Recently, the Government of India (GOI) introduced a slew of unprecedented measures through amendments to the Income-tax Act, 1961 (IT Act) and the Finance (No.2) Act, 2019. The amendments relate to concessional tax rates for specified domestic companies and new manufacturing companies subject to fulfillment of specified conditions. The decision as to whether a company should shift to the new concessional tax regime, and the timing thereof, would be based on a detailed impact analysis of the tax effect under the existing tax regime (with deductions/incentives) versus tax effect under the new concessional tax regime (without deduction/incentives). In this issue of Accounting and Auditing Update (AAU), our article on the topic provides an overview of the recent tax changes along with its impact on key sectors in India.
An entity with joint control of, or significant influence over an investee is required to account for its investment in an associate or a joint venture using the equity method as per Ind AS 28, Investments in Associates and Joint Ventures except when that investment qualifies for an exemption under Ind AS. While applying equity method, an investor would need to account for cross-holding. However, Ind AS is silent on the accounting for cross holding structures. Education material on Ind AS 28 issued by the Institute of Chartered Accountants of India (ICAI) provides guidance on these kinds of structures. Our article on the topic discusses the accounting of a cross holding structure with the help of a case study.
Recently, the International Auditing and Assurance Standards Board (IAASB) has issued revised International Standard on Auditing (ISA) 315, Identifying and Assessing the Risks of Material Misstatement. ISA 315 (revised) is applicable for audits of financial statements of all entities for periods beginning on or after 15 December 2021. The revised standard addresses the concerns relating to current ISA 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment by significantly enhancing the auditor’s considerations in relation to an entity’s use of Information Technology (IT) and its impact on the audit. The revised standard also requires an auditor to obtain an understanding of the entity’s control environment and how this forms a foundation for the rest of the entity’s system of internal control. Our article aims to summarise the key changes introduced by revised ISA 315 with respect to identification and assessment of material misstatement in the financial statements.
As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internationally.