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GAAP ReporterOctober 2017

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IntroductionDear Reader,

Grant Thornton in India presents ‘GAAP Reporter’, a quarterly bulletin that summarises significant accounting,

auditing and related updates. This publication has been compiled to meet the needs of dynamic Indian businesses,

capturing key developments in India and across the globe.

To access the source of information and complete details, you can click the hyperlinked text.

We would be pleased to receive your feedback. Please write to us at npsg@in.gt.com with your comments, questions

or suggestions.

This edition covers updates for the quarter ended 30 September 2017 along with hot topic. Abbreviations used in the

publication are explained in the Glossary.

ContentsPage

A. Hot Topic

1 Overview of exposure draft of Ind AS 116, Leases 7

B. India updates – Effective

a. Accounting updates

1 ITFG Clarification Bulletins 11

2 Clarifications on computation of book profit for the purposes of levy of MAT under section

115JB of IT Act for Ind AS compliant companies

13

3 Guidance note on Division II - Ind AS Schedule III to the Companies Act, 2013 14

4 Clarification on applicability of Ind AS and rule 4 of the Ind AS Rules to payment banks, small

finance banks which are subsidiaries of corporates

15

5 Publication: Indian Accounting Standards (Ind AS): An Overview (Revised 2017) issued by

ICAI

15

6 Publication: Educational material on Indian Accounting Standard (Ind AS) 18, Revenue

(Revised 2017) issued by ICAI

15

b. Auditing updates

1 Corrigendum and clarification regarding applicability of exemption given to certain private

companies under section 143(3)(i) of the 2013 Act

16

2 Appointment of statutory central auditors - modification of rest period 16

3 Income-Tax (18th Amendment) Rules, 2017 16

4 Technical guide on ICDS 17

3

c. Other regulatory updates

Companies Act, 2013 updates

1 Companies (Appointment and Qualification of Directors) Amendment Rules, 2017 18

2 Amendments to Schedule IV, Code for independent directors of the 2013 Act 18

3Clarification on meaning of joint venture with respect to specific exemption under the

Companies (Appointment and qualification of directors) Rules, 201418

4 Commencement of proviso to clause (87) of section 2 of the 2013 Act 18

5 The Companies (Restriction on number of layers) rules, 2017 18

6 Companies (Meetings of board and its powers) Second Amendment Rules, 2017 19

7 The Companies (Acceptance of deposits) Second Amendment Rules, 2017 20

8 National Company Law Tribunal (Amendment) Rules, 2017 20

9 National Company Law Appellate Tribunal (Amendment) Rules, 2017 20

10 Commencement of provisions of sub-sections (8), (9) and (10) of section 212 of the 2013 Act 21

11Companies (Arrests in connection with investigation by Serious Fraud Investigation Office)

Rules, 201721

SEBI updates

1 SEBI (Issue of capital and disclosure requirements) (Third amendment) Regulations, 2017 22

2 SEBI (Issue of capital and disclosure requirements) (Fourth amendment) Regulations, 2017 22

3Amendments to the SEBI (Infrastructure Investment Trusts) Regulations, 2014 and SEBI

(Real Estate Investment Trusts) Regulations, 201422

4 SEBI (Substantial acquisition of shares and takeovers) (Amendment) Regulations, 2017 23

5Acquisition of ‘control’ under the SEBI (Substantial acquisition of shares and takeovers)

Regulations, 201123

6Amendment to circular regarding schemes of arrangement by listed entities and relaxation

under sub-rule (7) of rule 19 of the Securities contracts (Regulation) Rules, 195724

4

7 Issuance, listing and trading of debt securities on exchanges in IFSC 24

8 SEBI (International financial services centres) Guidelines, 2015 – Amendments 24

9 Disclosures by listed entities of defaults on payment of interest/ repayment of principal

amount on loans from banks/ financial institution, debt securities, etc.

