Special Purpose Acquisition Companies (SPACs) commonly referred to as ‘blank check companies’ have increasingly become popular as a new method of going public by companies. The explosive growth of these entities - which exist solely to acquire other companies has provided another option for sellers, as well as an efficient way for private companies to tap public equity markets. India is also witnessing a growing trend of companies in particular by start-ups and new age technology companies willing to go public through SPAC route like their international counterparts. Capital markets regulator, the Securities and Exchange Board of India (SEBI) has indicated that it would release a framework for SPACs in India. In this edition of Accounting and Auditing Update (AAU), we aim to provide an overview of the SPAC transactions including how they are different from traditional listing i.e. an Initial Public Offer (IPO) and present legal structures in India and related developments. In our upcoming editions, we will cover key accounting, financial reporting and taxation considerations for companies undertaking such transactions.
Recently, the European Securities and Markets Authority (ESMA) has issued certain enforcement decisions from European Enforcers Coordination Sessions’ database on financial statements covering decisions taken by national enforcers in the period from November 2019 to July 2020. The decisions aim to provide issuers and users of financial statements with relevant information on the appropriate and consistent application of International Financial Reporting Standards (IFRS) in the European Economic Area. Some of the key guidance relates to measurement of expected credit loss, identification and depreciation of leased assets, presentation of expenses relating to COVID-19 and classification of current and non-current liabilities in the balance sheet. Our article summarises key guidance provided by ESMA in each of the specific scenarios under IFRS.
To facilitate smooth and sound LIBOR transition by banks and financial institutions in India, the Reserve Bank of India (RBI) has recently, issued a road map and guidelines for LIBOR transition. In accordance with the guidelines, banks/financial institutions are encouraged to cease and also encourage their customers to cease entering into new financial contracts that reference LIBOR as a benchmark and instead use any widely accepted Alternative Reference Rates (ARR) as soon as practicable and in any case by 31 December 2021. RBI has also eased regulatory restrictions relating to loans and advances by banks to directors and related entities. Additionally, certain relaxations have been provided by the Ministry of Corporate Affairs (MCA) and SEBI to companies from various compliances including extension of timeline for conduct of Annual General Meeting by top 100 listed companies for FY2020-21. Our regulatory updates section provides an overview of these and other relevant financial reporting developments in India and internationally.