Income Computation And Disclosure Standards - In Brief

Prabhakar K S , Last updated: 02 December 2016
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Income Computation and Disclosure Standards - ICDS

Section 145(2) of the Income -Tax Act, 1961 confers powers to the Central Government to notify accounting standards to be followed by any class of assessee. Exercising that power, the Central Government introduced ‘Income Computation and Disclosure Standards - [ICDS]’ vide notification dated 31st March, 2015.

As per the notification, the Standards will be applicable from Assessment year 2016-17 to -

All the assessees,
Following mercantile system of accounting,
Computation of income from business or profession,
Income from Other sources.

However, on 6th July, 2016, it was decided to defer the applicability of the said standards by a year to 2017-18.

Further, on 29th September, 2016, CBDT re-notified the Income Computation and Disclosure Standards. The new and revised standards will be applicable from assessment year - 2017-18. The CBDT also amended requisite Form No. 3CD suitably to incorporate the changes.

Exemption from Applicability:

As per the notification, Individual and Hindu Undivided Family who is not required to get his accounts of the previous year audited in accordance with the provisions of Section 44AB of the Income -Tax Act (in other words ‘ Tax Audit Cases’).

Summary of the major changes in revised ICDS:

Sl. No.	ICDS		Changes
1.	ICDS - I	Accounting Policies	No change
2.	ICDS - II	Valuation of Inventories	Standard Costing method of measurement of inventory has been allowed
3.	ICDS - III	Construction contracts	Transition provision has been changed
4.	ICDS - IV	Revenue Recognition	Revenue recognition from rendering of services in the case of contract with not more than 90 days period can be recognized when completed or substantially completed
5.	ICDS - V	Tangible Fixed Assets	In case jointly held assets, maintenance of separate Fixed Assets register dispensed with
6.	ICDS - VI	Effects of changes in foreign exchange rate	Segregation of integral and non-integral operation has been dispensed with.
7.	ICDS - VII	Government grants	No change
8.	ICDS - VIII	Securities	Included Part B, which deals with securities held by scheduled banks or public financial institutions, RBI Clarifications etc
9.	ICDS - IX	Borrowing Costs	Period of 12 months or more has been provided for capitalization of borrowings for general borrowings
10.	ICDS - X	Provisions, Contingent liabilities and contingent assets	No change