25

Other updates

1 Clarification regarding IRDAI (Other forms of capital) Regulations, 2015 - Creation of

debenture redemption reserve

26

2 Income-Tax (20th Amendment) Rules, 2017 26

3 Income-tax (22nd Amendment) Rules, 2017 26

4 Clarifications in respect of section 269ST of the IT Act 26

5 Extension of due date for filing return of income and audit reports 27

6 Disclosure of divergence in the asset classification and provisioning by banks 27

7 Inclusion of peer to peer lending platforms under NBFC norms 27

8 Amendments to Master Direction- Reserve Bank of India (Financial services provided by

banks) Directions, 2016

27

9 IBBI (Insolvency resolution process for corporate persons) (Amendment) Regulations, 2017

and IBBI (Fast track insolvency resolution process for corporate persons) (Amendment)

Regulations, 2017

28

10 Banking Regulation (Amendment) Act, 2017 28

11 Applicability of Payment of Wages Act, 1936 28

12 Employees’ State Insurance (General) Amendment Regulations, 2017 28

13 Revised secretarial standards on meetings of the board of directors (SS-1) and general

meetings (SS-2)

29

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C. India updates – Proposed

a. Accounting updates

1 Exposure draft on Ind AS 116, Leases 31

b. Auditing updates

1 Exposure draft of guidance note on report under section 92E of the Income-Tax Act, 1961

(Transfer pricing)

32

c. Other regulatory updates

1 The Companies (Amendment) Bill 2017 passed by Lok Sabha 33

2 Draft notification for self-reporting of estimated current income, tax payments and advance

tax liability on voluntary compliance basis

33

3 Draft Companies (Cost records and audit) Amendment Rules, 2017 33

D. International updates – Effective

a. IFRS updates

1 IFRS Practice statement 2: Making materiality judgements 34

b. USGAAP updates

1 ASU 2017-11 - Earnings per share (Topic 260); Distinguishing liabilities from equity (Topic

480); Derivatives and hedging (Topic 815): (Part I) Accounting for certain financial

instruments with down round features, (Part II) Replacement of the indefinite deferral for

mandatorily redeemable financial instruments of certain non-public entities and certain

mandatorily redeemable non-controlling interests with a scope exception

35

2 ASU 2017-12 - Derivatives and hedging (Topic 815): Targeted improvements to accounting

for hedging activities

36

3 SEC conforms staff guidance to new FASB revenue recognition rules 37

E. International updates – Proposed

a. IFRS updates

1 Exposure draft to clarify how to distinguish accounting policies from accounting estimates:

Proposed amendments to IAS 8

38

2 Exposure draft on definition of material: proposed amendments to IAS 1 and IAS 8 38

b. USGAAP updates

1 Proposed ASU: Leases (Topic 842) – Land easements practical expedient for transition to

topic 842

39

2 Proposed ASU - Not-for-profit entities (Topic 958) - Clarifying the scope and the accounting

guidance for contributions received and contribution made

39

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3 Proposed ASU – Consolidation (Topic 812) – Reorganization 40

4 Two proposed ASUs: Technical corrections and improvements to ASU No. 2016-01,

Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of

Financial Assets and Financial Liabilities and ASU No. 2016-02, Leases (Topic 842)

40

c. Auditing updates

1 Exposure draft of proposed statements on standards for attestation engagements (SSAE) -

Selected Procedures

41

2 Exposure draft of proposed statements on standards for accounting and review services

(SSARS) - Omnibus statement on standards for accounting and review services – 2018

41

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Overview of exposure draft of Ind AS 116, Leases

Introduction

Exposure Draft of revised lease standard Ind AS 116,

Leases (‘ED’) was issued by ICAI in July 2017. This ED

is largely converged with IFRS 16 (issued by IASB on 13

January 2016), representing ICAI’s intent to remain

converged with IFRS. When finalised, Ind AS 116 will

replace the existing lease standard Ind AS 17.

Under Ind AS 17, transactions that are identified as

leases are classified as either an operating lease or a

finance lease. While assets taken on finance leases are

recognised on balance sheet by the lessee (along with a

related lease liability), operating leases are an off-

balance sheet source of funding as the lessee only

recognises the amounts paid as lease rentals.

Scope

The ED applies to all leases for both the lessee and

lessor, except for a few scope exclusions. These

exclusions, some of which are similar to Ind AS 17’s, are

summarised in the table:

*A lessee may, but is not required to, apply Ind AS 116 to

leases of intangible assets other than those described in

the above table

Heading Main changes

Who’s affected? • entities that lease assets as a

lessee or lessor

What’s the impact

on lessees?

