The weekly messenger | Edition 12.21

ACCOUNTING NEWS

FAQ on Accounting for amounts to be incurred towards CSR pursuant to the Companies (CSR Policy) Amendment Rules, 2021 – 10 May 2021
 
The ICAI has issued a Frequently Asked Question (FAQ) on ‘Accounting for amounts to be incurred towards CSR pursuant to the Companies (CSR Policy) Amendment Rules, 2021’, wherein the ICAI has clarified that Corporate Social Responsibility (CSR) expenditure would be recognised as an expense in the statement of profit or loss as and when such expenditure is incurred on the CSR activities undertaken as per the Board approved CSR Policy and CSR projects during the financial year (FY). For the ‘unspent amount’, a legal obligation arises to transfer such amounts to specified accounts depending upon the fact that whether such unspent amount relates to ongoing projects or not. Accordingly, liability needs to be recognised for such ‘unspent amount’ as at the end of the FY as per para 17(a) of Ind AS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’.
 
Further as per Ind AS 34 ‘Interim Financial Statements’, CSR obligation will be recognised based on the principles for recognition of the same in annual financial statements. 
 
The conclusions drawn above would be equally applicable under the Companies (Accounting Standards) Rule, 2006 also.
 
For more information, click here.
 
IASB clarifies the accounting for deferred tax on leases and decommissioning obligations – 7 May 2021
 
The International Accounting Standards Board (IASB) has issued targeted amendments to IAS 12 ‘Income Taxes’, which specifies how a company should account for deferred tax on transactions such as leases and decommissioning obligations.
 
Under IAS 12, in specified circumstances, companies are exempt from recognising deferred tax when they recognise assets or liabilities for the first time. Therefore, earlier there had been some uncertainty about whether the exemption would be applicable to transactions such as leases and decommissioning obligations—transactions for which companies recognise both an asset and a liability. 
 
The amendments now clarify that the exemption does not apply and that companies are required to recognise deferred tax on such transactions.
 
The amendments are effective for annual reporting periods beginning on or after 1 January 2023, with early application permitted. 
 
For more information, click here.

AUDITING NEWS

Extension of validity of peer review certificate in the wake of COVID-19 spurt across the country – 4 May 2021
 
In order to mitigate the hardship due to the lockdown imposed by several State Governments, the Peer Review Board of the ICAI has decided to grant extension to the Peer Review Certificates expiring during the period from 1 April 2021 to 30 June 2021 till 31 July 2021. However, in order to maintain the continuity of validity of certificate, the Practice Units are requested to ensure the submission of completed Final Clean Report to the Board well in advance before 31 July 2021.
 
For more information, click here.

REGULATORY NEWS

FAQs on Circular regarding Relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013 issued by the MCA – 4 May 2021
 
The Ministry of Corporate Affairs (MCA) vide its Circular dated 3 May 2021, has provided relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013.
 
Consequently, the ICAI has issued certain FAQS w.r.t. the aforesaid relaxations. Some of the key FAQs are as follows:

• What is the relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013?
• What is the objective of the Circular?
• For which Forms, the Circular is applicable?
• What is the time period for applicability of the relaxation w.r.t. filing of charge form(s)?
• What relaxation is provided in case, where the date of creation/modification of charge is before 1 April 2021 but time limit of 120 days has not expired?
• What fee shall be charged where the date of creation / modification of charge falls on any date between 1 April 2021 to 31 May 2021 (both dates inclusive).
• For which cases the Scheme is not applicable?

For more information, click here.
 
Clarification on spending of CSR funds for ‘creating health infrastructure for COVID care’, ‘establishment of medical oxygen generation and storage plants’ etc. – 5 May 2021
 
The MCA vide its Circular dated 23 March 2020 had clarified that spending of CSR funds for COVID-19 would be treated as an eligible CSR activity.
 
Now, it has been further clarified that spending of CSR funds for creating health infrastructure for COVID care, establishment of medical oxygen generation and storage plants, manufacturing and supply of Oxygen concentrators, ventilators, cylinders and other medical equipment for countering COVID-19 or similar such activities would also be considered as eligible CSR activities.
 
The aforesaid activities or projects or programmes can be undertaken either directly by the companies themselves or in collaboration as shared responsibility with other companies subject to fulfillment of Companies (CSR Policy) Rules, 2014.
 
For more information, click here.
 
SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021 – 5 May 2021
 
The Securities and Exchange Board of India (SEBI) has issued the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021, wherein various amendments have been notified.
 
Some of the key amendments are as follows:

• In Regulation 2 ‘Definitions’

1. the term SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 has been substituted with the term SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018;
2. certain modifications have been made in the definition of main board; offer document; promoter and promoter group; small and medium enterprises; SME Exchange; specified securities and a new clause which defines the term ‘working days’ has also been added.

• In Regulation 21 ‘Risk Management Committee’, following changes have been made:

1. Applicability extended to top 1000 listed entities based on market capitalization instead of top 500 listed entities;
2. Additional requirement of having atleast 1 independent director in the aforesaid committee has been inserted;
3. Minimum number of meetings have been increased from once a year to twice a year;
4. Two new sub-regulations w.r.t. quorum and maximum gap between two meetings have been added;
5. The Risk Management Committee has been provided with a power to seek information.

• Listed entities to submit a secretarial compliance report to stock exchanges within 60 days from end of FY.
• Timelines for submission of quarterly compliance report on corporate governance to the stock exchange(s) increased from 15 days to 21 days from the end of each quarter.
• Disclosure w.r.t. events specified in sub-para 4 of Para A of Part A of Schedule III, which were earlier required to be made within 30 minutes of the conclusion of the board meeting would now be required to be made within the timelines specified therein.
• Sub-regulation (6) of Regulation 33 ‘Financial Results’ / Sub-regulation (3) of Regulation 52 ‘Financial Results’, which deals with the review of the Statement on Impact of Audit Qualifications (for audit report with modified opinion) and the accompanying annual audit report by the stock exchange has been omitted.
• Requirement of submission of a Business Responsibility Report to be discontinued after the FY 2021–22 and thereafter, to be replaced by the Business Responsibility and Sustainability Report from the FY 2022–23.
• Top 1000 listed entities required to formulate Dividend Distribution Policy instead of top 500 listed entities. Further, such policy needs to be disclosed on the website of the company, the weblink of which shall be provided in the annual report.

These Regulations shall come into force w.e.f. 6 May 2021.
 
For more information, click here.
 
Business Responsibility and Sustainability Reporting by listed entities – 10 May 2021
 
The SEBI has introduced new reporting requirements on ESG parameters called the ‘Business Responsibility and Sustainability Report (BRSR)’ accompanied by the Guidance Note on the same.
 
The new BRSR format seeks disclosures from the listed entities on their performance against the nine principles of the National Guidelines on Responsible Business Conduct (NGBRCs).
 
The new BRSR format would replace the existing format of Business Responsibility Report and would be applicable to top 1000 listed companies on mandatory basis w.e.f. FY 2022-23. However, listed entities may use the revised BRSR format for the FY 2021-22 on voluntary basis.
 
For more information, click here.
 
Resolution Framework 2.0 for Covid-19 related stress of MSMEs, individuals and small businesses – 5 May 2021             
 
The Reserve Bank of India has announced Resolution Framework 2.0 for COVID-19 related stressed assets of Micro, Small and Medium Enterprises (MSMEs), individuals and small businesses, wherein certain restructuring measures have been announced targeting the aforesaid group of borrowers
 
For Resolution Framework 2 for COVID -19 related stress of MSMEs, click here.
 
For Resolution Framework 2 for COVID -19 related stress of individuals and small businesses, click here.
 
IRDAI extends the time limit for filing of returns and uploading the public disclosures on websites of the insurers – 6 May 2021
 
In view of the restrictions imposed due to COVID 19 pandemic, the Insurance Regulatory and Development Authority of India (IRDAI) has decided to extend the time limit for furnishing of all monthly, quarterly, half yearly and annual returns by the insurers and reinsurers (including FRBs) for the period ending on 31 March 2021 by 30 days.
 
Further the time limit for ensuring compliance with the directions regarding public disclosures on websites by insurers, for the period ended on 31 March 2021, has also been extended by a period of 30 days.
 
However, all insurers shall continue to file the solvency position with the IRDAI on monthly basis within 15 days from the end of the respective month.
 
For more information, click here.
 
Section 142 of the Code on Social Security, 2020 notified – 5 May 2021
 
The Ministry of Labour & Employment has notified that the provisions of Section 142 ‘Application of Aadhaar’ of the Code on Social Security, 2020 shall come into force w.e.f. 3 May 2021.
 
For more information, click here.