The merger of a Special Purpose Acquisition Company (SPAC) and the target company, commonly referred to as a de-SPAC transaction may pose several challenges related to accounting and financial reporting. For instance, determination of the appropriate Generally Accepted Accounting Principles (GAAP) while preparing pre and post-merger financial statements, identification of the entity in the merger that should be treated as the acquirer for accounting purposes and accounting of share-based payment arrangements and complex financial instruments. Continuing our discussion, in this edition of Accounting and Auditing Update (AAU), we aim to cover some of the key accounting and financial reporting considerations for completion of the de-SPAC transaction.
In recent times, there has been a significant shift in focus on Indian companies’ commitment towards Corporate Social Responsibility (CSR) including ensuring compliance with the relevant provisions as laid down under the Companies Act, 2013 and related rules. To facilitate effective implementation of CSR provisions by companies in India, the Ministry of Corporate Affairs (MCA) has over the time made various amendments to these provisions and issued related guidance in the form of clarifications. Recently, MCA has issued certain clarifications in the form of Frequently Asked Questions (FAQs). In addition to their erstwhile clarifications, the FAQs cover recent amendments made to the CSR provisions pursuant to the Companies (Amendment) Act, 2019 and the Companies (Amendment) Act, 2020. Some of the key FAQs relate to eligible CSR activities, treatment of unspent CSR amount and surplus from CSR, impact assessment of specified projects and definition of an ongoing project. Our article summarises the key clarifications issued by MCA in this regard.
During the month, MCA has also notified amendments to the provisions relating to databank of independent directors and extended the exemption relating to mandatory online proficiency self-assessment test to certain specified individuals. For instance, individuals, who are or have been, for at least 10 years advocate of a court, in practice as a chartered accountant, cost accountant or company secretary have been exempt from the online test. Additionally, Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI) through an Exposure Draft (ED) proposed certain amendments to Indian Accounting Standard (Ind AS) 1, Presentation of Financial Statements. The proposed amendments require companies to disclose their ‘material accounting policy information’ rather than their ‘significant accounting policies’. Our regulatory updates section provides an overview of these and other relevant financial reporting developments in India and internationally.