 of the Securities contracts (Regulation) Rules, 195724
4
7 Issuance, listing and trading of debt securities on exchanges in IFSC 24
8 SEBI (International financial services centres) Guidelines, 2015 – Amendments 24
9 Disclosures by listed entities of defaults on payment of interest/ repayment of principal
amount on loans from banks/ financial institution, debt securities, etc.
25
Other updates
1 Clarification regarding IRDAI (Other forms of capital) Regulations, 2015 - Creation of
debenture redemption reserve
26
2 Income-Tax (20th Amendment) Rules, 2017 26
3 Income-tax (22nd Amendment) Rules, 2017 26
4 Clarifications in respect of section 269ST of the IT Act 26
5 Extension of due date for filing return of income and audit reports 27
6 Disclosure of divergence in the asset classification and provisioning by banks 27
7 Inclusion of peer to peer lending platforms under NBFC norms 27
8 Amendments to Master Direction- Reserve Bank of India (Financial services provided by
banks) Directions, 2016
27
9 IBBI (Insolvency resolution process for corporate persons) (Amendment) Regulations, 2017
and IBBI (Fast track insolvency resolution process for corporate persons) (Amendment)
Regulations, 2017
28
10 Banking Regulation (Amendment) Act, 2017 28
11 Applicability of Payment of Wages Act, 1936 28
12 Employees’ State Insurance (General) Amendment Regulations, 2017 28
13 Revised secretarial standards on meetings of the board of directors (SS-1) and general
meetings (SS-2)
29
5
C. India updates – Proposed
a. Accounting updates
1 Exposure draft on Ind AS 116, Leases 31
b. Auditing updates
1 Exposure draft of guidance note on report under section 92E of the Income-Tax Act, 1961
(Transfer pricing)
32
c. Other regulatory updates
1 The Companies (Amendment) Bill 2017 passed by Lok Sabha 33
2 Draft notification for self-reporting of estimated current income, tax payments and advance
tax liability on voluntary compliance basis
33
3 Draft Companies (Cost records and audit) Amendment Rules, 2017 33
D. International updates – Effective
a. IFRS updates
1 IFRS Practice statement 2: Making materiality judgements 34
b. USGAAP updates
1 ASU 2017-11 - Earnings per share (Topic 260); Distinguishing liabilities from equity (Topic
480); Derivatives and hedging (Topic 815): (Part I) Accounting for certain financial
instruments with down round features, (Part II) Replacement of the indefinite deferral for
mandatorily redeemable financial instruments of certain non-public entities and certain
mandatorily redeemable non-controlling interests with a scope exception
35
2 ASU 2017-12 - Derivatives and hedging (Topic 815): Targeted improvements to accounting
for hedging activities
36
3 SEC conforms staff guidance to new FASB revenue recognition rules 37
E. International updates – Proposed
a. IFRS updates
1 Exposure draft to clarify how to distinguish accounting policies from accounting estimates:
Proposed amendments to IAS 8
38
2 Exposure draft on definition of material: proposed amendments to IAS 1 and IAS 8 38
b. USGAAP updates
1 Proposed ASU: Leases (Topic 842) – Land easements practical expedient for transition to
topic 842
39
2 Proposed ASU - Not-for-profit entities (Topic 958) - Clarifying the scope and the accounting
guidance for contributions received and contribution made
39
6
3 Proposed ASU – Consolidation (Topic 812) – Reorganization 40
4 Two proposed ASUs: Technical corrections and improvements to ASU No. 2016-01,
Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of
Financial Assets and Financial Liabilities and ASU No. 2016-02, Leases (Topic 842)
40
c. Auditing updates
1 Exposure draft of proposed statements on standards for attestation engagements (SSAE) -
Selected Procedures
41
2 Exposure draft of proposed statements on standards for accounting and review services
(SSARS) - Omnibus statement on standards for accounting and review services – 2018
41
7
Overview of exposure draft of Ind AS 116, Leases
Introduction
Exposure Draft of revised lease standard Ind AS 116,
Leases (‘ED’) was issued by ICAI in July 2017. This ED
is largely converged with IFRS 16 (issued by IASB on 13
January 2016), representing ICAI’s intent to remain
converged with IFRS. When finalised, Ind AS 116 will
replace the existing lease standard Ind AS 17.
Under Ind AS 17, transactions that are identified as
leases are classified as either an operating lease or a
finance lease. While assets taken on finance leases are
recognised on balance sheet by the lessee (along with a
related lease liability), operating leases are an off-
balance sheet source of funding as the lessee only
recognises the amounts paid as lease rentals.
Scope
The ED applies to all leases for both the lessee and
lessor, except for a few scope exclusions. These
exclusions, some of which are similar to Ind AS 17’s, are
summarised in the table:
*A lessee may, but is not required to, apply Ind AS 116 to
leases of intangible assets other than those described in
the above table
Heading Main changes
Who’s affected? • entities that lease assets as a
lessee or lessor
What’s the impact
on lessees?
• all leases will be accounted for
‘on-balance sheet’, other than
short-term and low value asset
leases
• lease expense will typically be
‘front-loaded’
• lease liability will exclude:
- option periods unless
exercise is reasonably
certain
- contingent payments that
are linked to sales/usage
What’s the impact
on lessors?
• only minor changes from the
current standard, Ind AS 17,
leases
Are there other
changes?
• a new definition of a lease will
result in some arrangements
previously classified as leases
ceasing to be so, and vice
versa
• new guidance on sale and
leaseback accounting
• new and different disclosures
When are the
changes effective?
• proposed to be effective from
annual periods beginning on or
after 1 April 2019
• various transition reliefs
• no option to early adopt
Scope exclusion Standard to apply
Leases to explore for or
use of minerals, oil,
natural gas and similar
non-regenerative
resources
None specified.
Depending on the
circumstances Ind AS
106 ‘Exploration for and
Evaluation of Mineral
Resources’ or Ind AS 38
‘Intangible Assets’ might
apply
Leases of biological
assets in scope of Ind
AS 41 held by a lessee
Ind AS 41 ‘Agriculture’
Service concession
arrangements in scope
of Appendix D of Ind AS
115
Appendix D ‘Service
Concession
Arrangements’
Licences of intellectual
property granted by a
lessor in scope of Ind AS
115
Ind AS 115 ‘Revenue
from Contracts with
Customers
Rights held under
licensing agreements in
scope of Ind AS 38 for
items such as motion
picture films, video
recordings, plays,
manuscripts, patents and
copyrights*
Ind AS 38 ‘Intangible
Assets’
Hot topic
8
Definition of a lease
The ED brings more leases 'on-balance sheet' as
compared to Ind AS 17, and therefore the evaluation of
whether a contract is (or contains) a lease becomes even
more important than it is today. Under the ED a lease is
defined as ‘a contract, or part of a contract, that conveys
the right to use an asset (the underlying asset*) for a
period of time in exchange for consideration’. A contract
is, or contains, a lease if:
• fulfilment of the contract depends on the use of an
identified asset; and
• the contract conveys the right to control the use of the
identified asset for a period of time in exchange for
consideration.
In practice, the main impact of the ED’s new definition
and supporting guidance is likely to be on contracts that
are not in the legal form of a lease but involve the use of
a specific asset and may therefore contain a lease.
(*An underlying asset has been defined to mean as an
asset that is the subject of a lease, for which the right to
use that asset has been provided by a lessor to a
lessee.)
The ED replaces the guidance in Appendix C of Ind AS
17 which differs in some important respects.
As a result, some contracts that do not contain a lease
today will do so under Ind AS 116, and vice versa. If a
contract contains a lease, the lease component is
accounted for on-balance sheet in the same way as a
standalone lease (unless it is a short-term or low-value
asset lease).
Applying the new definition involves three key
evaluations.
These are summarised in the flowchart:
Flowchart: the three key evaluations
No
Yes
No
No
Yes
No
No
Yes
Lessee accounting
Subject to the optional accounting simplifications
discussed below, a lessee will be required to recognise
its leases on the balance sheet. This involves
recognising:
• a 'right-of-use' asset; and
• a lease liability.
The ED requires lease liability to be initially measured at
present value of future lease payments. For this purpose,
lease payments include fixed, non-cancellable payments
for lease elements, amounts due under residual value
guarantees, certain types of contingent payments and
amounts due during optional periods to the extent that
extension is 'reasonably certain'.
Practical Insight – Key changes from
Appendix C of Ind AS 17: One of the main
changes from Appendix C of Ind AS 17 is the
relevance of pricing when evaluating whether a
contract to supply goods or services contains a
lease. Under Appendix C of Ind AS, such
contracts do not contain leases if the unit price
paid by the customer is either fixed or at fair
value at the time of delivery. ED does not include
this ‘pricing exemption’
Does the customer have
the right to obtain
substantially all of the
economic benefits from
use of the identified asset
throughout the period of
use?
Is there an identified
asset?
Does the customer have
the right to direct the use
of the identified asset
throughout the period of
use?
Contract is (contains) a
lease
Contract is
not (does
not contain)
a lease
Hot topic
9
In subsequent periods, the right-of-use asset is
accounted for similarly to a purchased asset and
depreciated. As the expense is higher in the initial years
due to recognizing the interest at a constant rate of return
on the outstanding liability, this is expected to result in a
‘front loaded’ pattern of expenses. The lease liability is
accounted for similarly to a financial liability using the
effective interest method.
Optional accounting simplifications
ED provides important reliefs or exemptions for:
• short-term leases (a lease is short-term if it has a
lease term of 12 months or less at the
commencement date)
• low-value asset leases (the assessment of value is
based on the absolute value of the leased asset when
new and therefore requires judgment. [Application
Guidance in the ED provides that an underlying asset
can be of low value only if: a) the lessee can benefit
from use of the underlying asset on its own or
together with other resources that are readily
available to the lessee; and b) the underlying asset is
not highly dependent on, or highly interrelated with,
other assets].
If these exemptions are used, the accounting is similar to
operating lease accounting under the current Ind AS 17.
Lease payments are recognised as an expense on a
straight-line basis over the lease term or another
systematic basis (if more representative of the pattern of
the lessee's benefit).
Lessor accounting
ED’s requirements for lessor accounting are similar to
Ind AS 17 requirements. In particular:
• the distinction between finance and operating leases
is retained
• the definitions of each type of lease, and the
supporting indicators of a finance lease, are
substantially the same as under Ind AS 17
• the basic accounting mechanics are also similar, but
with some different or more explicit guidance in a few
areas. These include variable payments, sub-leases,
lease modifications and the treatment of initial direct
costs.
Sale and leaseback accounting
The ED makes significant changes to sale and leaseback
accounting. If an entity (the seller-lessee) transfers an
asset to another entity (the buyer-lessor) and leases that
asset back from the buyer-lessor, both the seller-lessee
and the buyer-lessor determine whether the transfer
qualifies as a sale. This determination is based on the
requirements for satisfying a performance obligation in
Ind AS 115.
Portfolio application
Both lessors and lessees have the option to apply the
model to a portfolio of similar leases if the effect is
reasonably expected to be materially the same as a
lease - by - lease approach. However, when accounting
for a portfolio the estimates and assumptions used must
reflect the size and composition of the portfolio.
Presentation and disclosure
Owing to the changes in lessee accounting, the
presentation requirements, in case of lessee, differ from
those under Ind AS 17 including classification in the cash
flow statement. For a lessor the requirements are largely
the same as Ind AS 17. The ED requires different and
more extensive disclosures about leasing activities than
Ind AS 17. The objective of the disclosures is to provide
users of financial statements with a basis to assess the
effect of leases on the entity’s financial position,
performance and cash flows. To achieve that objective,
lessees and lessors disclose both qualitative and
quantitative information.
Effective date and transition
ED proposes that Ind AS 116 would be effective for
annual reporting periods beginning on or after 1 April
2019, which is largely aligned with IFRS 16 becoming
applicable internationally.
ED provides that the date of initial application of Ind AS
116 is the beginning of the annual reporting period in
which an entity first applies the standard.
Also, ED provides lessees with a choice between two
broad methods:
• Full retrospective application - with restatement of
comparative information in accordance with Ind AS 8
'Accounting Policies, Changes in Accounting
Estimates and Errors'
Hot topic
10
• Partial retrospective application - without restating
comparatives. Under this approach the cumulative
effect of initially applying Ind AS 116 is recognised as
an adjustment to the opening balance of retained
earnings (or other component of equity as
appropriate), at the date of initial application. If a
lessee chooses this method, a number of more
specific transition requirements and optional reliefs
also apply.
