Cloud computing arrangements have seen a radical shift from the traditional way businesses think about information technology resources. A cloud service provider may provide different arrangements e.g. infrastructure as a service, platform as a service, or software as a service. These arrangements may involve two or more unrelated parties that contribute to providing the goods or services to a customer. Under Ind AS, revenue recognition for such arrangements is governed by the principles of Ind AS 115, Revenue from Contracts with Customers. When another party is involved in providing goods or services to a customer, an entity would need to evaluate the nature of its promise to the customer i.e. is it the principal or an agent to this arrangement. In this edition of Accounting and Auditing Update (AAU), we highlight key principles to be evaluated while applying Ind AS 115 and evaluating principal versus agent considerations for accounting of revenue transactions in cloud computing arrangements. These considerations have been illustrated with the help of examples.

Ind AS 32, Financial Instruments: Presentation and Ind AS 109, Financial Instruments provide guidance on classification, recognition, and measurement of financial guarantees. Financial guarantee contracts may have various legal forms, such as letter of credit, a credit default contract, or an insurance contract. When a parent entity provides corporate guarantee on behalf of its subsidiary company to external parties then the accounting falls within the ambit of financial instruments standards under Ind AS. Therefore, in our article on this topic, we have highlighted key principles from a recent Expert Advisory Committee’s opinion of the Institute of Chartered Accountants of India to evaluate whether a corporate guarantee is a financial guarantee and accounting for financial guarantee in separate financial statements of a parent.

On 31 March 2022, the IFRS International Sustainability Standards Board (ISSB) has issued its first two Exposure Drafts (ED) relating to IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2, Climate-related Disclosures. The comment period on both the EDs ends on 29 July 2022. They propose reporting across four content areas – governance, strategy, risk management, and metrics and targets – which are consistent with the Task Force on Climate-Related Financial Disclosures (TCFD) framework. The article on this topic provides summary of the key proposals of the ISSB given in both the EDs. 

Recently, the Ministry of Corporate Affairs has issued amendments to Ind AS. We have covered these amendments along with other important regulatory updates during the month of April 2022.