Indian Accounting Standards (Ind AS) are largely converged with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). In view of the issuance of new Conceptual Framework by the IASB and with an objective to remain converged with the global accounting framework, the Institute of Chartered Accountants of India (ICAI) has recently issued revised Conceptual Framework for Financial Reporting under Ind AS. The revised Conceptual Framework introduces some new concepts and clarifications along with revision in definitions and changes in recognition criteria of assets and liabilities under Ind AS. In this edition of Accounting and Auditing Update (AAU), we discuss some of the key changes introduced by the Conceptual Framework vis-à-vis financial reporting under Ind AS relevant for the preparers of the financial statements.
In the recent past, various instances of corporate failures have been reported on account of inability to meet their repayment obligations or siphoning off funds/utilisation of funds for purposes other than business purpose. The Companies (Auditor’s Report) Order, 2020 (CARO 2020) has introduced various reporting requirements which are aimed to assess the veracity of the loans and advances provided by or granted to the companies. Some of the key reporting requirements relate to loans or advances in the nature of loans which are either repayable on demand or do not specify any terms or period of repayment; application of terms loans for the purpose for which those have been raised, if not then specific reporting on amount so diverted; default in repayment of loans/borrowings by a company to any lender or declared as a willful defaulter and specific reporting on evergreening of loans. Our article on the topic covers these reporting requirements and also highlights related guidance provided by ICAI in the Guidance Note on CARO 2020 issued in this regard.
As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internationally. The much-awaited Companies (Amendment) Act, 2020 has received the Presidential assent on 28 September 2020. It makes significant amendments to the provisions of the Companies Act, 2013 (2013 Act). For instance, Central Government is now empowered to exclude companies issuing specified classes of securities from the definition of a listed company, certain class of public companies will be permitted to list their securities on permitted stock exchanges in permissible foreign jurisdictions and companies with a Corporate Social Responsibility (CSR) liability of up to INR50 lakh will be exempt from the requirement of constituting a CSR committee under the 2013 Act. Further, certain relaxations have also been given to companies by MCA amid COVID-19 up to 31 December 2020. Those, inter alia, include, conduct of board meetings for specific matters and Extraordinary General Meetings (EGMs) through video conferencing or other audio-visual means and extension of timeline for enrolment in data bank of independent directors. Our article provides an overview of these and other regulatory and financial reporting developments.