As for lessor, unless the lessor is an intermediate lessor,
lessor is not required to make any adjustments on
transition for leases in which it is a lessor and shall
account for those leases applying Ind AS 116 from the
date of initial application
Key differences between the ED and IFRS 16
• IFRS 16 provides that if lessee applies fair value
model in IAS 40 to its investment property, it should
apply that fair value model to the right-of-use assets
that meet the definition of investment property. Since
Ind AS 40, Investment Property, does not allow the
use of fair value model, the same guidance has not
been included in Ind AS 116.
• IFRS 16 provides an option of either to present right-
of-use assets separately or to include those right-of-
use assets within the same line item as that within
which the corresponding assets would be presented if
they were owned. Similar option is not given in Ind AS
116.
• IFRS 16 requires to classify cash payments for
interest portion of lease liability applying requirements
of IAS 7, Statement of Cash Flows. Since Ind AS 7
requires interest paid to be treated as financing
activity only, guidance under ED has been modified
accordingly. ED specified that that cash payments for
interest portion of lease liability would be classified as
financing activities applying Ind AS 7.
Hot topic
11
ITFG Clarification Bulletins
ITFG has issued two new clarification bulletins 10 and 11
which provide clarifications on various issues related to
the applicability and/or implementation of Ind AS under
the Companies (Indian Accounting Standards) Rules,
2015, which were raised by preparers/users/other
stakeholders.
Some of the clarifications provided in these clarification
bulletins are summarised below:
ITFG clarification bulletin 11
• Applicability of Ind AS to non-corporate entities
The Companies (Indian Accounting Standards) Rules,
2015 are applicable to the corporate entities only.
Non-corporates are required to follow the accounting
standards issued by the ICAI. They cannot be applied
by non-corporate entities even voluntarily unless
relevant regulator specifically provides for
implementation of Ind AS.
• Inclusion of ESOP reserve in computation of net
worth of a company to assess Ind AS applicability
For the purpose of assessing the Ind AS applicability,
ESOP reserve is required to be included while
calculating the net worth of a company.
• Interpretation of the term ‘parent entity’ used in
Paragraph 9 of Ind AS 33, Earnings per Share, in
case where separate financial statements of a
partly-owned subsidiary are prepared
Para 9 of Ind AS 33 states that an entity shall
calculate basic EPS amounts for profit or loss
attributable to ordinary equity holders of the parent
entity and, if presented, profit or loss from continuing
operations attributable to those equity holders.
It may be noted that an entity is required to disclose
EPS in both separate as well as consolidated financial
statements. Further, while calculating EPS based on
the consolidated financial statements, profit or loss
attributable to the parent entity refers to profit or loss
of the consolidated entity after adjusting for non-
controlling interests.
Hence, whilst the requirements of para 9 of Ind AS 33
have been provided in the context of calculating EPS
in the consolidated financial statements of an entity, in
case of separate financial statements, the parent
entity mentioned in para 9 will imply the legal entity of
which separate financial statements are being
prepared. Accordingly, when an entity presents EPS
in its separate financial statements, the same is
required to be calculated based on the profit or loss
attributable to its equity shareholders.
• Method of depreciation to be used in consolidated
financial statements where different methods of
depreciation are followed by the parent as well as
the subsidiary
As per Ind AS 8, Accounting Policies, Changes in
Accounting Estimates and Errors, the method of
depreciation is an accounting estimate and not an
accounting policy. Therefore, the requirement of Ind
AS 110, Consolidated Financial Statements, to
apply uniform accounting policies for like transactions
and events in similar circumstances, does not apply to
the method of depreciation.
There can be different methods of estimating
depreciation for property, plant and equipment (‘PPE’)
by the parent and subsidiary, only if such method
closely reflects the expected pattern of consumption.
The method once selected in the standalone financial
statements of the subsidiary should be consistently
applied and not be changed while preparing the
consolidated financial statements unless there is a
change in the expected pattern of consumption.
• Whether sitting fees paid to independent directors
and non-executive directors is required to be
disclosed in the financial statements prepared as
per Ind AS
Independent and non-executive directors are covered
under the definition of Key management personnel
(‘KMP’) given in para 9 of Ind AS 24, Related Party
Disclosures. The sitting fees paid to directors will fall
under the definition of “Short-term employee benefits”
as per paras 7 and 9 of Ind AS 19, Employee
Benefits, and is required to be disclosed as an
employee benefit for KMP in accordance with the
para 17 of Ind AS 24.
• Whether ASI 3 and ASI 6 which provide guidance
on how AS 22 is to be applied in the situations of
tax holiday under section 80-IA and 80-IB of the
Income-Tax Act, 1961, can be applied under Ind
AS also
The ASIs are not effective in the context of Ind AS
notified under Companies (Indian Accounting
Standards) Rules, 2015. Under Ind AS, the principles
enunciated under Ind AS 12, Income Taxes, are
required to be applied.
India – Effective – Accounting
Updates
12
Paragraphs 26-29 of Ind AS 12 can be referred for the
recognition of deferred tax as they provide sufficient
guidance in this regard. It provides that deferred tax
assets can only be recognised if it is probable that
there will be taxable profit available against which the
deductible temporary differences can be
utilised/future taxable profit will be available against
which the unused tax losses and unused tax credits
can be utilised. Further, paragraph 47 of Ind AS 12
states that deferred tax assets and liabilities shall be
measured at the tax rates that are expected to apply
to the period when the asset is realised or the liability
is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted by the end of
the reporting period.
Accordingly, the deferred tax in respect of temporary
differences which reverse during the tax holiday
period is not recognised to the extent the entity’s
gross total income is subject to the deduction during
the tax holiday period as per the requirements of
section 80IA/80IB of the Income Tax Act, 1961.
• Whether EPCG grant in the nature of exemption of
custom duty on capital goods with certain
conditions related to export of goods would be
accounted for as a grant related to asset or grant
related to income
The classification of the grant as related to asset or
income will require exercise of judgement and careful
examination of the facts, objective and conditions
attached to the scheme of the government. Care is
also required to ascertain the purpose of the grant
and the costs for which the grant is intended to
compensate.
If based on the terms and conditions of the scheme,
the grant received is to compensate the import cost of
assets subject to an export obligation as prescribed in
the EPCG Scheme; recognition of grant in the
statement of profit and loss should be linked to
fulfilment of associated export obligations. However, if
the grant received is to compensate the import cost of
the asset and based on the examination of the terms
and conditions of the grant, if it can be reasonably
concluded that conditions relating to export of goods
are subsidiary conditions, then it is appropriate to
recognise such grant in profit or loss over the life of
the underlying asset.
Click here for the bulletin.
ITFG clarification bulletin 10
• Accounting treatment of interest-free loan in the
standalone financial statements of a parent
company
A holding company has given interest-free loan to its
subsidiary and the differential of present value of loan
amount and its carrying amount as per previous
GAAP has been recognised as equity in subsidiary’s
standalone financial statements prepared as per Ind
AS. Both the companies are covered under phase I of
Ind AS roadmap. If the holding company exercises
the option under paragraph D15(b)(ii) of Ind AS 101,
First time adoption of Indian accounting
standards to measure the investment in subsidiary at
previous GAAP carrying amount, then the differential
in the carrying value of such loan under previous
GAAP and present value shall be added to the
investment in subsidiary measured at cost as required
by paragraph 10 of Ind AS 101, which requires
recognition, reclassification and measurement of
assets, liabilities and component of equity as per Ind
AS while preparing opening balance sheet.
• Accounting treatment of processing fees related
to undisbursed term loan amount for a first time
adopter
If a first time adopter has taken a loan and paid
processing fees at the time of sanction of loan, which
is disbursed in different tranches, then the accounting
treatment of the processing fee will be as follows:
- Where there is evidence that it is probable that
undisbursed term loan will be drawn down in
the future:
The entire processing fee, i.e. processing fee
pertaining to the disbursed as well as to the
undisbursed loan amount will be included, while
calculating the effective interest rate of the loan at
the date of transition to Ind AS and is recognised
as an expense over the term of the loan.
- Where it is not probable that the undisbursed
term loan will be drawn down in the future:
The fee is recognised as an expense on a straight-
line basis over the term of the loan.
India – Effective – Accounting
Updates
13
• Recognition of deferred tax asset on the tax
deductible goodwill
A holding company, which is required to comply with
Ind AS from 1 April 2017, has two subsidiaries which
were amalgamated in 2015 and goodwill was
recognised in the separate financial statements of the
amalgamated entity. The entity has decided not to
restate its past business combinations in accordance
with the exemption available under Ind AS 101.This
goodwill is allowed as deduction under Income-tax
laws in the books of the amalgamated entity. In the
consolidated financial statements (‘CFS’) of the
holding company such accounting goodwill gets
eliminated as a result of consolidation adjustment.
However, there is an increase in the tax base of
assets resulting from such tax deductible goodwill.
Deferred tax asset on the tax base of goodwill should
be recognised in accordance with Ind AS 12, Income
taxes by crediting the consolidated statement of profit
and loss, to the extent it is probable that taxable profit
will be available against which the deductible
temporary difference can be utilised, in the CFS of the
parent company. This will not qualify for the initial
recognition exemption under paragraph 24 of Ind AS
12 as there is no initial recognition of an asset or
liability arising from the amalgamation of subsidiaries
in the CFS.
• Deemed cost exemption for assets held for sale
If a company had classified a group of assets as
‘assets held for sale’ as per previous GAAP which
were presented separately from other fixed assets,
but on transition date, those assets did not meet the
criteria under Ind AS 105, Non-current assets held
for sale and discontinued operations, then those
assets should be re-classified as ‘Property, plant and
Equipment’ and also be eligible to avail the deemed
cost exemption under paragraph D7AA of Ind AS 101.
• Calculation of basic earnings per share for a first
time adopter who has availed option as per
paragraph 46/46A of AS 11
A first time adopter who had availed the option as per
paragraph 46/46A of AS 11, opted for exemption
under para D13A of Ind AS 101 by debiting exchange
differences arising from translation of long term
foreign currency monetary items to Foreign Currency
Monetary Item Translation Difference Account
(FCMITDA).
For the purpose of calculating basic earnings per
share, only those items of income and expense which
as per Ind AS would have been required to be
recognised in profit or loss but are recognised in
securities premium account/ other reserve, will need
to be deducted from statement of profit or loss.
However, since the option of debiting exchange
differences to FCMITDA as per paragraph 46/46A of
AS 11 is an option which is also available under Ind
AS, the same is not required to be reduced from profit
or loss from continuing operations for the purpose of
calculating basic earnings per share.
• Classification of expenses incurred on providing
free third party goods in case of a company
participating in customer loyalty programme
In respect of a company participating in customer
loyalty programme operated by a third party,
classification of the expense incurred on providing
free third party goods should be as follows:
- If an entity is acting as a principal, then it should
recognise the revenue at gross amount and the
expense of providing free third party goods should
be included in the cost of goods sold.
- If the entity is acting as an agent, it should
measure its revenue at the net amount, i.e. the
difference between the consideration allocated to
the award credits and the amounts payable to the
third party.
Click here for the bulletin.
Clarifications on computation of book profit for the
purposes of levy of MAT under section 115JB of IT
Act for Ind AS compliant companies
The Finance Act 2017 amended section 115JB of the
Income Tax Act, 1961 (‘Act’) to provide a framework,
recommended by MAT Ind AS Committee (‘Committee’),
for computation of book profits for the purpose of levying
MAT, in case of Ind AS compliant companies.
The amendments resulted in representations from
various stakeholders seeking clarifications on certain
implementation issues. CBDT referred the matter to the
Committee. The Committee after duly considering the
representations from stakeholders has issued
clarifications by way of FAQs for these issues vide
Circular No. 24/2017.
India – Effective – Accounting
Updates
14
Summarised below are some of the clarifications
included in the circular:
• Clause (i) of Explanation 1 to section 115JB (2)
requires provision for diminution/ impairment in value
of assets to be added back to the book profit which
computing MAT. CBDT has clarified that such an
adjustment is not required in case of Marked to
Market (MTM) losses on financial instruments
recognised at Fair Value Through Profit and Loss
(FVTPL). In case of assets other than financial
instruments recognised at FVTPL, the existing
provisions of clause (i) of Explanation 1 to section
115JB (2) would apply.
It is also clarified that for financial instruments where
gains or losses are recognised through other
comprehensive income, the provisions of MAT as
amended by Finance Act, 2017 would continue to
apply.