• all leases will be accounted for

‘on-balance sheet’, other than

short-term and low value asset

leases

• lease expense will typically be

‘front-loaded’

• lease liability will exclude:

- option periods unless

exercise is reasonably

certain

- contingent payments that

are linked to sales/usage

What’s the impact

on lessors?

• only minor changes from the

current standard, Ind AS 17,

leases

Are there other

changes?

• a new definition of a lease will

result in some arrangements

previously classified as leases

ceasing to be so, and vice

versa

• new guidance on sale and

leaseback accounting

• new and different disclosures

When are the

changes effective?

• proposed to be effective from

annual periods beginning on or

after 1 April 2019

• various transition reliefs

• no option to early adopt

Scope exclusion Standard to apply

Leases to explore for or

use of minerals, oil,

natural gas and similar

non-regenerative

resources

None specified.

Depending on the

circumstances Ind AS

106 ‘Exploration for and

Evaluation of Mineral

Resources’ or Ind AS 38

‘Intangible Assets’ might

apply

Leases of biological

assets in scope of Ind

AS 41 held by a lessee

Ind AS 41 ‘Agriculture’

Service concession

arrangements in scope

of Appendix D of Ind AS

115

Appendix D ‘Service

Concession

Arrangements’

Licences of intellectual

property granted by a

lessor in scope of Ind AS

115

Ind AS 115 ‘Revenue

from Contracts with

Customers

Rights held under

licensing agreements in

scope of Ind AS 38 for

items such as motion

picture films, video

recordings, plays,

manuscripts, patents and

copyrights*

Ind AS 38 ‘Intangible

Assets’

Hot topic

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Definition of a lease

The ED brings more leases 'on-balance sheet' as

compared to Ind AS 17, and therefore the evaluation of

whether a contract is (or contains) a lease becomes even

more important than it is today. Under the ED a lease is

defined as ‘a contract, or part of a contract, that conveys

the right to use an asset (the underlying asset*) for a

period of time in exchange for consideration’. A contract

is, or contains, a lease if:

• fulfilment of the contract depends on the use of an

identified asset; and

• the contract conveys the right to control the use of the

identified asset for a period of time in exchange for

consideration.

In practice, the main impact of the ED’s new definition

and supporting guidance is likely to be on contracts that

are not in the legal form of a lease but involve the use of

a specific asset and may therefore contain a lease.

(*An underlying asset has been defined to mean as an

asset that is the subject of a lease, for which the right to

use that asset has been provided by a lessor to a

lessee.)

The ED replaces the guidance in Appendix C of Ind AS

17 which differs in some important respects.

As a result, some contracts that do not contain a lease

today will do so under Ind AS 116, and vice versa. If a

contract contains a lease, the lease component is

accounted for on-balance sheet in the same way as a

standalone lease (unless it is a short-term or low-value

asset lease).

Applying the new definition involves three key

evaluations.

These are summarised in the flowchart:

Flowchart: the three key evaluations

No

Yes

No

No

Yes

No

No

Yes

Lessee accounting

Subject to the optional accounting simplifications

discussed below, a lessee will be required to recognise

its leases on the balance sheet. This involves

recognising:

• a 'right-of-use' asset; and

• a lease liability.

The ED requires lease liability to be initially measured at

present value of future lease payments. For this purpose,

lease payments include fixed, non-cancellable payments

for lease elements, amounts due under residual value

guarantees, certain types of contingent payments and

amounts due during optional periods to the extent that

extension is 'reasonably certain'.

Practical Insight – Key changes from

Appendix C of Ind AS 17: One of the main

changes from Appendix C of Ind AS 17 is the

relevance of pricing when evaluating whether a

contract to supply goods or services contains a

lease. Under Appendix C of Ind AS, such

contracts do not contain leases if the unit price

paid by the customer is either fixed or at fair

value at the time of delivery. ED does not include

this ‘pricing exemption’

Does the customer have

the right to obtain

substantially all of the

economic benefits from

use of the identified asset

throughout the period of

use?

Is there an identified

asset?

Does the customer have

the right to direct the use

of the identified asset

throughout the period of

use?

Contract is (contains) a

lease

Contract is

not (does

not contain)

a lease

Hot topic

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In subsequent periods, the right-of-use asset is

accounted for similarly to a purchased asset and

depreciated. As the expense is higher in the initial years

due to recognizing the interest at a constant rate of return

on the outstanding liability, this is expected to result in a

‘front loaded’ pattern of expenses. The lease liability is

accounted for similarly to a financial liability using the

effective interest method.

