The weekly messenger | Edition 13.20

Accounting News

IASB amends work plan and proposes amendment to IFRS 16 – 17 April 2020

The International Accounting Standards Board (IASB), in its supplementary Board meeting to discuss COVID-19 related matters, has decided to propose an amendment to IFRS 16 Leases, in order to help the companies to account for COVID-19 related rent concessions, such as rent holidays etc.
 
The Board has also decided to defer the effective date of amendment to IAS 1 Presentation of Financial Statements, issued in January 2020 that was with respect to ‘Classification of Liabilities as Current or Non-Current’, by one year.
 
For more information, click here.

Auditing News

Use of Electronic Signature for signing Audit Reports and Certificates – 13 April 2020

Considering the issues being faced by the auditors w.r.t. the physical signing of the audit report due to the COVID-19, the ICAI has allowed its members to use electronic signature for signing audit reports, all reports issued pursuant to any attestation engagement and certificates subject to the compliance of relevant requirements prescribed under the relevant law or regulation, Standards on Auditing and relevant announcements/ clarifications issued by ICAI on the said matter.
 
However, the requirement of mentioning of Unique Document Identification Number (UDIN) is still applicable both for manually and digitally signed reports/certificates.
 
For more information, click here.

Advisory for Bank Branch Auditors – 15 April 2020

The Professional Development Committee of the ICAI has issued an advisory for the Bank Branch Auditors for initiating the process of Statutory bank branch audit remotely in order to ensure timely and effective Bank Audit.
However, the said advisory is not available on the ICAI’s website. Instead, the same has been emailed to all the Applicants whose names were appearing in the Reserve Bank of India (RBI) Bank Branch Audit Panel. Therefore, it has been announced that Members / CA Firms who have been allotted the Branch Audit of Public Sector Banks (PSBs) for the year 2019-2020, may please check their emails.
 
For more information, click here.

Bank Branch Audit of Public Sector Banks for the year 2019-20 – 18 April 2020

In respect of the bank branch audit of the PSBs for the year 2019-20, the Professional Development Committee of the ICAI has made a separate page on the ICAI’s website, comprising of all the representations and advisories issued by the ICAI on the aforesaid subject matter till date.
 
For more information, click here.

Regulatory News

Filings under section 124 and section 125 of the Companies Act 2013 r/w IEPFA (Accounting, Audit, Transfer and Refund) Rules 2016 in view of emerging situation due to outbreak of COVID – 19 – 13 April 2020

In view of the current situation due to the COVID-19, the stakeholders have pointed out various difficulties and sought relaxation from the Ministry of Corporate Affairs (MCA), especially in procedures related to transfer of money remaining unpaid or unclaimed for a period of 7 years and transfer of securities under Section 124(5) and 124(6) of the CA 2013 respectively, which mainly deals with Unpaid Dividend Account.
 
In this regard, the MCA has clarified that it has already allowed filing in MCA-21 registry without payment of any additional fees till 30 September 2020.
 
For more information, click here.

Clarification on passing of ordinary and special resolutions by companies under the Companies Act, 2013 and rules made thereunder on account of the threat posed by COVID-19 – 13 April 2020

The MCA, vide its Circular dated 8 April 2020, has provided certain clarifications with respect to passing of Ordinary Resolution and Special Resolution by companies under the Companies, Act 2013 on account of threat posed by COVID-19.
 
Now, the MCA in response to the receipt of certain representations from stakeholders demanding clarification on some of the elements in the framework laid down therein, has provided certain more clarifications on the following matters:

• Manner and mode of issue of notices to the members before convening the general meeting;
• Requirement for voting by show of hands;
• Passing of certain items only through postal ballot without convening a general meeting;
• Sending of emails by members, where a poll on any item is required.

For more information, click here.

Web Service “Company Affirmation of Readiness towards COVID-19” discontinued – 14 April 2020 

Due to the outbreak of the COVID-19 virus, the MCA came up with a simple web based form namely ‘Company Affirmation of Readiness towards COVID-19’ (CAR), which was required to be filed by the Companies and Limited Liability Partnerships (LLPs) w.e.f. 23 March 2020, in order to confirm their readiness to deal with the COVID – 19 threat. Now, the aforesaid web service has been discontinued w.e.f 14 April 2020.
 
For more information, click here.

Additional relaxations / clarifications in relation to compliance with certain provisions of the SEBI (LODR) Regulations, 2015 due to the COVID –19 pandemic – 17 April 2020

In addition to the relaxations provided by the Securities and Exchange Board of India (SEBI) to the listed entities from compliance with certain provisions of the SEBI (Listing Obligations and Disclosure Requirements (LODR)) Regulations, 2015 (Listing Regulations) and circulars issued thereunder, vide its Circulars dated 19 March 2020 and 26 March 2020 respectively, the SEBI has granted further relaxations/issued clarifications w.r.t. the Listing Regulations, which are as follows:

For more information, click here. 

Regulatory Measures introduced by SEBI to continue in view of ongoing uncertainty – 20 April 2020

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, 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. The objective of issuing those measures was to ensure orderly trading and settlement, effective risk management, price discovery and maintenance of market integrity.
 