• CBDT has clarified that the starting point for
computation of book profits should be profit before
other comprehensive income [Item number XIII in Part
2 (Statement of Profit and Loss) of Division II of
Schedule III to the Companies Act 2013].
• Under Ind AS, proposed dividend should be
recognised in the year in which it has been declared.
However, under the Indian GAAP, proposed dividend
was accounted for in the year to which it pertained.
Therefore, on transition to Ind AS, amount of
proposed dividend recognised in the statement of
profit and loss should be reversed and credited to
retained earnings. Given this background, CBDT has
clarified that adjustments of proposed dividend would
not form part of the transition amount*.
• Considering adjustments made on transition to Ind AS
may have impact on deferred taxes, CBDT has
clarified that any deferred tax adjustments recorded
on the transition date (as per Ind AS) should be
ignored for the purpose of computing transition
amount*.
• Section 115JB of the Act provides that where a
revaluation/fair value adjustment is made to items of
property, plant and equipment (PPE) under Ind AS,
book profits of the previous year in which the item of
PPE is retired, disposed or realised shall be increased
or decreased, as the case may be, by the revaluation
amount relatable to such item of PPE. In this regard,
CBDT has clarified that revaluation amount to be
considered for adjustment as aforesaid should be the
amount after the adjustment of depreciation on the
revaluation amount relatable to such asset.
• Under Ind AS, investments in preference share is
considered to be a liability and the corresponding
dividend expense is debited to profit and loss account
as an interest cost. CBDT has clarified that for the
purpose of computation of MAT, profit/transition
amount* shall be increased by dividend/interest on
preference share (including dividend distribution
taxes) whether presented as dividend or interest.
*Transition amount - Under section 115JB (2C) of the
Act, transition amount has been defined as the amount or
the aggregate of the amounts adjusted in the ‘other
equity’ (excluding capital reserve and securities premium
reserve) on the convergence date but not including
certain specified items.
Further, the Committee also (vide report dated 17 June
2017) recommended certain amendments to the
provisions of section 115JB of the Act with effect from 1
April 2017. The relevant part of the Committee’s Report
has been released to seek a wider consultation regarding
the Committee’s recommendated amendments.
The last date for comments / suggestions from
stakeholders was 11 August 2017.
Click here for circular.
Click here for the report.
Click here for press release.
Guidance note on Division II - Ind AS Schedule III to
the Companies Act, 2013
ICAI has issued Guidance note on Division II - Ind AS
Schedule III to the Companies Act, 2013 (‘guidance
note’).
The objective of this guidance note is to provide
guidance in the preparation and presentation of the
financial statements in accordance with various aspects
of Division II - Ind AS Schedule III to the Companies Act,
2013, for companies adopting Ind AS.
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The guidance note provides guidance, inter alia, on the
following:
• Each item of balance sheet, statement of profit and
loss;
• Major differences in Division I and Division II of
Schedule III to the 2013 Act;
The guidance note also includes illustrative formats for
standalone financial statements and consolidated
financial statements and illustrations to provide guidance
on application of the principles are also given in the
guidance note.
The guidance given in ‘Guidance note on Schedule III to
the Companies Act, 2013’ published in February 2016
will continue to apply for companies not following Ind AS
and required to prepare financial statements as per the
format in Division I - Schedule III to the Companies Act,
2013.
The disclosure requirements under Ind AS, the 2013 Act,
other pronouncements of the ICAI, other statutes etc.,
would be in addition to this guidance note.
Click here for guidance note
Clarification on applicability of Ind AS and rule 4 of
the Ind AS Rules to payment banks, small finance
banks which are subsidiaries of corporates
MCA has issued a circular regarding the applicability of
Ind AS to a payment bank or a small finance bank, which
is a subsidiary of a company covered by MCA roadmap
for implementation of Ind AS.
The circular has clarified that a payment bank or small
finance bank, which is a subsidiary of a company
covered by MCA roadmap, should follow the banking
sector roadmap read with circular on ‘Operating
guidelines for payment banks’, issued by RBI, while the
holding company will continue to follow the MCA
roadmap.
It is to be noted that such payment bank or small finance
bank should, however, provide Ind AS financial data to its
holding company for the purpose of consolidation.
Click here for circular.
Publication: Indian Accounting Standards (Ind AS):
An Overview (Revised 2017) issued by ICAI
The publication contains an overview of various aspects
related to Indian Accounting Standards (Ind AS) such as
roadmap for the applicability of Ind AS, carve-outs from
International Financial Reporting Standards, changes in
financial reporting under Ind AS compared to financial
reporting under accounting standards, summary of all the
Ind AS etc. It also captures all the recent amendments to
Ind AS notified by the MCA in March 2017.
Click here for publication.
Publication: Educational material on Indian
Accounting Standard (Ind AS) 18, Revenue (Revised
2017) issued by ICAI
The educational material includes a summary of Ind AS
18, the key requirements of Ind AS 18 and frequently
asked questions covering issues, which are expected to
be frequently encountered in implementing Ind AS 18.
Click here for publication.
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Corrigendum and clarification regarding applicability
of exemption given to certain private companies
under section 143(3)(i) of the 2013 Act
The MCA, vide notification dated 13 June 2017
(‘exemption notification’), inter alia, provided exemption
from reporting on adequacy and operating effectiveness
of internal financial controls in the auditor’s report under
section 143(3)(i) of the 2013 Act in case of a private
company:
i. which is a one-person company or a small company
or;
ii. which has turnover less than INR fifty crores as per
latest audited financial statement or which has
aggregate borrowings from banks or financial
institutions or anybody corporate at any point of
time during the financial year less than INR twenty-
five crore.
Click here for exemption notification.
MCA has issued a corrigendum on 14 July 2017 to the
aforesaid exemption notification which provides that, in
item (ii) above, for the words ‘statement or’, the words
‘statement and’ are to be read.
Accordingly, both the criteria of turnover and borrowings
are to be evaluated for the purpose of aforesaid
exemption.
Click here for corrigendum.
Further, MCA has issued a circular on 25 July 2017
clarifying that the aforementioned exemption will be
applicable for those audit reports in respect of financial
statements pertaining to financial years commencing on
or after 1 April 2016, which are made on or after the date
of the exemption notification.
Click here for circular.
Appointment of statutory central auditors -
modification of rest period
RBI through its notification dated 30 January 2001
provided that an audit firm, subject to fulfilling the
prescribed eligibility norms, will be allowed to continue as
the statutory central auditors for a particular private
sector bank for a period of four years and, thereafter, the
said firm will be compulsorily rested for a period of two
years.
RBI has issued a notification on 27 July 2017 stating that
an audit firm, after completing its four-year tenure in a
particular private/foreign bank, will not be eligible for
appointment as statutory central auditor of the same
bank for a period of six years. These guidelines are also
applicable to foreign banks.
Click here for notification.
Income-Tax (18th Amendment) Rules, 2017
CBDT has issued Income-Tax (18th Amendment) Rules,
2017 (‘amended rules’) substituting serial number 31 and
the entries relating thereto in Form No. 3CD of the
Income-Tax Rules, 1962. This amendment is related to
section 269SS, Mode of taking or accepting certain
loans, deposits and specified sum, and section 269T,
Mode of repayment of certain loans or deposits, of
the IT Act.
The amended rules include the option of taking or
depositing loans via use of electronic clearing system
through a bank account. Further, the amended rules also
require the following particulars to be stated in serial
number 31 of Form No. 3CD:
• Particulars of each specified sum in an amount
exceeding the limit specified in section 269SS taken
or accepted during the previous year. section 269SS
defines ‘Specified sum’ as any sum of money
receivable, whether as advance or otherwise, in
relation to transfer of an immovable property, whether
or not the transfer takes place.
• Particulars of each repayment of any specified
advance in an amount exceeding the limit specified in
section 269T made during the previous year. Section
269T defines ‘Specified advance’ as any sum of
money in the nature of advance, by whatever name
called, in relation to transfer of an immovable
property, whether or not the transfer takes place.
• Particulars of repayment of loan or deposit or any
specified advance in an amount exceeding the limit
specified in section 269T received otherwise than by a
cheque or bank draft or use of electronic clearing
system through a bank account during the previous
year.
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• Particulars of repayment of loan or deposit or any
specified advance in an amount exceeding the limit
specified in section 269T received by a cheque or
bank draft which is not an account payee cheque or
account payee bank draft during the previous year.
CBDT has also issued a corrigendum dated 6 July 2017
related to these amended rules.
The amended rules have come into force from 19 July
2017.
Click here for amended rules.
Click here for corrigendum.
Technical guide on ICDS
The Central Government notified ten ICDS on 29
September 2016 which are applicable to the AY 2017-18
and subsequent AYs. Taxable profits will now be
determined after making appropriate adjustments to the
financial statements (whether prepared under existing AS
or Ind AS) to bring them in conformity with the provisions
of ICDS. With respect to this recent development, the
Direct Taxes Committee of the ICAI has issued a
technical guide on ICDS. While a technical guide is not
an authoritative pronouncement, it aims to assist
stakeholders in understanding the significant changes,
their impact and providing implementation guidance.
Click here for technical guide.
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Companies (Appointment and Qualification of
Directors) Amendment Rules, 2017
MCA has issued Companies (Appointment and
Qualification of Directors) Amendment Rules, 2017
(‘amended rules’) to amend Companies (Appointment
and Qualification of Directors) Rules, 2014 (‘principal
rules’). The amended rules have amended Rule 4,
Number of Independent Directors, of the principal
rules and, inter alia, provide the following:
• Sub-rule (2) has been inserted which states that the
following classes of unlisted public company will not
be covered under sub-rule (1):
- a joint venture;
- a wholly owned subsidiary; and
- a dormant company as defined under section 455
of the 2013 Act.
• These amended rules have also substituted existing
Form DIR-5, Application for surrender of director
identification number, with new Form DIR-5.
The amended rules have come into force on 6 July 2017.
Click here for amended rules.
Amendments to Schedule IV, Code for independent
directors of the 2013 Act
The Central Government has issued notification to
amend Schedule IV, Code for Independent Directors,
of the 2013 Act. The notification, inter alia, provides the
following amendments:
• An independent director who resigns or is removed
from the Board of the company will be replaced by a
new independent director within three months (earlier
it was one hundred and eighty days) from the date of
such resignation or removal, as the case may be;
• The independent directors of the company will hold at
least one meeting in a financial year (earlier, the term
‘year’ was used), without the attendance of non-
independent directors and members of management.
The notification has come into force on 6 July 2017.
Click here for notification.
Clarification on meaning of joint venture with respect
to specific exemption under the Companies
(Appointment and qualification of directors) Rules,
2014
MCA issued the Companies (Appointment and
qualification of directors) Amendment Rules, 2017 on 5
July 2017, amending rule 4 of the Companies
(Appointment and qualification of directors) Rules, 2014.
The amended Rule 4 exempted an unlisted public
company which is a joint venture, a wholly owned
subsidiary or a dormant company from appointing
independent directors.
MCA was asked to clarify the term ‘joint venture, since it
is not defined under Companies Act, 2013. As a result,
MCA has issued a circular dated 5 September 2017,
clarifying that a ‘joint venture’ as “a joint arrangement,
entered into in writing, whereby the parties that have joint
control of the arrangement, have rights to the net assets
of the arrangement.” This clarification aligns the definition
to the definition in the accounting standards.
Click here for circular.
Commencement of proviso to clause (87) of section
2 of the 2013 Act
The provisions of proviso to clause (87) of section 2 of
the 2013 Act have come into force on 20 September
2017.
Sub-section (87) of section 2 of the 2013 Act defines
“subsidiary company” or “subsidiary’ and the proviso to
this sub-section provides that such class or classes of
holding companies as may be prescribed shall not have
layers of subsidiaries beyond such numbers as may be
prescribed.
Click here for notification.
The Companies (Restriction on number of layers)
rules, 2017
With the notification of commencement of proviso to
clause (87) of section 2 of the 2013 Act, MCA has issued
the Companies (Restriction on number of layers) rules,
2017 (‘rules’), under the said proviso.
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The rules provide that no company shall have more than
two layers of subsidiaries on and from the date of
commencement of these rules except the following class
of companies:
i. a banking company as defined in clause (c) of
section 5 of the Banking Regulation Act, 1949;
ii. an NBFC as defined in clause (f) of Section 45-I of
the RBI Act, 1934 which is registered with the RBI
and considered as systematically important NBFC
by the RBI;
iii. an insurance company being a company which
carries on the business of insurance in accordance
with provisions of the Insurance Act, 1938 and the
Insurance Regulatory Development Authority Act,
1999;
iv. a Government company referred to in clause (45) of
section 2 of the 2013 Act.