Optional accounting simplifications

ED provides important reliefs or exemptions for:

• short-term leases (a lease is short-term if it has a

lease term of 12 months or less at the

commencement date)

• low-value asset leases (the assessment of value is

based on the absolute value of the leased asset when

new and therefore requires judgment. [Application

Guidance in the ED provides that an underlying asset

can be of low value only if: a) the lessee can benefit

from use of the underlying asset on its own or

together with other resources that are readily

available to the lessee; and b) the underlying asset is

not highly dependent on, or highly interrelated with,

other assets].

If these exemptions are used, the accounting is similar to

operating lease accounting under the current Ind AS 17.

Lease payments are recognised as an expense on a

straight-line basis over the lease term or another

systematic basis (if more representative of the pattern of

the lessee's benefit).

Lessor accounting

ED’s requirements for lessor accounting are similar to

Ind AS 17 requirements. In particular:

• the distinction between finance and operating leases

is retained

• the definitions of each type of lease, and the

supporting indicators of a finance lease, are

substantially the same as under Ind AS 17

• the basic accounting mechanics are also similar, but

with some different or more explicit guidance in a few

areas. These include variable payments, sub-leases,

lease modifications and the treatment of initial direct

costs.

Sale and leaseback accounting

The ED makes significant changes to sale and leaseback

accounting. If an entity (the seller-lessee) transfers an

asset to another entity (the buyer-lessor) and leases that

asset back from the buyer-lessor, both the seller-lessee

and the buyer-lessor determine whether the transfer

qualifies as a sale. This determination is based on the

requirements for satisfying a performance obligation in

Ind AS 115.

Portfolio application

Both lessors and lessees have the option to apply the

model to a portfolio of similar leases if the effect is

reasonably expected to be materially the same as a

lease - by - lease approach. However, when accounting

for a portfolio the estimates and assumptions used must

reflect the size and composition of the portfolio.

Presentation and disclosure

Owing to the changes in lessee accounting, the

presentation requirements, in case of lessee, differ from

those under Ind AS 17 including classification in the cash

flow statement. For a lessor the requirements are largely

the same as Ind AS 17. The ED requires different and

more extensive disclosures about leasing activities than

Ind AS 17. The objective of the disclosures is to provide

users of financial statements with a basis to assess the

effect of leases on the entity’s financial position,

performance and cash flows. To achieve that objective,

lessees and lessors disclose both qualitative and

quantitative information.

Effective date and transition

ED proposes that Ind AS 116 would be effective for

annual reporting periods beginning on or after 1 April

2019, which is largely aligned with IFRS 16 becoming

applicable internationally.

ED provides that the date of initial application of Ind AS

116 is the beginning of the annual reporting period in

which an entity first applies the standard.

Also, ED provides lessees with a choice between two

broad methods:

• Full retrospective application - with restatement of

comparative information in accordance with Ind AS 8

'Accounting Policies, Changes in Accounting

Estimates and Errors'

Hot topic

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• Partial retrospective application - without restating

comparatives. Under this approach the cumulative

effect of initially applying Ind AS 116 is recognised as

an adjustment to the opening balance of retained

earnings (or other component of equity as

appropriate), at the date of initial application. If a

lessee chooses this method, a number of more

specific transition requirements and optional reliefs

also apply.

As for lessor, unless the lessor is an intermediate lessor,

lessor is not required to make any adjustments on

transition for leases in which it is a lessor and shall

account for those leases applying Ind AS 116 from the

date of initial application

Key differences between the ED and IFRS 16

• IFRS 16 provides that if lessee applies fair value

model in IAS 40 to its investment property, it should

apply that fair value model to the right-of-use assets

that meet the definition of investment property. Since

Ind AS 40, Investment Property, does not allow the

use of fair value model, the same guidance has not

been included in Ind AS 116.

• IFRS 16 provides an option of either to present right-

of-use assets separately or to include those right-of-

use assets within the same line item as that within

which the corresponding assets would be presented if

they were owned. Similar option is not given in Ind AS

116.