Now, the SEBI has decided that the aforesaid regulatory measures, which were implemented w.e.f. 23 March 2020 will continue to remain in force till 28 May 2020.
 
For more information, click here. 

RBI announces second set of measures to preserve financial stability and help put money in the hands of the needy and disadvantaged – 17 April 2020

The Governor of the RBI has issued second set of nine measures to revive the struggling domestic economy. The purpose of issuing these measures is to maintain adequate liquidity in the system and its constituents in the face of COVID-19 related dislocations, facilitate and incentivise bank credit flows, ease financial stress, and enable the normal functioning of markets. The broad heads under which these measures have been categories are as follows: 

• Targeted Long-Term Operations (TLTRO) 2.0;
• Refinancing Facilities for All India Financial Institutions;
• Reduction of Reverse Repo Rate under Liquidity Adjustment Facility;
• Raising Limit of Ways and Means Advances of states and UTs;
• Asset Classification;
• Extension of Resolution Timeline;
• Distribution of Dividend;
• Lowering of Liquidity Coverage Ratio requirement;
• Non - Banking Financial Company (NBFC) Loans to Commercial Real Estate Projects.

For more information, click here.

COVID19 Regulatory Package - Asset Classification and Provisioning – 17 April 2020

With reference to the Governor’s Statement dated 17 April 2020, announcing certain additional regulatory measures aimed at alleviating the lingering impact of COVID - 19 on businesses and financial institutions in India, the RBI has issued ‘COVID19 Regulatory Package – Asset Classification and Provisioning’, thereby providing detailed instructions w.r.t. asset classification and provisioning.
 
For more information, click here.

COVID19 Regulatory Package – Review of Resolution Timelines under the Prudential Framework on Resolution of Stressed Assets – 17 April 2020

On the similar terms as provided in the aforesaid update, the RBI has also issued ‘COVID19 Regulatory Package – Review of Resolution Timelines under the Prudential Framework on Resolution of Stressed Assets’, thereby providing detailed instructions relating to extension of resolution timelines under the ‘Prudential Framework on Resolution of Stressed Assets’ dated 7 June 2019.
 
For more information, click here. 

RBI lowers the requirement of Liquidity Coverage Ratio – 17 April 2020

In order to accommodate the burden on banks’ cash flows on account of the COVID - 19 pandemic, the revised Liquidity Coverage Ratio that banks would be required to maintain as against the current requirement of maintaining 100% would be as follows:

For more information, click here.

Declaration of dividends by banks (Revised) – 17 April 2020

Due to the uncertainty caused by COVID-19, the RBI states that it is important for banks to conserve capital in order to retain their capacity to support the economy and absorb losses. Therefore, it has been decided that all banks shall not make any further dividend payouts from the profits pertaining to the financial year ended 31 March 2020 until further instructions. This restriction shall be reassessed by the RBI based on the financial results of banks for the quarter ending 30 September 2020.
 
For more information, click here.

RBI Announces Targeted Long-Term Repo Operations 2.0  – 17 April 2020

In order to channel liquidity to small and mid-sized corporates, including NBFCs and micro finance institutions (MFIs), that have been impacted by COVID-19 disruptions, the RBI has been decided to conduct TLTRO 2.0 at the policy repo rate for tenors up to three years for a total amount of up to ₹ 50,000 crores, to begin with, in tranches of appropriate sizes.
 
The funds availed under TLTRO 2.0 shall be deployed in investment grade bonds, commercial paper (CPs) and NCDs of NBFCs.
 
For more information, click here.

Prudent management of financial resources of insurers in the context of COVID-19 pandemic – 13 April 2020

Due to the stress experienced by the economy, sufficiency of capital and liquidity position of the insurers may be adversely impacted, and all the insurers need to guard against the same. In the light of this, the Insurance Regulatory and Development Authority of India (IRDAI) has issued a circular advising all insurers to take following steps for prudent management of financial resources:

• Board of insurers are advised to critically examine their capital availability and solvency margin as required in the current financial year 2020-21 and devise strategies to ensure that they have adequate capital and resources available with them;
• To align the dividend pay-out for the FY 2019-20, so as to be in conformity with the strategy at (i) above; and
• Rationalize the expenses of management for the FY 2020-21, so as to be in line with the strategy at (i) above.

For more information, click here.

IRDAI provides further relief for Health Policy and Third Party Motor Insurance holders in the light of COVID 19 lockdown – 16 April 2020

The IRDAI had earlier extended the renewal dates of Health and Motor insurance policies which were falling in the period from 25 March 2020 to 14 April 2020 till 21 April 2020 due to lockdown.
 
Now due to the extension of the lockdown, the aforesaid period of 25 March 2020 to 14 April 2020  has been extended till 3 May 2020 and the payment date for renewal of such policies has also been extended from 21 April 2020 to 15 May 2020.
 