The rules have clarified that the above requirement shall
not affect a company from acquiring a company
incorporated outside India with subsidiaries beyond two
layers as per the laws of such country.
The rules have further clarified that for computing the
number of layers as stated above, one layer which
consists of one or more wholly owned subsidiary or
subsidiaries shall not be taken into account.
The rules also provide specific requirements for
companies existing on or before the commencement of
these rules which have number of layers of subsidiaries
in excess of the layers specified in these rules including
filing returns with the Registrar.
The rules have come into force on 21 September 2017.
Click here for rules.
Companies (Meetings of board and its powers)
Second Amendment Rules, 2017
MCA has issued Companies (Meetings of board and its
powers) Second Amendment Rules, 2017 (‘amended
rules’) to amend Companies (Meetings of board and its
powers) Rules, 2014 (‘principal rules’). The amended
rules amend Rule 3, Meetings of Board through video
conferencing or other audio visual means, and Rule
6, Committees of the Board, of the principal rules.
The amended rules, inter alia, provide the following:
• Rule 3(3)(e) of the principal rules has been
substituted by the following:
Any director who intends to participate in the meeting
through electronic mode may intimate about such
participation at the beginning of the calendar year and
such declaration shall be valid for one year:
Provided that such declaration shall not debar him
from participation in the meeting in person in which
case he shall intimate the company sufficiently in
advance of his intention to participate in person.
Earlier, such prior intimation was required for each
meeting.
• Rule 6 of the principal rules has been substituted by
the following:
The Board of directors of every listed company and a
company covered under Rule 4, Number of
independent directors, of the Companies
(Appointment and qualification of directors) Rules,
2014 will constitute an 'Audit Committee' and a
'Nomination and Remuneration Committee of the
Board’. Thresholds stated in both Rule 6 and Rule 4
stated above are same for applicability for constitution
of Committees. But by virtue of provisions of Rule
4(2) of the Companies (Appointment and Qualification
of Directors) Rules, 2014 constitution of committee
will not be applicable on following unlisted public
company:
- a joint venture;
- a wholly owned subsidiary; and
- a dormant company as defined under section 455
of the 2013 Act.
The amended rules have come into effect from 14 July
2017.
Click here for amended rules.
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The Companies (Acceptance of deposits) Second
Amendment Rules, 2017
MCA has notified the Companies (Acceptance of
deposits) Second Amendment Rules, 2017(‘amended
rules’) which substitutes proviso to sub-rule (3) of rule (3)
of Companies (Acceptance of deposits) Rules, 2014. The
substituted proviso earlier provided that a private
company might accept from its members monies not
exceeding one hundred per cent of aggregate of the paid
up share capital, free reserves and securities premium
account and such company should file the details of
monies so accepted to the registrar in such manner as
may be specified.
The amended proviso provides that a specified IFSC
public company may also accept monies, as aforesaid,
from its members and further clarifies that the details of
monies so accepted should be filed to the registrar in
form DPT-3, Return of deposits. This form has also
been substituted by the amended rules.
The amended rules have also added further provisos to
aforesaid sub-rule (3) of rule (3), which inter alia, provide
that the maximum limit in respect of deposits to be
accepted from members, as discussed above, will not
apply to certain classes of private companies specified
therein.
The amended rules have come into force on 20
September 2017.
MCA further issued a circular on 27 September 2017 to
clarify that the new form DPT-3 will be made available for
e-filing after the month of November 2017. It was also
clarified that till such time the new e-form is made
available, the existing e-form can be used.
Click here for amended rules.
Click here for circular on availability of the new e-form.
National Company Law Tribunal (Amendment) Rules,
2017
MCA has issued National Company Law Tribunal
(Amendment) Rules, 2017 (‘amended rules’) to amend
the National Company Law Tribunal Rules, 2016. The
amended rules have inserted new Rule 87A, Appeal or
application under sub-section (1) and (3) of section
252, which provide, inter alia, the following:
• An appeal may be filed before the NCLT in Form No.
NCLT 9, with such modifications as may be
necessary, under the following sections of the 2013
Act:
- Section 252(1): If a person is aggrieved by an
order of the Registrar, notifying a company as
dissolved under section 248 of the 2013 Act.
- Section 252(3): If a company, or any member or
creditor or workman thereof feels aggrieved by the
company having its name struck off from the
register of companies, such company, member,
creditor or workman may file application to the
NCLT.
The amended rules have come into force on 6 July 2017.
Click here for amended rules.
National Company Law Appellate Tribunal
(Amendment) Rules, 2017
MCA has issued National Company Law Appellate
Tribunal (Amendment) Rules, 2017 (‘amended rules’) to
amend rule 63, Appearance of authorised
representative, of the National Company Law Appellate
Tribunal Rules, 2016 (‘principal rules’).
Rule 63 of the principal rules states that subject to
provisions of section 432, Right to legal
representation, of the 2013 Act, a party to any
proceedings or appeal before the NCLAT may either
appear in person or authorise one or more chartered
accountants or company secretaries or cost accountants
or legal practitioners or any other person to present his
case before the NCLAT.
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The amended rules have inserted new sub-rules to rule
63. These sub-rules deal with authorisation of an officer
or an advocate by the Central Government, the Regional
Director or the Registrar of Companies or Official
Liquidator to represent in the proceedings before the
NCLAT.
The amended rules have come into force on 24 August
2017.
Click here for amended rules.
Commencement of provisions of sub-sections (8), (9)
and (10) of section 212 of the 2013 Act
MCA has issued a notification appointing 24 August 2017
as the date of commencement of the provisions of sub-
sections (8), (9) and (10) of section 212, Investigation
into affairs of company by Serious Fraud
Investigation Office, of the 2013 Act.
These sub-sections deal with arrest of any person if the
Director, Additional Director or Assistant Director of
Serious Fraud Investigation Office (‘SFIO’) has reason to
believe that such person is guilty of offence punishable
under sub-section (6) of Section 212 of the 2013 Act (i.e.
offence covered under section 447, Punishment for
fraud), on the basis of the material in his possession.
Click here for notification.
Companies (Arrests in connection with investigation
by Serious Fraud Investigation Office) Rules, 2017
With the notification of commencement of the provisions
of sub-sections (8), (9) and (10) of section 212 of the
2013 Act, MCA has also issued the Companies (Arrests
in connection with investigation by Serious Fraud
Investigation Office) Rules, 2017 (‘rules’), which provide
the procedural requirements to be followed during and
after the arrest under aforementioned sub-sections.
These rules deal with, among other matters, the following
matters:
• In the case of investigation into the affairs of a
company other than a government company or a
foreign company, arrest of any person where SFIO
has reason to believe, on the basis of material in his
possession, that such person is guilty of any offence
punishable under section 212 of the 2013 Act;
• Arrest of a person in connection with a Government
company or a foreign company under investigation
only with the prior written approval of the Central
Government.
These rules have also clarified that the provisions of the
Code of Criminal Procedure, 1973, relating to arrest shall
be applied mutatis mutandis to every arrest made under
the 2013 Act.
These rules have come into force on 24 August 2017.
Click here for rules.
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SEBI (Issue of capital and disclosure requirements)
(Third amendment) Regulations, 2017
SEBI has issued the SEBI (Issue of Capital and
Disclosure Requirements) (‘ICDR’) (Third Amendment)
Regulations, 2017 (‘amended regulations’) to amend
clause (b) of proviso to Regulation 37 of the SEBI (ICDR)
Regulations, 2009.
Regulation 37 states that in case of an initial public offer,
the entire pre-issue capital held by persons other than
promoters shall be locked-in for a period of one year.
Clause (b) of the proviso provides that nothing contained
in this regulation shall apply to equity shares held by a
venture capital fund or alternative investment fund of
category I or a foreign venture capital investor.
The amended regulations state that Alternate Investment
Fund of category II shall also be considered for the
purpose of aforementioned proviso.
The amended regulations have come into force on 31
July 2017.
Click here for amended regulations.
SEBI (Issue of capital and disclosure requirements)
(Fourth amendment) Regulations, 2017
SEBI has issued SEBI (Issue of capital and disclosure
requirements) (Fourth amendment) Regulations, 2017
(‘amended regulations’) to amend SEBI (Issue of capital
and disclosure requirements) Regulations, 2009
(‘principal regulations’). These amended regulations
have changed the applicability of regulation 70, Chapter
VII (Preferential Issue) not to apply in certain cases,
of the principal regulations. These amendments, inter-
alia, provide the following:
• The conditions for exemption from applicability of
provisions of Chapter VII where preferential issue of
specified securities is made to the lenders pursuant to
conversion of their debt as a part of debt restructuring
schemes has been amended. Specified securities
means equity shares and convertible securities.
Earlier such exemption was provided for preferential
issue of equity shares only. Some of these revised
conditions are stated below:
- Guidelines for determining the conversion price
shall be in compliance with the applicable
provisions of the 2013 Act;
- There is change in the qualification of the valuers
who are required to certify the conversion price.
Prior to the amendment, valuer used to mean the
one defined in SEBI (Issue of Sweat Equity)
Regulations, 2002. Now, valuer will mean a person
registered under section 247, Valuation by
registered valuers, of the 2013 Act and the
relevant rules framed thereunder;
- Lock-in period will be one year from the date of
allotment of specified securities as against the
earlier requirement of ‘date of trading approval’.
The lock-in period of equity shares allotted
pursuant to conversion of convertible securities
issued on preferential basis shall be reduced to
the extent the convertible securities have already
been locked-in;
• Specifies the conditions for exemption from
applicability of provisions of Chapter VII where the
preferential issue of specified securities is made to a
person(s) at the time of lenders selling their holding of
specified securities or enforcing change in ownership
in favour of such person(s) pursuant to a debt
restructuring scheme. The conditions in this case are
more exhaustive (and include the disclosure
requirements) as compared to the exemptions in case
of conversion.
These amended regulations have come into force on 14
August 2017.
Click here for amended regulations.
Amendments to the SEBI (Infrastructure Investment
Trusts) Regulations, 2014 and SEBI (Real Estate
Investment Trusts) Regulations, 2014
In its board meeting held on 18 September 2017, SEBI
board has approved certain changes in SEBI
(Infrastructure investment trusts) regulations, 2014
and SEBI (Real estate investment trusts) regulations,
2014 to facilitate the growth of infrastructure investment
trusts (InvITs) and real estate investment trust (REITs).
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Following are the changes approved by the SEBI board:
i. Allowing REITs and InvITs to raise debt capital by
issuing debt securities;
ii. Introducing the concept of Strategic Investor for
REITs on similar lines of InvITs;
iii. Allowing single asset REIT on similar lines of InvIT;
iv. Allowing REITs to lend to underlying Holdco/SPV;
v. Amending the definition of valuer for both REITs
and InvITs.
On a proposal of allowing REITs to invest at least 50% of
the equity share capital or interest in the underlying
Holdco/SPVs, and similarly allowing Holdco to invest with
at least 50% of the equity share capital or interest in the
underlying SPVs, the SEBI board has decided to have
further consultation with the stakeholders.
Click here for press release.
SEBI (Substantial acquisition of shares and
takeovers) (Amendment) Regulations, 2017
Further to the amendment to regulation 70, Chapter VII
(Preferential Issue) not to apply in certain cases, of
the SEBI (Issue of capital and disclosure requirements)
Regulations, 2009 (as amended), as referred above,
SEBI has issued SEBI (Substantial acquisition of shares
and takeovers) (Amendment) Regulations, 2017
(‘amended regulations’) to amend SEBI (Substantial
acquisition of shares and takeovers) Regulations, 2011
(‘principal regulations’). Regulation 10 of the principal
regulations provides exemptions from the obligation to
make an open offer under regulation 3, Substantial
acquisition of shares or voting rights, and regulation
4, Acquisition of control, of the principal regulations to
certain specific acquisitions subject to fulfilment of the
conditions stipulated therefor. The amended regulations,
inter-alia, provide that the following nature of acquisitions
will also be exempt under regulation 10:
• Acquisition pursuant to a resolution plan approved
under section 31 of the Code;
• In line with the provisions inserted by new regulation
70(6) of the SEBI (Issue of capital and disclosure
requirements) (Fourth amendment) Regulations,
2017, as referred above, acquisition of shares by the
person(s), by way of allotment by the target company
or purchase from the lenders at the time of lenders
selling their shareholding or enforcing change in
ownership in favour of such person(s),pursuant to a
debt restructuring scheme implemented provided it
complies with the conditions specified in regulation
70(6) of the SEBI (Issue of capital and disclosure
requirements) Regulations, 2009 (as amended).
