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Issue no. 51 | October 2020

Issue no. 51 | October 2020

Companies cater to their financial needs in various forms including acceptance of deposits from members or public. Stringent provisions are laid down under the Companies Act, 2013 for acceptance of deposits by a company. On the other hand, companies are also required to make certain payments under various laws and regulations such as provident fund, income-tax, etc. to the concerned regulatory authorities within the timelines prescribed. In order to ensure how far the companies are compliant with the respective laws and regulations, Companies (Auditor’s report) Order 2020 has introduced enhanced reporting requirements with respect to deposits accepted by companies and payment of statutory dues. In this edition of Accounting and Auditing Update (AAU), we aim to discuss these reporting requirements along with highlighting the related guidance provided by the Institute of Chartered Accountants of India (ICAI). 

Climate change is rapidly emerging as a threat to the stability of the financial systems across the globe. Therefore, there is an increase in demand for decision-useful, climate related information by a range of participants in the financial markets, particularly by the investors. To address the concern, internationally, in 2015, the Financial Stability Board (FSB) formed the Task Force on Climate-related Financial Disclosures (TCFD) to help investors understand their financial exposure to climate risk and help companies disclose this information in a clear and consistent way. With this objective, in 2017, the TCFD issued a report with its recommendations which focus specifically on business disclosure of how climate change affects financial performance now and in the future. The topic has been continuously discussed in various other forums including the International Accounting Standards Board (IASB) and the International Auditing and Assurance Standards Board (IAASB). Our article on the topic discusses in detail the financial impacts of climate related issues along with recommended financial disclosures to be considered by companies.

The economic fallout on account of the COVID-19 pandemic has led to significant financial stress for borrowers across the board. The resultant stress can potentially impact the long-term viability of many firms, otherwise having a good track record, due to their debt burden becoming disproportionate relative to their cash flow generation abilities. Therefore, in order to preserve the soundness of the Indian banking sector and mitigate risks to financial stability, the Reserve Bank of India (RBI) has introduced a ‘Resolution Framework for COVID-19-related Stress’ (the framework) in August 2020. The framework aims to enable lenders to implement a resolution plan in respect of eligible corporate exposures without change in ownership and personal loans, while classifying such exposures as standard, subject to specified conditions. Recently, RBI has issued certain clarifications to ease the implementation of the framework by the lenders. Our article summarises the key clarifications provided by RBI.

As is the case each month, we have also included a regular round-up of some recent regulatory updates in India.

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