• IFRS 16 requires to classify cash payments for

interest portion of lease liability applying requirements

of IAS 7, Statement of Cash Flows. Since Ind AS 7

requires interest paid to be treated as financing

activity only, guidance under ED has been modified

accordingly. ED specified that that cash payments for

interest portion of lease liability would be classified as

financing activities applying Ind AS 7.

Hot topic

11

ITFG Clarification Bulletins

ITFG has issued two new clarification bulletins 10 and 11

which provide clarifications on various issues related to

the applicability and/or implementation of Ind AS under

the Companies (Indian Accounting Standards) Rules,

2015, which were raised by preparers/users/other

stakeholders.

Some of the clarifications provided in these clarification

bulletins are summarised below:

ITFG clarification bulletin 11

• Applicability of Ind AS to non-corporate entities

The Companies (Indian Accounting Standards) Rules,

2015 are applicable to the corporate entities only.

Non-corporates are required to follow the accounting

standards issued by the ICAI. They cannot be applied

by non-corporate entities even voluntarily unless

relevant regulator specifically provides for

implementation of Ind AS.

• Inclusion of ESOP reserve in computation of net

worth of a company to assess Ind AS applicability

For the purpose of assessing the Ind AS applicability,

ESOP reserve is required to be included while

calculating the net worth of a company.

• Interpretation of the term ‘parent entity’ used in

Paragraph 9 of Ind AS 33, Earnings per Share, in

case where separate financial statements of a

partly-owned subsidiary are prepared

Para 9 of Ind AS 33 states that an entity shall

calculate basic EPS amounts for profit or loss

attributable to ordinary equity holders of the parent

entity and, if presented, profit or loss from continuing

operations attributable to those equity holders.

It may be noted that an entity is required to disclose

EPS in both separate as well as consolidated financial

statements. Further, while calculating EPS based on

the consolidated financial statements, profit or loss

attributable to the parent entity refers to profit or loss

of the consolidated entity after adjusting for non-

controlling interests.

Hence, whilst the requirements of para 9 of Ind AS 33

have been provided in the context of calculating EPS

in the consolidated financial statements of an entity, in

case of separate financial statements, the parent

entity mentioned in para 9 will imply the legal entity of

which separate financial statements are being

prepared. Accordingly, when an entity presents EPS

in its separate financial statements, the same is

required to be calculated based on the profit or loss

attributable to its equity shareholders.

• Method of depreciation to be used in consolidated

financial statements where different methods of

depreciation are followed by the parent as well as

the subsidiary

As per Ind AS 8, Accounting Policies, Changes in

Accounting Estimates and Errors, the method of

depreciation is an accounting estimate and not an

accounting policy. Therefore, the requirement of Ind

AS 110, Consolidated Financial Statements, to

apply uniform accounting policies for like transactions

and events in similar circumstances, does not apply to

the method of depreciation.

There can be different methods of estimating

depreciation for property, plant and equipment (‘PPE’)

by the parent and subsidiary, only if such method

closely reflects the expected pattern of consumption.

The method once selected in the standalone financial

statements of the subsidiary should be consistently

applied and not be changed while preparing the

consolidated financial statements unless there is a

change in the expected pattern of consumption.

• Whether sitting fees paid to independent directors

and non-executive directors is required to be

disclosed in the financial statements prepared as

per Ind AS

Independent and non-executive directors are covered

under the definition of Key management personnel

(‘KMP’) given in para 9 of Ind AS 24, Related Party

Disclosures. The sitting fees paid to directors will fall

under the definition of “Short-term employee benefits”

as per paras 7 and 9 of Ind AS 19, Employee

Benefits, and is required to be disclosed as an

employee benefit for KMP in accordance with the

para 17 of Ind AS 24.

• Whether ASI 3 and ASI 6 which provide guidance

on how AS 22 is to be applied in the situations of

tax holiday under section 80-IA and 80-IB of the

Income-Tax Act, 1961, can be applied under Ind

AS also

The ASIs are not effective in the context of Ind AS

notified under Companies (Indian Accounting

Standards) Rules, 2015. Under Ind AS, the principles

enunciated under Ind AS 12, Income Taxes, are

required to be applied.