For Circular providing relief to Health Policy Insurance holders, click here;
 
For Circular providing relief to Third Party Motor Policy Insurance holders, click here;

Clarification in respect of option under section 115 BAC of the Income-tax Act, 1961 – 13 April 2020

Section 115 BAC of Income Tax Act 1961, inserted by the Finance Act, 2020 w.e.f. the A.Y. 2021-22, inter alia, provides an option to an individual or HUF, having income other than income from business or profession, to compute tax for FY 2020-21 as per concessional tax rates prescribed under the aforesaid section. Since the said option is to be exercised at the time of filing return u/s 139(1), therefore, the Central Board of Direct Taxes (CBDT) has received several representations from employers as to whether the provisions of section 115 BAC of the Act are to be considered at the time of deducting TDS. In response to the representations, the CBDT has provided following clarifications:

• An Employee intending to opt for the concessional rate under section 115 BAC of the Act, may intimate his employer, of such intention for each previous year and upon such intimation, the employer shall compute his total income, and make TDS thereon in accordance with the provisions of section 115 BAC of the Act;
• If such intimation is not made by the employee, the employer shall make TDS without considering the provision of section 115 BAC of the Act.
• It is also clarified that the intimation so made to the employer shall be only for the purposes of TDS during the previous year and cannot be modified during that year.

For more information, click here.

Clarification regarding short deduction of TDS/TCS due to increase in rates of surcharge by Finance (No.2) Act, 2019-reg – 13 April 2020

The Central Government (CG) has observed several cases wherein deductors/ collectors were held to be an assessee in default for short deduction of TDS/ short collection of TCS due to increase in rates of surcharge by Finance (No.2) Act, 2019 (effective from 1 April 2019) and where final transaction was done before laying of the Finance (No.2) Bill, 2019 in the Parliament, i.e. 5 July 2019. In this regard, the CBDT has issued a clarification that a person responsible for deduction/collection of tax under any provision of the IT Act will not be considered to be an assessee in default in respect of transactions where:

• such transaction has been completed and entire payment has been made to the deductee/payee on or before 5 July 2019 and there is no subsequent transaction b/w the deductor/collector and the deductee/payee in the FY 2019-20 from which the shortfall of tax could have been deducted/collected by the deductor/collector;
• TDS has been deducted or TCS has been collected by such deductor/collector on such sum as per the rates in force as per the provisions prior to the enactment of the Act;
• such tax deducted or collected has been deposited in the account of CG by the deductor/collector on or before the due date of depositing the same;
• TDS/ TCS statement has been furnished by such person on before the due date of filing of the said statement.

For more information, click here.

CBDT revising return forms to enable taxpayers avail benefits of timeline extension due to COVID-19 – 19 April 2020

In order to facilitate income taxpayers to avail full benefits of various timeline extensions granted by the Government of India due to COVID-19 pandemic situations, the CBDT is revising the income tax return forms for FY 2019-20 (A.Y. 2020-21) which shall be notified by the end of this month.
 
For more information, click here.

ESIC further extends the due date for ESI Contribution for the month of February 2020 – 13 April 2020

The Employees’ State Corporation (ESIC) had earlier extended the timelines for the purpose of payment of ESI contribution for the month of February 2020 and March 2020 from 15 March 2020 and 15 April 2020 to 15 April 2020 and 15 May 2020 respectively.
 
Now, the due date for making payment of ESI contribution for the month of February 2020 has been further extended from 15 April 2020 to 15 May 2020.
 
For more information, click here.

ICMAI issues Advisory on the Treatment of Various Items of Cost in light of the COVID19 Pandemic & Presentation / Disclosures of such items of costs in form CRA 3 of The Companies (Cost Records & Audit) Rules 2014 – 13 April 2020 

The ICMAI has issued an advisory on ‘Treatment of Various Items of Cost in light of the COVID19 Pandemic’ in order to guide the stakeholders on treatment of various elements of costs in compilation of any Cost Statement and compilation of Cost Records & Annexures to Cost Audit Report for the year 2019-20. The Advisory is issued in two parts namely  

• Part A – Treatment of Various Items of Cost in light of the COVID19 Pandemic;
• Part B – Presentation / Disclosure of the various items of Quantity Information & Costs in Form CRA 3 – Cost Audit Report & Annexure to Cost Audit Report.

The advisory is applicable for the accounting period ended 31 March 2020.
 
For more information, click here.

Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2020 – 13 April 2020

The CG has further amended the ‘Prevention of Money-laundering (Maintenance of Records) Rules, 2005’ with the ‘Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2020’, wherein in a new sub-rule i.e. sub-rule (5) has been inserted in Rule 8, Furnishing of information to the Director, namely:
 
“(5) Notwithstanding anything contained in sub-rule (1) and (3) the Reporting Officer shall furnish the information specified therein by the 30 June 2020”.
 
For more information, click here.

Extension of Submission Date of Share Capital Audit Report for the quarter ended 31 March 2020 – 14 April 2020

The Bombay Stock Exchange (BSE), vide its circular dated 14 April 2020 after considering the current situation amidst COVID-19, has informed listed companies that the prescribed timelines for the purpose of submission of share capital audit report by the companies for the quarter ended 31 March 2020 has been extended till 31 May 2020, as notified by SEBI.
 
For more information, click here.