Union Government amends the “Indian Accounting Standards”

The Ind-AS 103 116 and other standards have been amended

• The government has amended certain Indian Accounting Standards (Ind-AS), including the standard relating to leases amid the coronavirus pandemic
• Ind-AS 103, 116 and some other standards have been amended by the Corporate Affairs Ministry
• The amendments are being made in consultation with the National Financial Reporting Authority (NFRA)

Reasons and changes have been inducted

• Ind-AS 103, 116 and some other standards have been amended by the Corporate Affairs Ministry
• While Ind-AS 103 pertains to business combinations, Ind-AS 116 relates to principles for recognition, presentation and disclosure of leases
• In the wake of the pandemic, many lessors have extended rent concessions to lessees. However, applying the Ind-AS 116 requirements for changes to lease payments could have posed practical difficulties in the current situation
• Against this backdrop, the ministry has amended the rules whereby entities would get relief from lease modification accounting due to COVID-19 related rent concessions
• The amendment to Ind-AS 116 will provide significant relief to such lessees for accounting for rent concessions from lessors specifically arising from the COVID-19 pandemic
• Lease modification requires re-computation of lease liability using discount rate on the date of modification
• This would have posed significant challenge to company whose volume of leases is very high
• While lessees that elect to apply the practical expedient do not need to assess whether a concession constitutes a modification, they still need to evaluate the appropriate accounting for each concession as the terms of the concession granted may vary
• Among others, the ministry has also amended rules regarding Ind-AS 103
• These are aimed at helping entities to determine whether a transaction needs to be accounted as a business combination or as an asset acquisition

What is “Indian Accounting Standards”?

• It is the Accounting standard adopted by companies in India and issued under the supervision of Accounting Standards Board (ASB) which was constituted as a body in the year 1977
• ASB is a committee under Institute of Chartered Accountants of India (ICAI) which consists of representatives from government department, academicians, other professional bodies viz. ICAI, representatives from ASSOCHAM, CII, FICCI, etc
• The Ind AS are named and numbered in the same way as the International Financial Reporting Standards (IFRS). National Financial Reporting Authority (NFRA) recommends these standards to the Ministry of Corporate Affairs (MCA)
• MCA has to spell out the accounting standards applicable for companies in India. As on date MCA has notified 41 Ind AS
• This shall be applied to the companies of financial year 2015-16 voluntarily and from 2016-17 on a mandatory basis

National Financial Reporting Authority

• It is an independent regulator that acts under Companies Act, 2013. It was created in 2018
• The former IAS officer Rangachari Sridharan is the chairperson of NFRA
• The concept of NFRA was suggested after Satyam Scandal that occurred in 2009
• The authority is responsible for investigations, sanctions and auditing firms

Pic courtesy : financialexpress.com