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Issue 15 | October 2017

Implementation of Indian Accounting Standards (Ind AS) would require financial institutions in India to change the way impairment allowance is calculated on their financial assets. Currently, they follow a standardised and regulatory approach whereas under Ind AS they would need to measure impairment based on an ‘Expected Credit Loss’ (ECL) approach. The ECL approach requires entities to estimate the Probability of Default (PD) associated with loan exposures in a methodological framework. In this edition of Accounting and Auditing Update (AAU), we describe the key components of a PD-based approach for computation of ECL on term loans given by financial institutions.

The Companies Act, 2013 (2013 Act) lays down guidance for reopening or revision of accounts and board’s report, while the Companies Act, 1956 did not allow reopening or revision of accounts except in limited circumstances. The article on 2013 Act provides an overview of the requirements of revision or reopening of financial statements and the board’s report under the 2013 Act.

This publication also carries an article which elaborates the disclosures that entities should provide when they recognise an impairment loss. Under Ind AS, if there is an indication of impairment then an entity has to perform an impairment test for its non-financial assets such as property, plant and equipment, intangible assets, and its investment in subsidiaries, associates and joint ventures.

The Institute of Chartered Accountants of India (ICAI) published an educational material on Ind AS 18, Revenue in the form of frequently asked questions. An article on this topic explains the key principles discussed in the education material.

Our publication also carries a regular synopsis of some recent regulatory updates in India and internationally along with an overview of the report of the Committee on Corporate Governance issued on 5 October 2017.