Further, it requires certain additional conditions which
need to be complied with in such cases.
These amended regulations have come into force on 14
August 2017.
Click here for amended regulations.
Acquisition of ‘control’ under the SEBI (Substantial
acquisition of shares and takeovers) Regulations,
2011
Ascertaining acquisition of control under the SEBI
(Substantial acquisition of share and takeovers)
Regulations, 2011 (‘regulations’) required consideration
of facts on a case to case basis. This resulted in varied
opinions.
As a result, SEBI decided to explore adoption of bright-
line tests for acquisition of ‘control’ under the regulations,
by seeking public comments on a discussion paper.
However, this exercise did not result in an overwhelming
support from the stakeholders for any particular option of
ascertaining acquisition of control.
In view of the above, SEBI has issued a press release on
8 September 2017 thereby clarifying to continue with the
practice of ascertaining acquisition of ‘control’ as per the
extant definition in the regulations. This clarification
ensures that the definition of control continues to be
consistent with the definition used in the 2013 Act and
other laws.
Click here for press release.
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Amendment to circular regarding schemes of
arrangement by listed entities and relaxation under
sub-rule (7) of rule 19 of the Securities contracts
(Regulation) Rules, 1957
SEBI had issued a circular on 10 March 2017 regarding
the framework for schemes of arrangement by listed
entities and relaxation under rule 19(7) of the Securities
contracts (regulation) Rules, 1957 (‘rules’).
Certain provisions specified in the aforesaid circular
relating to post-scheme minimum public shareholding
were not in line with the requirements specified under
rule 19(2)(b) of the rules.
SEBI has, therefore, issued a circular on 21 September
2017 to align the requirements of aforementioned circular
dated 10 March 2017 with those specified under rule
19(2)(b) of the rules.
Click here for circular dated 10 March 2017.
Click here for circular dated 21 September 2017.
Issuance, listing and trading of debt securities on
exchanges in IFSC
SEBI has issued a circular on 31 August 2017 on
issuance, listing and trading of debt securities on
exchanges in IFSC. It, inter alia, provides the following:
• Issue: In continuation of guidelines on debt securities
contained in Chapter V, Issue of debt securities, of
the SEBI (International financial services centres)
Guidelines, 2015, SEBI has decided that for issuing
debt securities in IFSC, stock exchanges have to
evolve a detailed framework prescribing:
- the eligibility criteria for the issuers: and
- the issue requirements to be complied with by
such eligible issuers for issuing debt securities in
IFSC.
Such framework and the subsequent changes made
thereto, if any, has to be submitted to SEBI for
approval.
• Listing: In addition to mandatory listing of debt
securities that are issued in IFSC, SEBI now permits
listing of those debt securities on stock exchanges in
IFSC, which are issued outside IFSC. However, listing
of only those debt securities will be permitted which
are issued in, and by issuers resident in Financial
Action Task Force (FATF) member jurisdictions.
Further, stock exchanges in IFSC should evolve a
detailed framework prescribing the initial and
continuous listing requirements including corporate
governance to be complied with by the issuers whose
securities are listed/proposed to be listed on stock
exchanges in IFSC.
• ‘Person resident in India’ will not invest or trade in
rupee denominated bonds issued and/or listed in
IFSC, except to the extent as permitted by the RBI.
Further, ‘Person resident in India’ will also not invest
or trade in other debt securities, issued and/or listed in
IFSC, by Indian entities;
• Trading: Guideline 21 of SEBI (IFSC) Guidelines,
2015 earlier provided that the debt securities listed in
stock exchanges need to be traded on the platform of
the stock exchange and such trades had to be cleared
and settled through clearing corporation set up in
IFSC as specified. It has now been decided to permit
over the counter trading of debt securities in IFSC
subject to clearing and settlement through clearing
corporations in IFSC.
Click here for circular.
SEBI (International financial services centres)
Guidelines, 2015 – Amendments
SEBI had issued SEBI (International financial services
centres) Guidelines, 2015 (‘IFSC guidelines’) on 27
March 2015. These IFSC guidelines came into force on 1
April 2015. SEBI has issued a circular dated 31 August
2017 amending, inter alia, the following provisions of the
IFSC guidelines:
Guideline 17 - Credit rating requirement
• The circular now provides that for debt securities
listed on the stock exchanges in IFSC, the credit
rating needs to be obtained either from a credit rating
agency registered with SEBI or from any other credit
rating agency registered in FATF (earlier it could have
been obtained from any other credit agency registered
in foreign jurisdiction).
India – Effective – Other
Regulatory Updates: SEBI
25
Guideline 18 - Agreement with depository or
custodian
• An issuer of debt securities needs to enter into an
agreement with a depository or custodian, registered
in FATF member jurisdiction (earlier it was required
with depository or custodian eligible to operate in
IFSC) for issue of debt securities etc.
Guideline 19 - Reporting of financial statements
• The IFSC guidelines earlier required the issuer of debt
securities in IFSC to prepare its statement of accounts
in accordance with the 2013 Act as applicable in
IFSC;
• This circular now provides that the entities issuing
and/or listing their debt securities in IFSC need to
prepare their statement of accounts in accordance
with IFRS/US GAAP or accounting standards as
applicable to them in their place of incorporation;
• It further provides that, in case an entity does not
prepare its statement of accounts in accordance with
IFRS/US GAAP, a quantitative summary of significant
differences between the national accounting
standards and IFRS need to be prepared by such
entity and incorporated in the relevant disclosure
documents to be filed with the stock exchange.
Click here for circular.
Disclosures by listed entities of defaults on payment
of interest/ repayment of principal amount on loans
from banks/ financial institution, debt securities, etc.
SEBI has issued a circular on 4 August 2017 under
regulation 101, Power to remove difficulties, of SEBI
(Listing obligations and disclosure requirements)
Regulations, 2015, which inter-alia provides that all
specified listed entities shall make disclosures to the
stock exchange on default in payment of
interest/instalment obligations on debt securities
(including commercial paper), medium term notes,
foreign currency convertible bonds, loans from banks and
financial institutions, external commercial borrowings etc.
The entities are required to make disclosures within one
working day from the date of default at the first instance
of default in the format specified in the circular. Further,
entities are also required to disclose specified details if
there is any outstanding amount under default as on the
last date of any quarter within 7 days from the end of
such quarter.
The circular is applicable to all listed entities which have
listed any of the following:
• Specified securities (equity and convertible
securities);
• Non-convertible debt securities; and
• Non-convertible and redeemable preference shares.
The circular was to come into force on 1 October 2017.
Click here for circular.
However, on 29 September 2017, SEBI released a press
release deferring the implementation of the aforesaid
circular dated 4 August 2017, until further notice.
Click here for press release.
India – Effective – Other
Regulatory Updates: SEBI
26
Clarification regarding IRDAI (Other forms of capital)
Regulations, 2015 - Creation of debenture
redemption reserve
The IRDAI had permitted insurers to raise capital in other
forms such as preference shares and subordinated debt
by issue of IRDAI (Other forms of capital) Regulations,
2015. In this regard, the IRDAI has issued a circular on 4
August 2017 clarifying that the insurers who have raised
capital by issue of debentures should create a debenture
redemption reserve (DRR), in terms of the 2013 Act and
rules made thereunder. DRR is presently required to be
created at 25 per cent of the value of outstanding
debentures. It has also been clarified that the DRR will
be ignored and not considered as a liability for the
purpose of computation of solvency margin and ratio.
Click here for circular.
Income-Tax (20th Amendment) Rules, 2017
CBDT has issued Income-Tax (20th Amendment) Rules,
2017 (‘amended rules’) which substitutes Rule
11UA(1)(c)(b) of the Income-Tax Rules, 1962 (‘principal
rules’) for determination of the fair market value of
unquoted equity shares.
Section 56(2)(x) and section 50CA have been inserted by
the Finance Act, 2017 (‘Act’) in the IT Act. Section
56(2)(x) widens the scope of taxability of receipt of sum
of money or property without/inadequate consideration.
Section 50CA provides that where consideration for
transfer of unquoted equity share of a company is less
than the FMV of such share determined in accordance
with the prescribed manner, the FMV shall be deemed to
be the full value of consideration for the purpose of
computing income under the head ‘Capital Gains’.
The amended rules require to take into account the FMV
of jewellery, artistic work, shares and securities and
stamp duty value in case of immovable property and
book value for the rest of the assets. Earlier for the
purpose of valuation of unquoted equity shares, book
value was taken into consideration for determining the
value of such shares.
The amended rules will come into force from 1 April 2018
and will apply in relation to AY 2018-19 and subsequent
years.
Click here for amended rules.
Income-tax (22nd Amendment) Rules, 2017
The Finance Act, 2017 introduced the relevant guidance
for computation of book profit for the companies that are
preparing financial statements in compliance with Ind AS.
For this purpose, the adjustments to the book profits for
MAT computation were introduced in the form of sections
115JB (2A) and 115JB (2C) of the IT Act. The CBDT has
issued the Income-tax (22nd Amendment) Rules, 2017
on 18 August 2017 (‘amended rules’). The amended
rules relate to the following matters:
• Form No. 29B, Report under section 115JB of the
Income-tax Act, 1961 for computing the book profits of
the company, has been revised to align it with the
requirements of Ind AS. Two new parts have been
introduced in the revised form which are applicable to
Ind-AS compliant companies:
- Part B, Details of the amount required to be
increased or decreased in accordance with sub-
section (2A) of section 115JB;
- Part C, Details of the amount required to be
increased or decreased in accordance with sub-
section (2C) of section 115JB. This part is to be
filled-up for the year of convergence and each of
the following four previous years only:
• An assessee required to furnish a report of audit
specified under section 115JC of the IT Act, Special
provisions for payment of tax by certain persons other
than a company, shall furnish the same electronically
along with the return of income.
These amended rules have come into force on 18 August
2017.
Click here for amended rules.
Clarifications in respect of section 269ST of the IT
Act
The new section 269ST inserted in the IT Act prohibits
receipt of an amount of INR two lakh or more by a
person, in the circumstances specified therein, through
modes other than by way of an account payee cheque or
an account payee bank draft or use of electronic clearing
system through a bank account.
India – Effective – Other Regulatory
Updates: Others
27
CBDT has now issued a circular clarifying that in respect
of receipt in the nature of repayment of loan by NBFCs or
housing finance companies, the receipt of one instalment
of loan repayment in respect of a loan shall constitute a
‘single transaction’ as specified in clause (b) of section
269ST of the IT Act and all the instalments paid for a
loan will not be aggregated for the purposes of
determining applicability of the provisions of section
269ST.
Click here for notification.
Extension of due date for filing return of income and
audit reports
CBDT has issued an order on 31 August 2017 extending
the ‘due date’ for filing of return of income as well as
various audit reports prescribed under the IT Act which
are required to be filed by the said ‘due date’ from 30
September 2017 to 31 October 2017.
This extension is available for all the following
assessees, other than an assessee who is required to
furnish a report referred to in section 92E of the IT Act:
• a company;
• a person (other than a company) whose accounts are
required to be audited under the IT Act or under any
other law for the time being in force; or
• a working partner of a firm whose accounts are
required to be audited under the IT Act or under any
other law for the time being in force.
Click here for the order.
Disclosure of divergence in the asset classification
and provisioning by banks
RBI, vide its notification dated 18 April 2017, requires
disclosures by banks in a prescribed format in certain
cases of divergence in the asset classification and
provisioning. The notification requires the disclosures to
be made in the notes to accounts in the ensuing annual
financial statements published immediately after the
communication of such divergence by RBI to the banks.
Click here for notification.
Accordingly, SEBI has issued circular requiring all banks
which have listed specified securities, to comply with the
following requirements:
• The banks will disclose to the stock exchanges,
divergences in the asset classification and
provisioning wherever:
- the additional provisioning requirements assessed
by RBI exceed 15 per cent of the published net
profits after tax for the reference period; and/or
- the additional gross NPAs identified by RBI
exceed 15 per cent of the published incremental
gross NPAs for the reference period.
• The disclosures will be made in the format specified in
the aforesaid RBI’s notification.
• The aforesaid disclosures will be placed as an
annexure to the annual financial results filed with the
stock exchanges in accordance with Regulation
33(3)(d) of the SEBI (Listing Obligations and
Disclosures Requirements) Regulations, 2015. Such
disclosures will be made along with the annual
financial results filed immediately following
communication of such divergence by RBI to the
banks.
