Voice on Reporting: June 2015
Voice on Reporting: June 2015
Ind AS 103 provides specific guidance on accounting of business combinations. The term business combination has wider scope than current Indian GAAP guidance. Ind AS 103 explains principles to determine whether a purchase is a purchase of business or purchase of assets.
Ind AS 103 provides specific guidance on accounting of business combinations. The term business combination has wider scope than current Indian GAAP guidance. Ind AS 103 explains principles to determine whether a purchase is a purchase of business or purchase of assets. If a purchase meets the definition of business then it will trigger the application of business combination accounting, otherwise the purchase will be accounted for as a purchase of assets.
Under Indian GAAP, there is no comprehensive guidance that addresses accounting for business combinations and the current accounting is driven by the form of the transaction, i.e. legal merger, share acquisition, business division acquisition, etc. which results in varied results based on the form of acquisition.
Under Ind AS 103, all business combinations are accounted for using the purchase method that considers the acquisition date fair values of all assets, liabilities and contingent liabilities of the acquiree. The limited exception to this principle relates to acquisitions between entities under common control.
In our call we examined the key requirements of the Ind AS 103 along with the first time adoption requirements relating to business combinations. We also highlighted key differences from current Indian GAAP.
The Union Cabinet on 2 December 2014 had introduced an amendment bill in the Parliament proposing certain amendments to the Companies Act, 2013 (2013 Act). Subsequently, on 29 April 2015 certain additions were made in the amendment bill. Post approval by the Lok Sabha and the Rajya Sabha, the amendment bill was finally assented by the President of India on 25 May 2015. These amendments are called as the Companies (Amendment)
Act, 2015 and have been published in the Official Gazette on 26 May 2015.
Additionally, on 29 May 2015, the MCA has issued certain amendments to some of the provisions contained in:
- Companies (Registration Offices and Fees) Rules, 2014
- Companies (Share Capital and Debentures) Rules, 2014
- Companies (Declaration and Payment of Dividend) Rules, 2014, and
- Companies (Incorporation) Rules, 2014.
On our call, we provided an overview of the key amendments introduced by the Companies (Amendment) Act, 2015 relating to areas of fraud reporting, shareholders’ approval for related party transactions and prohibition of public inspection of board resolutions filed with the Registrar of Companies and to the aforesaid Rules.
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