The Company Law Committee (the committee) was formed on 18 September 2019 to recommend changes to foster improved corporate governance and promote ease of doing business and ease of living to law abiding corporates. The committee submitted its third report to the central government on 21 March 2022 and proposed various amendments to the existing provisions of the Companies Act, 2013 (the 2013 Act). The objective of the proposals is to strengthen existing company law framework and indicate an effort to address practical challenges being faced by the companies. The proposals relate to many areas e.g. amendments relating to directors’ appointment, tenure and disqualification, audit framework, aligning of provisions of the 2013 Act with the SEBI Listing Regulations, expedite corporate processes, improve compliance requirements, and remove ambiguities from existing provisions of the 2013 Act. In this edition of Accounting and Auditing Update (AAU), our article summarises the key proposals of the committee.
The publication also cast lens on calculation of deferred taxes in relation to compound financial instruments. Ind AS 32, Financial Instruments: Presentation and Ind AS 109, Financial Instruments provide guidance on determination of components of financial liability and equity within a compound financial instrument. Further, Ind AS 12, Income Taxes prescribes accounting for income taxes. It follows a balance sheet approach to determine the amount of deferred taxes. One of the important steps in determination of deferred tax liability or deferred tax asset is the identification of a tax base and accounting base of the assets and liabilities on a company’s balance sheet. The tax base of an asset or a liability is the amount attributed to that asset or liability for tax purposes. Determination of tax base of the balance sheet items may not be straight forward, and it could involve complex computation in some situations e.g. where tax consequences depend upon how carrying amounts are recovered or settled, items with multiple tax consequences. or compound financial instruments. The article highlights the complexity with the help of two examples i.e. compulsorily convertible debentures and optionally convertible debentures.
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