Click here for circular.
Inclusion of peer to peer lending platforms under
NBFC norms
The RBI has specified a non-banking institution that
carries on ‘the business of a peer to peer lending
platform’ to be an NBFC.
The RBI has further clarified that the term “the business
of a peer to peer lending platform” shall mean the
business of providing under a contract, the service of
loan facilitation, via online medium or otherwise, to the
participants who have entered into an arrangement with
that platform to lend on it or to avail of loan facilitation
services provided by it.
Click here for notification.
Amendments to Master Direction- Reserve Bank of
India (Financial services provided by banks)
Directions, 2016
RBI has issued amendments to Master Direction -
Reserve Bank of India (Financial Services provided by
Banks) Directions, 2016 dated 26 May 2016. The
amendments include amendments to the paragraphs
dealing with the investments that can be made by a
bank.
Click here for notification.
India – Effective – Other Regulatory
Updates: Others
28
IBBI (Insolvency resolution process for corporate
persons) (Amendment) Regulations, 2017 and IBBI
(Fast track insolvency resolution process for
corporate persons) (Amendment) Regulations, 2017
The IBBI has issued IBBI (Insolvency resolution process
for corporate persons) (Amendment) Regulations, 2017
and IBBI (Fast track insolvency resolution process for
corporate persons) (Amendment) Regulations, 2017
(‘amended regulations’) to amend the IBBI (Insolvency
resolution process for corporate persons) Regulations,
2016 and the IBBI (Fast track insolvency resolution
process for corporate persons) Regulations, 2017
respectively. These amended regulations inter-alia lay
down the requirements relating to submission of claims
by creditors other than those covered under regulation 7
(claims by operational creditors), regulation 8 (claims by
financial creditors) and regulation 9 (claims by workmen
and employees) of the Code. These amended
regulations also provide that the financial creditors shall
submit their proof of claims by electronic means only and
all other creditors may submit the proof of claims in
person, by post or by electronic means.
These amended regulations have come into force on 16
August 2017.
Click here for amended regulations.
Banking Regulation (Amendment) Act, 2017
The Banking Regulation (Amendment) Act, 2017
(‘amended act’) received the assent of Honourable
President of India on 25 August 2017. The amended act
replaces the Banking Regulation (Amendment)
Ordinance, 2017 (‘ordinance’) that was promulgated on 4
May 2017. This amended act has inserted new sections
in the Banking Regulations Act, 1949 enabling RBI to
handle cases related to stressed assets of the banks and
to initiate recovery proceedings against defaulters under
the Insolvency and Bankruptcy Code, 2016 (‘Code’). The
amended act provides, inter alia, the following:
• Section 35AA: The Central Government may
authorise the RBI to issue directions to any banking
company or banking companies to initiate insolvency
resolution process in respect of a default, under the
provisions of the Code. Section 3(12) of the Code
defines term ‘default’ as non-payment of debt when
whole or any part or instalment of the amount of debt
has become due and payable and is not repaid by the
debtor or the corporate debtor, as the case may be;
• Section 35AB: RBI may issue directions to any
banking company or banking companies for resolution
of stressed assets.
The amended act is deemed to have come into force on
4 May 2017.
Click here for ordinance.
Click here for amended act.
Click here for Code.
Applicability of Payment of Wages Act, 1936
Section 1(6) of the Payment of Wages Act, 1936 (‘Act’)
states that the Act applies to wages payable to an
employed person in respect of a wage period if such
wages for that wage period do not exceed INR 6,500 per
month or such other higher sum as may be specified on
the basis of figures of the consumer expenditure survey
published by the Central Government, after every five
years, by notification in the Official Gazette.
The Central Government has issued a notification on 29
August 2017 specifying INR 24,000 per month (earlier
INR 18,000 per month) as wages for the purpose of the
aforementioned section.
Click here for notification.
Employees’ State Insurance (General) Amendment
Regulations, 2017
Employees’ State Insurance Corporation has issued
Employees’ State Insurance (General) Amendment
Regulation, 2017 (‘amended regulation’) amending
Regulation 31 of Employees’ State Insurance (General)
Regulations, 1950. The amended regulation provides
that due date of contribution payable of employee state
insurance will be 15 days of the next month (earlier due
date was 21 days of the next month). The amended
regulation has come into force with effect from the
contribution payable for the month of June 2017, i.e. 15
July 2017.
Click here for amended regulation.
India – Effective – Other Regulatory
Updates: Others
29
Revised secretarial standards on meetings of the
board of directors (SS-1) and general meetings (SS-
2)
Secretarial standards on meetings of the board of
directors (SS-1) and general meetings (SS-2) were
approved by the Central Government on 10 April 2015
and were published on 23 April 2015 by the ICSI. These
secretarial standards were effective from 1 July 2015.
Click here for notification.
These secretarial standards have now been revised by
the ICSI and approval of the Central Government has
been obtained for the revised SS-1 and SS-2. The
revised SS-1 and SS-2 shall be applicable for
compliance by all the companies (except the exempted
class of companies) with effect from 1 October 2017.
Most of the amendments are made to make the
provisions of these secretarial standards consistent with
the provisions of the 2013 Act, Companies (Amendment)
Act, 2015 and rules made thereunder, and MCA’s
exemption notification dated 5 July 2015 in respect to
private companies. Following are the key amendments in
revised SS-1 and SS-2:
Revised SS-1:
• Revised SS-1 exempts section 8 companies from its
scope. It is further clarified that section 8 companies
need to comply with the applicable provisions of the
2013 Act relating to board meetings. This amendment
is made to reflect the effect of the MCA’s exemption
notification dated 5 June 2015 in respect of section 8
companies as these are exempted from the
compliance of section 118 of the 2013 Act;
• It is applicable on only those committees which are
mandatorily required to be constituted by the board
under the 2013 Act. Hence, such provisions will not
apply to various other committees constituted under
other laws/regulations;
• A board meeting can be convened on ‘national
holiday’. Section 174(4) of the 2013 Act prohibits
conduct of meetings adjourned for want of quorum on
national holidays, but it is silent about the original
board meeting. Accordingly, the restriction on
meetings on national holidays is removed from this
standard also;
• Section 173(2) of the 2013 Act provides for option to a
director to participate in a meeting either in person or
through video conferencing. The intention of law is
that if a director opts to attend through video
conferencing, the company shall provide the facility.
The standard is reworded accordingly to reflect the
intention of law makers;
• According to SS-1, board meeting should be held at
least once in every calendar quarter with maximum
interval of 120 days between two consecutive
meetings. Revised SS-1 now provides that board shall
hold at least four meetings in each calendar year with
maximum interval of 120 days between any two
consecutive meetings. The amendment aims to
provide relaxation from holding meeting of the board
in each calendar quarter, in alignment with the
provisions of law. This provision is also relevant for
listed companies;
• Existing SS-1, provided that director should not be
reckoned for quorum in respect of an item in which he
is interested and shall not be present during the
discussions and voting on such item. Revised SS-1
provides that in case of a private company, a director
shall be entitled to participate in respect of such item
after disclosure of his interest. Further, revised SS-1
provides that for this purpose a director shall not be
treated as interested in a contract or arrangement
entered into or proposed to be entered into by the
company with the director himself or his relative. Such
amendment is made to reflect the effect of MCA’s
exemption notification dated 5 June 2015 in respect of
private companies and to bring more clarity in
alignment with the provisions of law as the term
‘Director himself or his relative’ is not prescribed
under section 184(2) of the 2013 Act;
• Report of the board of directors has to include a
statement on compliances of applicable secretarial
standards. This amendment is made to align the
disclosure requirement with the provisions of section
134(5)(f) of the 2013 Act which provides that the
directors responsibility statement shall state that the
directors have devised proper systems to ensure
compliances with the provisions of all applicable laws
and that such systems are adequate and operating
effectively.
India – Effective – Other Regulatory
Updates: Others
30
• All appointments made one level below key
managerial personnel is no longer required to be
noted by the Board. The amendment has been made
pursuant to amendment made in rule 8 of the
Companies (Meetings of board and its powers) Rules,
2014.
Revised SS-2:
• Revised SS-2 exempts section 8 companies from its
scope. It is further clarified that section 8 companies
need to comply with the applicable provisions of the
2013 Act relating to general meetings. This
amendment is made to reflect the effect of the MCA’s
exemption notification dated 5 June 2015 in respect to
section 8 Companies as these are exempted from the
compliance of section 118 of the 2013 Act;
• It is now clarified that the notice of general meeting is
to be hosted on the website till the conclusion of the
meeting. In case of a private company, the notice
shall be hosted on the website of the company, if any,
unless otherwise provided in the articles of
association. This provision has been introduced to
reflect the effect of MCA’s exemption notification
dated 5 July 2015 in respect of private companies;
• As per SS-2, it was mandatory to mention the
resolution at notice of each general meeting whenever
the new auditor or director was being appointed other
than retiring auditor/director. Now, according to
revised SS-2, there is no need to give the resolution in
notice. It provides greater clarity of the provision that
in case of ordinary business resolutions are not
required to be stated in the notice;
• SS-2 provides that a member who is a related party is
not entitled to vote on a resolution relating to approval
of any contract or arrangement in which such member
is a related party. Revised SS-2 further provides that
in case of a private company, a member who is a
related party is entitled to vote on such resolution.
This provision has been introduced to reflect the effect
of MCA’s exemption notification dated 5 July 2015 in
respect of private companies.
• The qualifications, observations or comments or other
remarks, if any, mentioned in the auditor’s report on
the financial transactions/secretarial audit report
which has any adverse/material adverse effect on the
functioning of the company should only be read at the
AGM.
Click here for announcement.
Click here for revised SS-1.
Click here for revised SS-2.
India – Effective – Other Regulatory
Updates: Others
31
Exposure draft on Ind AS 116, Leases
ICAI has issued an exposure draft on Ind AS 116,
Leases, which will supersede Ind AS 17, Leases. Ind AS
116 sets out the principles for the recognition,
measurement, presentation and disclosure of leases and
is based on IFRS 16. The proposed standard is
converged with IFRS 16 except for changes necessitated
due to removal of fair value model option for investment
property under Ind AS and a couple of other areas where
the other alternate options given under IFRS have been
removed.
The key changes proposed by Ind AS 116 are as follows:
• Ind AS 116 largely retains the definition of lease in Ind
AS 17 but changes the guidance on how to apply it.
Under Ind AS 116, the definition of a lease is much
more driven by the question of which party to the
contract controls the use of the underlying asset for
the period of use. Since all leases will be recognised
in the balance sheet of the lessee under Ind AS 116,
there is likely to be a greater focus on identifying
whether a contract is/contains a lease.
• Ind AS 116 modifies the accounting for leases in the
books of a lessee. A lessee will be required to
recognise assets and liabilities for all leases with term
of more than twelve months, unless the underlying
asset is of a low value.
• Under Ind AS 17, a lessee was required to classify the
lease as an operating or finance lease. Accounting
requirements varied depending on the classification.
• Ind AS 116 introduces increased disclosure
requirements in the books of the lessee and lessor.
• Ind AS 116 includes guidance on accounting for lease
modification in the books of the lessee and lessor,
which was not there under Ind AS 17.
It is relevant to note that accounting for leases in the
books of the lessor is substantially similar to the
requirements of Ind AS 17.
Ind AS 116 is proposed to be effective from annual
periods beginning on or after 1 April 2019.
Comments were invited on the exposure draft and the
last date for submission of comments was 31 August
2017.
Click here for exposure draft.
India – Proposed – Accounting
Updates
32
Exposure draft of guidance note on report under
section 92E of the Income-Tax Act, 1961 (Transfer
pricing)
The ICAI has issued the exposure draft of guidance note
on report under section 92E of the IT Act (Transfer
Pricing) (‘proposed GN’) for comments. The proposed
GN introduces the changes made by the Finance Act,
2017 in the IT Act in respect to transfer pricing.
Following are the amendments made by the Finance Act,
2017 in respect to which changes are introduced in the
proposed GN:
• Amendment in the applicability of specified domestic
transactions compliance by excluding expenditure
made to person referred to in section 40A(2)(b) of the
IT Act, from the ambit of the definition;
• New sections 92CE and 94B regarding secondary
adjustments and limitation on interest deduction
respectively introduced;
• Revised safe harbour rules in India notified by CBDT
vide notification dated 7 June 2017.
Comments were invited on the exposure draft and the
last date for submission of comments was 11 September
2017.
