This month the Accounting and Auditing Update focusses on the emerging new trends and approaches in the field of accounting and auditing.

This month’s edition includes final article on our Data and Analytics (D&A) series. The article highlights how D&A is expected to be a game changer and next gen audit would no longer be about past performance. These tools are capable of testing large quantities of records in an efficient and consistent manner. The article summarises the attributes of future audits and key challenges D&A tools are likely to pose.

The companies covered in phase I of Ind AS road map have started implementing Ind AS and listed companies have started reporting their financial results for the second quarter, the accounting of machinery spares is emerging as an important implementation issue. In view of recent developments under Accounting Standards (AS) and new standards in Ind AS, certain machinery spare parts would be treated as part of property, plant equipment and not inventory. Our article focusses on the new accounting principles and their impact even beyond accounting.

This edition also highlights the guidance on two new concepts in the area of financial instruments accounting: ‘derivatives arising from contracts for purchase or sale of non-financial items’ and ‘expected credit losses model’ for assessment of impairment of trade receivables. The current ‘AS’ do not provide specific guidance on derivatives arising from contracts of purchase or sale of non-financial items or on the method for impairment assessment of trade receivables. Our articles explain these concepts with the help of illustrative examples and detailed flowcharts.

We also cast our lens on disclosures required for associates when preparing Consolidated Financial Statements (CFS) with the help of illustrations. As entities work towards preparing Consolidated Financial Statements (CFS) under Ind AS, one standard that would apply is Ind AS 112, Disclosure of Interests in Other Entities. The standard integrates the disclosure requirements for subsidiaries, associates, joint arrangements and unconsolidated structured entities.

In addition to covering recent regulatory updates, we also discuss the guidance on combined and carve-out financial statements issued by the Institute of Chartered Accountants of India. We furthermore highlight some areas where careful evaluation would be needed while preparing combined and carve-out financial statements.