The Indian capital market has undergone a significant change over the recent years. From erstwhile promoter led companies to new age companies including technology and start-ups with no identifiable promoters, necessitated a need to revisit some of the existing provisions, most importantly those relating to promoter and promoter group companies. Therefore, the Securities and Exchange Board of India (SEBI) constituted a subgroup to review the regulatory framework relating to promoters and promoter group. Basis the recommendations of the subgroup, SEBI has issued a consultation paper and has, inter alia, sought views on the need to shift the concept of promoter and promoter group to ‘person in control’ or ‘controlling shareholders’ and ‘persons acting in concert’. Amongst other, the recommendations also seek to rationalise the definition of promoter group and proposed reduction in lock-in period in respect of minimum promoter’s contribution and specified securities held by persons other than promoters. In this edition of Accounting and Auditing Update (AAU), we aim to summarise the proposals issued by SEBI in its consultation paper. 

With a view to facilitate enhanced disclosures and transparency in operations by companies in India, the Ministry of Corporate Affairs (MCA) has issued a slew of amendments to the Schedule III to the Companies Act, 2013 (2013 Act) relating to presentation and disclosures in the financial statements. The amendments are largely driven by the reporting requirements of the new auditor’s report, Companies (Auditor’s Report) Order, 2020 (CARO 2020) effective for companies from financial years commencing on or after 1 April 2021. Additionally, as part of the amendments, companies are required to disclose details relating to crypto and virtual currency, if traded in the notes to the statement of profit and loss. The amendments have also brought much needed clarity on presentation of lease obligations of a lessee in the financial statements. Our article on the topic aims to provide an overview of the changes made in Schedule III to the 2013 Act. 

Further, to bring clarity in the application of recent amendments relating to the treatment of unspent amount of Corporate Social Responsibility (CSR) under the 2013 Act, the Institute of Chartered Accountants of India (ICAI) has issued a guidance in the form of Frequently Asked Question (FAQ). As per the guidance, a company would be required to recognise a liability for the unspent CSR amount as at the end of the financial year in accordance with the provisions of Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets. Additionally, companies have been permitted to set-off the amount contributed to the PM CARES Fund on 31 March 2020 over and above the minimum amount required to be spent for financial year 2019-20 against the amount earmarked for CSR for financial year 2020-21 subject to certification by the CFO and the statutory auditor of the company. Our regulatory updates section provides an overview of these and other financial reporting updates in India.