The weekly messenger | Edition 51.18

Accounting News

ITFG Clarification Bulletin 17 – 19 December 2018

The Indian Accounting Standards (Ind AS) Technical Facilitation Group (ITFG) of Ind AS (IFRS) Implementation Committee has been constituted to provide clarification on various issues related to applicability and/or implementation of Ind AS under the Companies (Ind AS) Rules, 2015, raised by preparers, users and other stakeholders. Recently, ITFG has issued the seventeenth set of clarifications. This bulletin contains clarifications on following significant matters:

• Amount at which non-monetary asset received from government will be valued i.e. either at fair value or at nominal amount as per Ind AS 20 (Revised), in case of new and existing Ind AS compliant companies;
• Whether Dividend Distribution Tax (DDT) should be included while calculating effective interest rate on preference shares as per Ind AS 109;
• Whether exemption received by SEZ/STP unit from payment of taxes and duties on import/export of goods would be treated as government grant or government assistance as per Ind AS 20;
• How to recognise ‘dividend income’ on an investment on a debt instrument in books of investor;
• Whether adjustments arising out of fair valuation of investment property as required under Ind AS 28 should be made in the Consolidated Financial Statements of investor;
• Whether a service given by a subsidiary to its parent is required to be disclosed as related party transaction as per Ind AS 24, even if the tariff for the same is decided by an independent rate-setting authority etc.

For more information, click here.

The Institute of Chartered Accountants of India has published the convergence status of International Financial Reporting Standard (IFRS) as on 19 December 2018 which is as follows:
 

 
For more information, click here. 

Regulatory News

Draft amendment to Rule 8 of the Companies (Incorporation) Rules, 2014 – 17 December 2018

The Ministry of Corporate Affairs has proposed to substitute the existing Rule 8 ‘Undesirable Names’ of the Companies (Incorporation) Rules, 2014 with a new Rule 8 ‘Names which resemble too nearly with the name of an existing company’. The purpose of proposing the amendments in the aforesaid Rule is to provide more clarity to the rules related to name availability by:

• inclusion of illustrations in the rules;
• providing a clear test to determine as to whether the applied name resembles too nearly with the name of an existing company; and
• bringing more clarity in the rule related to ‘general names’/descriptive names and trademark applicability.

Comments are to be provided by 31 December 2018.
 
For more information, click here.

The Central Government (CG) has amended the Companies (Registration of Charges) Rules, 2014 with the Companies (Registration of Charges) Second Amendment Rules, 2018 wherein it has substituted the existing Form No. CHG-4, ‘Particulars for satisfaction of charge thereof’ with a new one.
 
These rules shall come into force from the date of their publication in the Official Gazette i.e. 18 December 2018.
 
For more information, click here.

The CG has amended the Companies (Incorporation) Rules, 2014 with the Companies (Incorporation) Fourth Amendment Rules, 2018, wherein the CG has made the following amendments:
Insertion of the following new Rules:

• Rule 23A, ‘Declaration at the time of commencement of business’ which provides that declaration to be filed by the director at the time of commencement of business under section 10 A ‘Commencement of Business etc.’ shall be filed in Form No. INC – 20A subject to certain other conditions;
• Rule 40, ‘Application under sub-section (41) of section 2 for change in financial year’ which states that the application for approval from concerned regional director, in case of use of different financial year is to be filed in e- FORM No. RD-1 subject to fulfilment of certain other conditions; and
• Rule 41, ‘Application under section 14 for conversion of public company into private company’ which provides that an application for alteration in Articles of Association having the effect of conversion of a public company into a private company has to be filed  in e- FORM No. RD-1 with the Regional Director within 60 days from the date of passing of special resolution along with certain other compliances as given in the aforesaid Rule. 
• Formats of the newly introduced forms i.e. Form INC. 20 A ‘Declaration for commencement of business, Form INC.- 25A ‘Advertisement to be published in the newspaper for conversion of public company into a private company’, Form RD - 1 ‘Form for filing application to Regional Director’, Form RD GNL – 5 ‘Form for filing Addendum for rectification of defects or incompleteness’.

These rules shall come into force from the date of their publication in the official gazette.
 
For more information, click here.

The CG has delegated the powers and functions vested in it under the first proviso to section 2(41) (which provides for taking the approval of the CG in case the company adopts different financial year) and second proviso to section 14(1) of the Companies Act, 2013 (which requires the approval of CG in case of alteration of Articles of Association having effect of conversion of public company into a private company), respectively to the Regional Directors at Mumbai, Kolkata, Chennai, New Delhi, Ahmedabad, Hyderabad and Shillong, subject to the condition that the CG may revoke such delegation of powers or may itself exercise the powers under the aforesaid sections, if in its opinion such a course of action is necessary in the public interest.
 
For more information, click here. 

The Securities and Exchange Board of India (SEBI) has reviewed the risk management framework for equity derivatives segment wherein the SEBI considering the recommendations of its Risk Management Review Committee has made the following changes in the existing framework:

• Margin Period of Risk (MPOR) has been increased to 2 days as compared to the current requirement of 1 day;
• The payment of Mark to Margin (MTM) would now be required to be made mandatorily by all the members on T+0 basis i.e. before start of trading on the next day, as against the earlier requirement wherein an option was given between (T+0) basis and (T+1) basis;
• Additionally, the SEBI has asked the stock exchanges and clearing corporations to estimate the appropriate MPOR, subject to a minimum of two days, for each equity derivative product based on liquidity and scale up the initial margins and exposure margins accordingly etc.

These provisions shall come into effect from 21 January 2019.
 
For more information, click here. 

The Reserve Bank of India has issued the Foreign Exchange Management (FEMA) (Borrowing and Lending) Regulations, 2018 which governs the borrowing and lending between a person resident in India and a person resident outside India.
 
For more information, click here.

Further GST Updates

The Central Board of Indirect Taxes and Customs has issued certain updates w.r.t. Goods and Services Tax (GST) whose links are as follows: 

• For more information w.r.t recommendations made during 31st Meeting of the GST Council held on 22nd December, 2018 (New Delhi) - Rate changes, click here;
• For more information w.r.t In-Principle approval given for Law Amendments during 31^st Meeting of the GST Council, click here;
• For more information w.r.t important issues referred by GST Council to various Committees / GoM, click here;
• For more information w.r.t recommendations made during 31^st Meeting of the GST Council, click here;
• For more information w.r.t recommendations made during 31st Meeting of the GST Council held on 22nd December, 2018 (New Delhi) - Rate changes and clarification in Goods, click here;
• For more information w.r.t decisions taken by the GST Council in the 31^st meeting held on 22^nd December 2018 regarding GST rate on services, click here; and

Formation of GoM in pursuance of the decisions of the 31st GST Council Meeting - Reg., click here