Indian Accounting Standards Framework (Ind AS Framework) is based on IFRS Standards. IFRS Standards undergo regular upgrades due to issuance of new Standards and amendments in existing Standards by way of annual improvements etc. The Central Government, prescribes under Section 133 of the Companies Act, the Accounting Standards recommended by the ICAI, in consultation with and after examination of the recommendations of the National Financial Reporting Authority (NFRA).
ICAI releases the Compendium of Ind AS (E-version) for standards effective 1st April 2019. During the previous year there have been certain amendments to Ind ASs which have all been incorporated in appropriate places and relevant standards in this updated version of compendium. Key changes in this e-version of Ind ASs are summarised below.
(a) Companies (Indian Accounting Standards) Amendment Rules, 2019 dated 30 March 2019
New Standard on Leases, viz., Ind AS 116, Leases, has been notified which replaces the existing standard Ind AS 17, Leases. Ind AS 116 is based on IFRS 16 Leases which is an outcome of the joint project of IASB of IFRS Foundation and FASB, US National Standard-setter.
The key changes relate to accounting by lessees due to introduction of single lease accounting model by elimination of classification between operating and finance leases, and recognition of gain/loss for sale and lease-back transactions. In the new lease accounting model for lessees, leases will be recognised on balance sheet by recognising a lease liability with a corresponding ‘right-of use’ asset. Ind AS 116 will have an impact on all three components of the financial statements. The extent of impact would vary for each industry depending on the financing and leasing structures prevalent in that industry.
(b) Companies (Indian Accounting Standards) Second Amendment Rules, 2019 dated 30 March 2019, include changes in Ind AS related to following areas:
i) Appendix C Uncertainty over Income Tax Treatments to Ind AS 12 provides guidance as to how uncertainty about a tax treatment should be reflected in the accounting for income taxes.
ii) Plan Amendment, Curtailment or Settlement -Amendments to Ind AS 19: Consequent to this amendment Ind AS 19 requires an entity to use updated actuarial assumptions to determine current service cost and net interest for the remainder of the annual reporting period after the plan amendment, curtailment or settlement when the entity remeasures its net defined benefit liability (asset) in accordance with paragraph 99.
iii) Long-term Interests in Associates and Joint Ventures- Amendments to Ind AS 28: The amendments provide clarifications as to applicability of Ind AS 109, including impairment requirements, to entity’s long term interests in an associate of joint venture.
iv) Prepayment Features with Negative Compensation- Amendments to Ind AS 109: The amendments are in the context of classification of a debt instrument that could have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding if its contractual terms permit the borrower (ie the issuer) to prepay the instrument at an amount that could be more or less than unpaid amounts of principal and interest, such as at the instrument’s current fair value or an amount that reflects the instrument’s remaining contractual cash flows discounted at a current market interest rate. Such a contractual feature is termed as Prepayment Feature with negative compensation.
v) Annual Improvements to Ind AS: There are amendments to four Ind ASs as follows:
a) Ind AS 103 Business Combinations and Ind AS 111 Joint Arrangements: The amendments provide additional guidance on accounting for change in entity’s interests in joint operations.
b) Ind AS 12 Income Tax: The amendments provide clarification regarding presentation of Income-tax consequences of payments on financial instruments classified as equity.
c) Ind AS 23 Borrowing Costs: Additional clarification is provided about the treatment of the borrowings made specifically to obtain a qualifying asset in general borrowings when that qualifying asset is ready for its intended use or sale.
CA. Prafulla P. Chhajed, President, ICAI said, "ICAI has been at the forefront of ensuring high-quality accounting standards in India. The Compendium of Ind AS will be highly useful to all stakeholders in particular prepares and auditors of financial statements. ICAI will also continue to engage in disseminating knowledge of these Standards and the changes through a series of initiatives including webcasts, workshops, training programmes and certificate courses.”