The weekly messenger | Edition 27.20

Accounting News

Companies (Indian Accounting Standards) Amendment Rules, 2020 – 24 July 2020

The Central Government in consultation with National Financial Reporting Authority (NFRA) has issued the Companies (Indian Accounting Standards) Amendment Rules, 2020, which comprises of the following changes:

• In Ind AS 103 ‘Business Combinations’, the erstwhile definition of business has been substituted with a new definition, which will help the entities to determine, whether a transaction needs to be accounted as a business combination or as an asset acquisition.
• In Ind AS 107 ‘Financial Instruments: Disclosures’, a new disclosure requirement has been inserted, which is to be given, when there is uncertainty due to Interest Rate Benchmark Reform.
• In Ind AS 109 ‘Financial Instruments’, detailed provisions with respect to temporary exceptions from applying specific hedge accounting requirements and transition for hedge accounting have been added.
• In Ind AS 116 ‘Leases’, provisions with respect to COVID-19 related rent concessions for lessees have been inserted, which will provide significant relief to the lessees for accounting for the rent concessions provided by the lessors arising from COVID-19 pandemic.
• In Ind AS 1 ‘Presentation of Financial Statements’ and Ind AS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’, changes have been made to the definition of material.
• Certain other standards that have also undergone changes includes Ind AS 10 ‘Events after the Reporting Period’, Ind AS 34 ‘Interim Financial Reporting’ and Ind AS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’.    

The aforesaid amendments shall come into force from different dates.
 
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Clarification on Implementation of Accounting Standards by NBFCs and ARCs – 24 July 2020

In March 2020, the Reserve Bank of India (RBI) had issued a notification with respect to Non-Banking Financial Companies (NBFCs) and Asset Reconstruction Companies (ARCs) implementing Ind AS, wherein it had clarified that while computing the ‘Regulatory Capital and Regulatory Ratios’, any net unrealised gains arising on fair valuation of financial instruments, should not be included in owned funds whereas all such net losses should be considered .
 
However, now it has decided that the unrealised gain/loss on a derivative transaction undertaken for hedging may be offset against the unrealised loss/gain recognized in the capital (either through Profit or Loss or through Other Comprehensive Income) on the corresponding underlying hedged instrument. If after such offset and netting with unrealised gains/losses on other financial instruments, there are still net unrealised gains, the same should be excluded from regulatory capital as required by the erstwhile notification as mentioned in aforesaid paragraph.
 
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Regulatory News

Constitution of Technical Advisory Committee for NFRA – 17 July 2020

The NFRA vide Rule 15 ‘Advisory committees, study groups and task forces’ of the NFRA Rules, 2018 has setup an Advisory Committee that could reflect and express the views and concerns of the users of corporate financial statements and preparers.
 
The functions of such Committee will include:  

• Aid and advise the Executive Body (EB) of the NFRA on issues relating to the drafts of accounting standards and auditing standards;
• Advise on improvements to the processes followed by the EB, especially relating to Audit Quality Reviews;
• Provide inputs from the perspectives of users, preparers, and auditors of financial statements;
• Advise on development of measures of audit quality.

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In view of the uncertainty observed in the recent past due to concerns relating to COVID-19 pandemic and the resultant fear of economic slowdown, the Securities and Exchange Board of India (SEBI) vide its Press Release dated 20 March 2020 had introduced various regulatory measures for a period of one month w.e.f. 23 March 2020. This date later got extended till 30 July 2020 respectively. 
Now, in order to ensure orderly trading and settlement, the effective risk management, price discovery and maintenance of market integrity, the SEBI has once again decided to further extend the validity of the aforesaid regulatory measures till 27 August 2020.
 
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Relaxations relating to procedural matters – Issues and Listing – 24 July 2020

The SEBI vide its Circular dated 6 May 2020, had granted certain onetime relaxations from the strict enforcement of certain regulations of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, pertaining to Right Issue opening upto 31 July 2020.
 
Now, based on the various representations received from market participants, the validity of aforesaid relaxations has been further extended and shall be applicable for Right Issues openings upto 31 December 2020.
 
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MOU between CBDT and CBIC – 21 July 2020

A Memorandum of Understanding (MOU) has been signed between the Central Board of Direct Taxes (CBDT) and the Central Board of Indirect Taxes and Customs (CBIC), for the purpose of exchange of data between the two. This MOU will supersede the MOU signed between the CBDT and erstwhile Central Board of Excise and Customs (CBEC) in the year 2015.
 
This MOU will facilitate the sharing of data and information between CBDT and CBIC on an automatic and regular basis. In addition to regular exchange of data, CBDT and CBIC will also exchange with each other, on request and spontaneous basis, any information available in their respective databases which may have utility for the other organization.
 
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