The weekly messenger | Edition 06.16

Accounting news

FASB issues ASU 2016-15 on Statement of Cash flow - 27 August 2016

Financial Accounting Standards Board (FASB) has issued an Accounting Standard Update (ASU) on Statement of Cash Flow (Topic 230) regarding the presentation and classification of certain cash payments and cash receipts to clarify the areas where GAAP has been either unclear or lacking in specific guidance in order to reduce the existing diversity in practice as indicated by the stakeholders which provides the guidance on the following issues: 

• Proceeds from the settlement of insurance claims.
• Contingent consideration payments made after a business combination.
• Debt prepayment or debt extinguishment costs.
• Settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that is insignificant in relation to the effective interest rate of the borrowing.
• Distributions received from equity-method investees
• Proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies.
• Separately identifiable cash flows and application of the predominance principle.
• Beneficial interests in securitization transactions.

These amendments will become effective for public business entities for fiscal years beginning after 15 December 2017 and interim periods within those fiscal years and for all other entities from fiscal year beginning after 15 December 2018.           
 
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Auditing News

Implementation Guide on Audit of IFC with respect to smaller companies issued by AASB - August 2016

The Auditing and Assurance Standards Board (AASB) has issued an implementation guide on Audit of Internal Financial Controls (IFC) over Financial Reporting with specific reference to smaller, less complex companies in order to provide simpler guidance for reporting on IFCs for such companies. This implementation guide is in the form of frequently asked questions (FAQs) arising from practical difficulties faced by auditors in the audit of IFCs of such companies. However, this implementation guide should be read in conjunction with the Guidance Note (GN) on IFCs over financial reporting.               
 
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Implementation Guide on Auditor’s Report under Ind AS for Transition Phase released by AASB - August 2016 

The AASB has released an implementation guide on Auditor’s Report under Indian Accounting Standards (Ind AS) for Transition Phase as the first time implementation of Ind AS has thrown up many challenges for the companies as well as their statutory auditors due to the substantial differences between the “Accounting Standards” used for preparation of financial statements and the “Ind AS”.
 
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Exposure Draft of GN on Audit Reports and Certificates for Special Purposes (Revised 2016) issued by AASB - August 2016 

The AASB has issued an exposure draft of GN on Audit Reports and Certificates for Special Purposes to provide guidance on engagements which require a professional accountant in public practice (known as practitioner) to issue reports other than those which are issued in audits or reviews of historical financial information (dealt by Standards on Auditing (SAs) and Standards on Review Engagements (SREs) issued by ICAI).

 Comments to be received by 10 September 2016
 
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Exposure Draft of GN on Audit of Consolidated Financial Statements (Revised 2016) issued by AASB - August 2016 

The AASB has issued an exposure draft of GN on Audit of Consolidated Financial Statements which provides guidance on the specific issues and audit procedures to be applied in an audit of consolidated financial statements. This GN can also be used for consolidated financial statements prepared for special purpose, to the extent applicable such as Initial Public Offer (IPOs).This GN does not deal with accounting matters arising on consolidation of financial statements. This GN does not provide guidance in relation to amalgamation/business combination.
 
Comments to be received by 10 September 2016
 
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Regulatory News

 Review of Prudential Norms – Risk weights for exposures to Corporate, AFCs and NBFC - IFCs-25 August 2016 

The Reserve Bank of India (RBI) has made certain modifications to its present risk weights i.e.100% applicable to unrated exposures to the captioned entities which are as follows: 

• From 30 June 2017 onwards, risk of 150% will be attracted if the unrated claims on corporate, Asset Finance Companies (AFCs), and Non Banking Financial Companies (NBFCs) - International Finance Corporations (IFCs) are having aggregate exposure from banking system of more than INR 200 Crore.
• Risk weight of 150% will be attracted immediately on corporates, AFCs, and NBFC-IFCs if the claims having aggregate exposure from banking system of more than INR 100 crore which were rated earlier and subsequently have become unrated.

 For more information click here

GN on preparation of Investment Returns- 24 August 2016 

The Insurance Regulatory Authority of India (IRDAI) has issued a GN on preparation of investment returns to ensure consistency in data filed through online submission.
 
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IRDAI (Investment) Regulations, 2016- 24 August 2016 

IRDAI has issued IRDAI (Investment) Regulations, 2016 which shall come into force on the date of their publication in Official Gazette. The insurer shall comply with these regulations from 31 March 2017. The regulations, inter alia, includes: 

• Approved investments.
• Regulation of investments-Life Insurer
• Exposure/prudential norms
• Returns to be submitted by insurer
• Duty to report extraordinary events affecting the investment portfolio
• Provisions on investment management
• Dealings in financial derivatives
• Repeal and savings etc.

 For more information click here
 
Further IRDAI has made necessary amendments to the earlier circulars and guidelines issued prior to these regulations and have issued an Investment-Master Circular on the above mentioned regulations which will cover all operational, procedural and guidelines issued on: 

• Investment category
• Valuation Guidelines
• Risk management and Concurrent audits
• Operational Procedures
• Disclosure and reporting norms etc

 For more information click here

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