Click here for exposure draft.
India – Proposed – Auditing
Updates
33
The Companies (Amendment) Bill 2017 passed by
Lok Sabha
The Companies (Amendment) Bill 2016 (‘original bill’)
was introduced in Lok Sabha on 16 March 2016. The Lok
Sabha has passed the Companies (Amendment) Bill
2017 (‘amended bill’) on 27 July 2017 with certain
amendments in the original bill introduced.
Click here for amended bill.
Draft notification for self-reporting of estimated
current income, tax payments and advance tax
liability on voluntary compliance basis
For tax payers liable to discharge part of their tax liability
by way of advance taxes, arriving at a reasonably
accurate estimate of their current income and advance
tax liability is essential to avoid the additional burden of
interest on default/ deferment of advance tax. At the
same time, a reliable and advance estimate of tax
revenues for the year is also essential for the
Government in order to plan allocation of resources.
As a result, it is proposed to create a mechanism for self-
reporting of estimates of current income, tax payments
and advance tax liability by certain taxpayers (companies
and tax audit cases) on voluntary compliance basis. The
proposed reporting mechanism is sought to be created
by way of inserting a new rule 39A and Form No. 28AA in
the Income-tax Rules, 1962.
The draft notification has proposed that the
aforementioned category of taxpayers shall furnish an
intimation of estimated income and payment of taxes as
on 30 September of the previous year, on or before 15
November of the previous year.
However, if the income estimated as on 30 September of
the previous year is less than the income of the
corresponding period of the immediately preceding
previous year by an amount of INR 5 Lakh or 10 percent,
whichever is higher, then the such taxpayer shall be
required to furnish an intimation of estimated income and
payment of taxes as on 31 December of the previous
year, on or before 31 January of the previous year.
Comments were invited from stakeholders and general
public on the proposed draft notification and the
comment period ended on 29 September 2017.
Click here for press release
Click here for proposed draft notification.
Draft Companies (Cost records and audit)
Amendment Rules, 2017
MCA has issued draft Companies (Cost records and
audit) Amendment Rules, 2017 (‘proposed
amendments’) to amend the Companies (Cost records
and audit) Rules, 2014 for comments. These proposed
amendments have been issued pursuant to the
implementation of Ind AS to bring parity between
financial records and cost records. These proposed
amendments have substituted old Form CRA-1,
Particulars relating to the items of costs to be
included in the books of accounts, and Form CRA-3,
Form of the cost audit report, with new forms.
Click here for notice inviting comments.
Click here for notification.
India – Proposed – Others
Regulatory Updates
34
IFRS Practice statement 2: Making materiality
judgements
The IASB has issued IFRS practice statement 2:
Making materiality judgements (‘practice statement’)
which provides companies with guidance on how to
make materiality judgements when preparing their
general purpose financial statements in accordance with
IFRS. The practice statement represents a non-
mandatory guidance on making materiality judgments.
Therefore, compliance with the practice statement is not
required to ensure compliance with IFRS. To help
companies decide whether information is material, the
practice statement gathers all the materiality
requirements in IFRS standards and adds practical
guidance and examples.
Companies tend to follow the requirements in IFRS as a
checklist rather than applying judgement to decide what
information should be provided in the financial
statements. This practice statement, therefore
encourages a behavioural change in making disclosures
in financial statements.
The guidance in the practice statement can be applied to
the financial statements prepared any time after 14
September 2017.
Click here for news.
Click here for project summary of the practice statement.
International – Effective – IFRS
Updates
35
ASU 2017-11 - Earnings per share (Topic 260);
Distinguishing liabilities from equity (Topic 480);
Derivatives and hedging (Topic 815): (Part I)
Accounting for certain financial instruments with
down round features, (Part II) Replacement of the
indefinite deferral for mandatorily redeemable
financial instruments of certain non-public entities
and certain mandatorily redeemable non-controlling
interests with a scope exception
FASB has issued ASU 2017-11 with two parts.
Part I simplifies the accounting for certain financial
instruments with down round features.
Down round features are features of certain equity-linked
instruments (or embedded features) that result in the
strike price being reduced on the basis of the pricing of
future equity offerings. Under the existing guidance, an
equity-linked financial instrument (or embedded feature)
with a down round provision that is not classified as a
liability under Topic 480, Distinguishing liabilities from
equities is evaluated under Topic 815, Derivatives and
hedging, to determine whether the instrument meets the
definition of a derivative. If the instrument meets that
definition, it is evaluated further to determine whether it
qualifies for a scope exception from derivative accounting
because it is both (1) indexed to the entity’s own stock,
and (2) classified in equity.
For embedded features in certain financial instruments
with a debt host, an instrument is not considered to be
indexed to the entity’s own stock if a down round feature
exists. As a result, under the existing guidance, the entity
is then required to classify the freestanding financial
instrument (or the bifurcated conversion option) as a
liability that is initially measured at fair value and is re-
measured at each reporting date in the future.
ASU 2017-11 requires companies to disregard the down
round feature when assessing whether the instrument is
indexed to its own stock, for purposes of determining
liability or equity classification. Thus the classification
analysis of certain equity-linked financial instruments (or
embedded features) with down round features is
changed with the introduction of ASU 2017-11.
Therefore, a freestanding equity-linked financial
instrument (or embedded conversion option) no longer
would be accounted for as a derivative liability at fair
value as a result of the existence of a down round
feature.
The ASU further requires the entities providing earnings
per share (‘EPS’) data to adjust the effect of the down
round feature in their basis EPS calculation only when
triggered and the effect of trigger is also to be recognised
within equity.
The amendments in Part II, which do not have an
accounting effect, address the difficulty of navigating the
guidance in Topic 480, due to the existence of extensive
pending content in the Codification. This pending content
has resulted from the indefinite deferral of accounting
requirements related to mandatorily redeemable financial
instruments of certain non-public entities and certain
mandatorily redeemable non-controlling interests. As a
result, the amendments in Part II re-characterise the
pending content related to the indefinite deferral of
certain provisions of Topic 480 as a scope exception.
The amendments in Part I of the ASU 2017-11 are
effective for public business entities for fiscal years, and
interim periods within those fiscal years, beginning after
15 December 2018. For all other entities, the
amendments in Part I are effective for fiscal years
beginning after 15 December 2019, and interim periods
within fiscal years beginning after 15 December 2020.
Early adoption is permitted for all entities, including
adoption in an interim period. If an entity early adopts the
amendments in an interim period, any adjustments
should be reflected as of the beginning of the fiscal year
that includes that interim period.
The amendments in Part I should be applied
retrospectively to outstanding financial instruments with a
down round feature in either of the following ways:
• By means of a cumulative-effect adjustment to the
statement of financial position as at the beginning of
the first fiscal year and interim period(s) in which the
pending content that links to this paragraph is
effective.
• For each prior reporting period presented in
accordance with the guidance on accounting changes
prescribed in specified paragraphs of ASU 250,
Accounting changes and error corrections.
The amendments in Part II of the ASU do not require any
transition guidance because those amendments do not
have an accounting effect.
Click here for news release.
Click here for ASU.
International – Effective – USGAAP
Updates
36
ASU 2017-12 - Derivatives and hedging (Topic 815):
Targeted improvements to accounting for hedging
activities
FASB has issued an ASU with the objective of improving
the financial reporting of hedging relationships to better
portray the economic results of an entity’s risk
management activities in its financial statements. In
addition to that main objective, the amendments in this
ASU make certain targeted improvements to simplify the
application of the hedge accounting guidance in current
GAAP based on the feedback received from various
stakeholders.
Following are the key amendments introduced in ASU:
• Alignment of hedge accounting with risk
management activities: The ASU will expand hedge
accounting for both financial and nonfinancial risk
components to better align hedge accounting with a
company’s risk management activities.
• Risk component hedging: The ASU permits more
flexibility in hedging interest rate risk for both variable
rate and fixed rate financial instruments, and
introduces the ability to hedge risk components for
non-financial hedges.
• Accounting for the hedged item in fair value
hedges of interest rate risk: The ASU has changed
the guidance for designating fair value hedges of
interest rate risk and measuring the change in fair
value of the hedged item in fair value hedges of
interest rate risk. Specifically, the ASU, inter alia:
− Permits an entity to measure the change in fair
value of the hedged item on the basis of the
benchmark rate component of the contractual
coupon cash flows determined at hedge
inception, rather than on the full contractual
coupon cash flows as required by current GAAP.
− Permits an entity to measure the hedged item in
a partial-term fair value hedge of interest rate
risk by assuming the hedged item has a term
that reflects only the designated cash flows
being hedged. Current GAAP does not allow this
methodology.
• Recognition and presentation of the effects of
hedging instruments: ASU also aligns the
recognition and presentation of the effects of the
hedging instrument and the hedged item in the
financial statements to increase the understandability
of the results of an entity’s intended hedging
strategies.
• Amounts excluded from the assessment of hedge
effectiveness: Current GAAP permits an entity to
exclude option premiums and forward points from the
assessment of hedge effectiveness. The ASU
continues to allow an entity to exclude those
components. Additionally, the ASU permits an entity
to exclude the portion of the change in fair value of a
currency swap that is attributable to a cross-currency
basis spread from the assessment of hedge
effectiveness.
• Disclosures: ASU will enhance the presentation of
hedge results in the financial statements and
disclosures about hedging activities. The ASU also
requires new tabular disclosures related to cumulative
basis adjustments for fair value hedges.
The ASU is effective for public companies from fiscal
years beginning after 15 December 2018 and interim
periods within those fiscal years. For all other entities,
the ASU is effective for fiscal years beginning after 15
December 2019 and interim periods beginning after 15
December 2020.
Early application is permitted in any interim period after
issuance of the ASU.
Click here for news release.
Click here for ASU.
International – Effective – USGAAP
Updates
37
SEC conforms staff guidance to new FASB revenue
recognition rules
SEC has issued a SAB No. 116 to modify interpretive
guidance included in previous staff accounting bulletins
to make the interpretations consistent with ASC Topic
606, Revenue from contracts with customers, issued
by the FASB in 2014.
SAB No. 116 has made clear that Topic 13 in the
codification of SEC SAB; the guidance in Securities
Exchange Act Release No. 23507 and Accounting and
Enforcement Release No. 108, for criteria to be met to
recognise revenue when delivery has not occurred (‘bill-
and-hold’ arrangements) and SEC Topic 8 guidance are
no longer applicable. Topic 13 provided SEC staff views
on then-existing general revenue recognition guidance in
ASC Topic 605, Revenue recognition and Topic 8
provided the SEC staff’s views on the prohibition of
presenting sales of a leased or licensed department
within a retailer’s statement of comprehensive income,
and the staff’s views on the disclosure of finance charges
imposed by retailers on credit sales. These topics have
been eliminated upon adoption of Topic 606. Similarly,
ASC Topic 606 provides specific guidance for bill-and-
hold arrangements.
SAB No. 116 has also stated that SEC Topic 11.A is
modified to clarify that revenues from operating-
differential subsidies presented under a revenue caption
should be presented separately from revenue from
contracts with customers accounted for under ASC Topic
606.
SAB No.116 has come into force on 29 August 2017.
Click here for news.
Click here for SAB No. 116.
International – Effective – USGAAP
Updates
38
Exposure draft to clarify how to distinguish
accounting policies from accounting estimates:
Proposed amendments to IAS 8
The IASB has proposed narrow-scope amendments to
IAS 8, Accounting Policies, Changes in Accounting
Estimates and Errors and has invited comments from
the public.
The objective of these proposed amendments is to
enable entities to distinguish accounting policies from
accounting estimates.
The distinction is important because accounting
requirements for changes in accounting policies and
accounting estimate in the financial statements are
different.
Key highlights of the exposure draft are as follows:
• Changed definition of accounting policy and new
definition of accounting estimated inserted
• Clarification on how accounting policies and
accounting estimates relate to each other, by:
− explaining that accounting estimates are used in
applying accounting policies; and
− making the definition of accounting policies
clearer and more concise;
• Clarification that selection of an estimation technique,
or valuation technique, used when an item in the
financial statements cannot be measured with
precision, constitutes making an accounting estimate;
and
• Clarification that selection of cost formula
interchangeable inventories constitutes selecting an
accounting policy.
The exposure draft is open for comments until 15
January 2018.
Click here for news.
Click here for exposure draft.
