Though the COVID-19 outbreak in India occurred towards the end of March 2020 i.e. near the year-end reporting for majority of the companies in India, the impact continued during the quarter ended 30 June 2020. The impact of COVID-19 on the financial results would depend on the facts and circumstances including degree to which a company’s operations are exposed to the impacts of the outbreak. Therefore, it becomes imperative for companies to provide updated information in their interim financial results that would be useful to various stakeholders including investors to adequately reflect the current and expected impact of the COVID-19 situation on the financial position, performance and cash-flows of companies. This would warrant additional disclosures around the risks and uncertainties to which companies are exposed to, revisions in budgets and forecasts, changes in estimations or change in accounting policies and many other things alike. In this edition of Accounting and Auditing Update (AAU), we aim to discuss key financial reporting considerations for the companies while preparing their interim financial results.
Regulators, internationally (such as the International Organisation of Securities Commissions (IOSCO), the European Securities and Markets Authority (ESMA) and the U.S. Securities and Exchange Commission (SEC)) and in India, the Securities and Exchange Board of India (SEBI) too have elaborated on the importance of disclosure about COVID-19 by companies. In this regard, we have analysed the financial results of Nifty50 companies for the quarter and year ended 31 March 2020. Our article on the topic provides an analysis of the COVID-19 specific disclosures provided by these companies as part of their financial results, investor presentation and press release to financial results.
Corporate Social Responsibility (CSR) activities play a significant role in the nation building. From the time CSR provisions (as laid down in the Companies Act, 2013 and related rules) have been made effective, significant amendments have been made to these provisions to streamline its implementation by companies. For instance, the Companies (Amendment) Act, 2019 issued in July 2019 made it mandatory for companies to utilise unspent amount earmarked for CSR, failing which it would be transferred to the funds specified in the Schedule VII of the 2013 Act. However, this requirement has not been notified yet. Subsequently, in March 2020, another set of amendments were proposed to the CSR provisions through the Companies (Amendment) Bill, 2020. To address the resultant change in accounting and presentation of CSR expenses, recently, the Institute of Chartered Accountants of India (ICAI) has issued a technical guide on ‘Accounting for Expenditure on CSR Activities’. In our article, we have summarised key guidance relating to accounting of expense pursuant to CSR activities as provided by ICAI in its technical guide.
As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internationally.