Exposure draft on definition of material: proposed
amendments to IAS 1 and IAS 8
IASB has published the exposure draft: definition of
material (‘exposure draft’) relating to proposed
amendments to the definition of 'material' and has invited
comments on the same. The exposure draft proposes
minor amendments to IAS 1, Presentation of financial
statements, and IAS 8, Accounting policies, changes
in accounting estimates and errors, to clarify the
definition and improve understanding of the current
requirements.
The proposed amendments in the exposure draft is
expected to improve understanding of the existing
requirements. The exposure draft has proposed the
following amendments:
• align the definition in IFRS standards and the
definition in the Conceptual Framework for Financial
Reporting. These definitions are though similar but not
identical;
• some of the existing supporting requirements in IAS 1
to be included as the definition to give them additional
prominence; and
• improve the clarity of the explanation that
accompanies the definition of material.
The exposure draft is open for comments until 15
January 2018.
Click here for news.
Click here for exposure draft.
International – Proposed – IFRS
Updates
39
Proposed ASU: Leases (Topic 842) – Land
easements practical expedient for transition to topic
842
The FASB issued ASU No. 2016-02, Leases (Topic 842)
in February 2016 to increase transparency and
comparability among entities. ASU 2016-02, substantially
similar to IFRS 16 issued by IASB, required entities to
recognize lease assets and lease liabilities on the
balance sheet and disclose key information about leasing
transactions. A number of stakeholders raised concerns
on the application of Topic 842 to land easements. Land
easements, also known as rights of way, represent the
right to use, access, or cross another entity’s land for a
specified purpose.
Land easements are currently accounted for differently
by different entities. While some entities account for them
as leases under Topic 840, Leases, some entities apply
other Topics within the FASB Accounting Standards
Codification, such as Topic 350, Intangibles - Goodwill
and Other, or Topic 360, Property, Plant, and
Equipment.
The FASB has issued purposed ASU: Leases (Topic
842) - Land easement practical expedient for
transition to Topic 842, which provides a practical
expedient permitting entities to continue applying their
current policy for accounting for land easements that
existed as of, or expired before, the effective date of
Topic 842.
The last date for submitting comments is 25 October
2017
.
Click here for news release.
Click here for proposed ASU.
Proposed ASU - Not-for-profit entities (Topic 958) -
Clarifying the scope and the accounting guidance for
contributions received and contribution made
FASB has issued a proposed ASU intended to clarify and
improve the scope and the accounting guidance for
contributions received and made, primarily by NFP. The
amendments in this proposed ASU would clarify and
improve guidance about whether a transfer of assets is
an exchange transaction or a contribution.
The amendments in this proposed ASU would apply to all
organisations that receive or make contributions of cash
and other assets, including other business enterprises.
The proposed amendments would not apply to transfer of
assets from the government to business enterprises.
The amendments in this proposed ASU would provide a
more robust framework to determine when a transaction
should be accounted for as a contribution under subtopic
958-605 or as an exchange transaction accounted for
under other guidance (for example, Topic 606). The
proposed amendments also would provide additional
guidance about how to determine whether a contribution
is conditional or unconditional. Stakeholders have
indicated that additional guidance would help reduce
diversity in practice and ease the application of judgment
because the current guidance is open to differences in
interpretation and can be difficult to apply. The proposed
amendments would provide for additional clarifying
guidance for the evaluation of such arrangements,
resulting in greater consistency in application of the
guidance, and would make the accounting for
contributions more operable.
The amendments in this proposed ASU would apply to
both contributions received by a recipient and
contributions made by a resource provider.
The proposed ASU follows the same effective dates as
the revenue recognition standard i.e., the proposed ASU
would be effective for public business entities and NFP
that have issued, or are conduit bond obligors for,
securities that are traded, listed or quoted on an
exchange or an over-the-counter market for annual
periods beginning after 15 December 2017, and for
interim periods therein. For all other entities, it would be
effective for annual periods beginning after 15 December
2018, and interim periods within annual periods
beginning after 15 December 2019.
Early adoption of the amendments in this proposed ASU
would be permitted irrespective of the early adoption of
the amendments in the revenue recognition standard.
Comments on the proposed ASU are due by 1 November
2017.
Click here for proposed ASU.
International – Proposed –
USGAAP Updates
40
Proposed ASU – Consolidation (Topic 812) –
Reorganization
The FASB has issued a proposed ASU, Consolidation
(Topic 812)—Reorganization (‘proposed ASU’), to
reorganize and clarify certain items within the existing
consolidation guidance in ASC 810, Consolidation. The
FASB has issued the proposal in response to
stakeholders’ concerns that the existing consolidation
guidance is difficult to understand and navigate.
The proposed amendments would:
• Reorganize the existing consolidation guidance in
ASC 810 into a new topic, ASC 812, Consolidation
• Create separate subtopics for variable interest entities
in ASC 812-20, Variable Interest Entities, and for
voting interest entities in ASC 812-30, Voting Interest
Entities
• Move the existing guidance in ASC 810 for
consolidation of entities controlled by contract to ASC
958, Not-for-Profit Entities because this guidance only
applies to not-for-profit entities
• Supersede the existing guidance in ASC 810-30,
Research and Development Arrangements
• Clarify certain areas of the existing consolidation
guidance to make it easier to understand, but not
change any of the analyses performed under the
existing guidance
FASB will determine the effective dates for the
amendments for public business entities and all other
entities after it considers feedback on the proposal.
Although the Board does not anticipate changes in
accounting practices or outcomes from the proposed
amendments, it has provided the following transition
guidance:
• Entities that have not adopted the amendments in
ASU 2015-02, Amendments to the Consolidation
Analysis, would be required to adopt the amendments
in the proposal at the same time that they adopt the
amendments in ASU 2015-02, and should apply the
same transition method (a modified retrospective
approach by recording a cumulative effect adjustment
to beginning retained in the year of adoption, or a
retrospective approach) that it elects for ASU 2015-
02.
• Entities that have adopted the amendments in ASU
2015-02 would be required to apply the proposed
amendments retrospectively to all prior periods
presented, beginning with the period that the
amendments in ASU 2015-02 were initially adopted.
The comment period on the proposed ASU ends on
December 4 2017.
Click here for proposed ASU.
Two proposed ASUs: Technical corrections and
improvements to ASU No. 2016-01, Financial
Instruments - Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial
Liabilities and ASU No. 2016-02, Leases (Topic 842)
FASB has issued a proposed ASU that contains
proposed technical corrections and clarifications for
separate standards issued in 2016, ASU No. 2016-01,
Financial Instruments - Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets
and Financial Liabilities and ASU No. 2016-02, Leases
(Topic 842).
The FASB issued ASU No. 2016-01, Financial
Instruments - Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial
Liabilities in January 2016, which retained the current
framework for accounting for financial instruments but
made targeted improvements to address certain aspects
of recognition, measurement, presentation, and
disclosure of financial instruments. In addition to
amending Topic 825, Financial Instruments, the FASB
added Topic 321, Investments - Equity Securities, and
made a number of consequential amendments to the
Codification.
Similarly, in February 2016, the FASB issued ASU No.
02, Leases (Topic 842), to increase transparency and
comparability among organizations by recognizing lease
assets and lease liabilities on the balance sheet and
disclosing key information about leasing transactions.
This proposed ASU for technical correction is an ongoing
project about technical corrections and improvements to
clarify the Codification or to correct unintended
application of guidance and generally are not expected to
have a significant effect on current accounting practice or
create a significant administrative cost for most entities.
The amendments in the proposed ASU are as a result of
the items brought to the attention of FASB by
stakeholders
.
The last date for submitting comments is 13 November
2017.
Click here for proposed ASU.
International – Proposed –
USGAAP Updates
41
Exposure draft of proposed statements on standards
for attestation engagements (SSAE) - Selected
Procedures
The Exposure draft of proposed statements on
standards for attestation engagements - Selected
Procedures (‘‘exposure draft’) is a result of deliberations
on expansion of a practitioner’s ability to perform
procedures and report in a procedures and findings
format beyond that currently provided by AT-C section
215, Agreed-Upon Procedures Engagements.
The exposure draft has proposed the following matters:
• Abolishing the requirements for specified parties to
either establish the procedures or agree to the
sufficiency of the procedures for their purposes. This
is intended to provide greater flexibility as, in a
selected procedures engagement, the practitioner
may determine the procedures to be performed and
no party would be required to take responsibility for
the sufficiency of the procedures. This will enable the
practitioner to perform engagements when the
specified parties are not able or willing to fully develop
or determine the procedures, without having to
perform a separate consulting services engagement.
• Excluding the requirement to either request an
assertion or disclose in the accountant’s report when
the practitioner does not obtain a written assertion.
This is because the appropriate party may not have
the ability or may not otherwise be willing to perform
its own measurement or evaluation of the subject
matter.
• To exclude the requirement for a practitioner to
restrict the use of the report. This will ensure the
report can be used by a wider audience including
parties who are unwilling or unable to agree to the
sufficiency of the procedures for their purposes.
The SSAE is proposed to be effective for reports dated
on or after 1 May 2019. This effective date is provisional,
but will not be earlier than 1 May 2019. Earlier
implementation will be permitted.
The due date for giving comments on the exposure draft
is 1 December 2017.
Click here for exposure draft.
Exposure draft of proposed statements on standards
for accounting and review services (SSARS) -
Omnibus statement on standards for accounting and
review services – 2018
The AICPA’s Accounting and Review Services
Committee (ARSC) proposed omnibus Statement on
Standards for Accounting and Review Services,
Omnibus Statement on Standards for Accounting and
Review Services – 2018, on international reporting
issues. The proposed SSARS:
• Creates a new AR-C Section 100, International
Reporting Issues. This new section provides
standards for a compilation or review when either (a)
the financial statements were prepared in accordance
with a financial reporting framework generally
accepted in another country not adopted by an AICPA
designated body, or (b) the review or compilation
engagement is to be performed in accordance with
both SSARS and another set of compilation or review
standards.
• Revises paragraph .06 of AR-C Section 60, General
Principles for Engagements Performed in Accordance
With Statements on Standards for Accounting and
Review Services, to add a new definition of the term
“fair presentation framework” and revises the
definition of the term “financial reporting framework” to
the SSARS.
• Adds guidance from Interpretation No. 1,
Considerations Related to Reviews Performed in
Accordance With International Standard on Review
Engagements (ISRE) 2400 (Revised), of AR-C
section 90 to new AR-C Section 100 and withdraws
Interpretation No. 1
• Revises AR-C Section 90, Review of Financial
Statements, paragraph .39 to make the requirements
regarding the contents of the accountant’s review
report consistent with the illustrative examples in
exhibit C of AR-C Section 90.
The proposed SSARS will be effective for compilations
and reviews of financial statements for periods ending on
or after 15 June 2019. This effective date is provisional;
however, it will not be effective before this date. The
technical corrections for AR-C Section 90, paragraph .39,
will be effective upon issuance.
The due date for giving comments on the exposure draft
is 14 December 2017.
Click here for exposure draft.
International – Proposed – Auditing
Updates
42
Glossary
1956 Act Companies Act, 1956
2013 Act Companies Act, 2013
AGM Annual General Meeting
ASI Accounting Standard Interpretation
ASU Accounting Standards Update
AY Assessment Year
CBDT Central Board of Direct Taxes
EPCG Export Promotion Capital Goods
EPS Earnings Per Share
ESOP Employee Stock Option Plan
FAQ Frequently Asked Question
FASB Financial Accounting Standards Board
FMV Fair Market Value
GAAP Generally Accepted Accounting Principles
IASB International Accounting Standards Board
IBBI Insolvency and Bankruptcy Board of India
ICAI Institute of Chartered Accountants of India
ICDR Issue of Capital and Disclosure Requirements
ICDS Income Computation and Disclosure Standard(s)
IFRS International Financial Reporting Standard(s)
IFSC International Financial Services Centres
Ind AS Indian Accounting Standard(s)
Ind AS RulesCompanies (Indian Accounting Standards) Rules,
2015
IRDAIInsurance Regulatory and Development Authority of
India
IT Act Income Tax Act, 1961
ITFG Ind AS Transition Facilitation Group
MAT Minimum Alternate Tax
MCA Ministry of Corporate Affairs
NBFC Non-Banking Financial Company
NCLAT National Company Law Appellate Tribunal
NCLT National Company Law Tribunal
NFP Not-for-Profit
NPA Non Performing Asset
PCAOB Public Company Accounting Oversight Board
PPE Property, plant and equipment
RBI Reserve Bank of India
SEBI Securities and Exchange Board of India
SEC Securities and Exchange Commission
SPV Special Purpose Vehicle
43
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