India – Effective – Accounting

Updates

12

Paragraphs 26-29 of Ind AS 12 can be referred for the

recognition of deferred tax as they provide sufficient

guidance in this regard. It provides that deferred tax

assets can only be recognised if it is probable that

there will be taxable profit available against which the

deductible temporary differences can be

utilised/future taxable profit will be available against

which the unused tax losses and unused tax credits

can be utilised. Further, paragraph 47 of Ind AS 12

states that deferred tax assets and liabilities shall be

measured at the tax rates that are expected to apply

to the period when the asset is realised or the liability

is settled, based on tax rates (and tax laws) that have

been enacted or substantively enacted by the end of

the reporting period.

Accordingly, the deferred tax in respect of temporary

differences which reverse during the tax holiday

period is not recognised to the extent the entity’s

gross total income is subject to the deduction during

the tax holiday period as per the requirements of

section 80IA/80IB of the Income Tax Act, 1961.

• Whether EPCG grant in the nature of exemption of

custom duty on capital goods with certain

conditions related to export of goods would be

accounted for as a grant related to asset or grant

related to income

The classification of the grant as related to asset or

income will require exercise of judgement and careful

examination of the facts, objective and conditions

attached to the scheme of the government. Care is

also required to ascertain the purpose of the grant

and the costs for which the grant is intended to

compensate.

If based on the terms and conditions of the scheme,

the grant received is to compensate the import cost of

assets subject to an export obligation as prescribed in

the EPCG Scheme; recognition of grant in the

statement of profit and loss should be linked to

fulfilment of associated export obligations. However, if

the grant received is to compensate the import cost of

the asset and based on the examination of the terms

and conditions of the grant, if it can be reasonably

concluded that conditions relating to export of goods

are subsidiary conditions, then it is appropriate to

recognise such grant in profit or loss over the life of

the underlying asset.

Click here for the bulletin.

ITFG clarification bulletin 10

• Accounting treatment of interest-free loan in the

standalone financial statements of a parent

company

A holding company has given interest-free loan to its

subsidiary and the differential of present value of loan

amount and its carrying amount as per previous

GAAP has been recognised as equity in subsidiary’s

standalone financial statements prepared as per Ind

AS. Both the companies are covered under phase I of

Ind AS roadmap. If the holding company exercises

the option under paragraph D15(b)(ii) of Ind AS 101,

First time adoption of Indian accounting

standards to measure the investment in subsidiary at

previous GAAP carrying amount, then the differential

in the carrying value of such loan under previous

GAAP and present value shall be added to the

investment in subsidiary measured at cost as required

by paragraph 10 of Ind AS 101, which requires

recognition, reclassification and measurement of

assets, liabilities and component of equity as per Ind

AS while preparing opening balance sheet.

• Accounting treatment of processing fees related

to undisbursed term loan amount for a first time

adopter

If a first time adopter has taken a loan and paid

processing fees at the time of sanction of loan, which

is disbursed in different tranches, then the accounting

treatment of the processing fee will be as follows:

- Where there is evidence that it is probable that

undisbursed term loan will be drawn down in

the future:

The entire processing fee, i.e. processing fee

pertaining to the disbursed as well as to the

undisbursed loan amount will be included, while

calculating the effective interest rate of the loan at

the date of transition to Ind AS and is recognised

as an expense over the term of the loan.

- Where it is not probable that the undisbursed

term loan will be drawn down in the future:

The fee is recognised as an expense on a straight-

line basis over the term of the loan.

India – Effective – Accounting

Updates

13

• Recognition of deferred tax asset on the tax

deductible goodwill

A holding company, which is required to comply with

Ind AS from 1 April 2017, has two subsidiaries which

were amalgamated in 2015 and goodwill was

recognised in the separate financial statements of the

amalgamated entity. The entity has decided not to

restate its past business combinations in accordance

with the exemption available under Ind AS 101.This

goodwill is allowed as deduction under Income-tax

laws in the books of the amalgamated entity. In the

consolidated financial statements (‘CFS’) of the

holding company such accounting goodwill gets

eliminated as a result of consolidation adjustment.

However, there is an increase in the tax base of

assets resulting from such tax deductible goodwill.

Deferred tax asset on the tax base of goodwill should

be recognised in accordance with Ind AS 12, Income

taxes by crediting the consolidated statement of profit

and loss, to the extent it is probable that taxable profit

will be available against which the deductible

temporary difference can be utilised, in the CFS of the

parent company. This will not qualify for the initial

recognition exemption under paragraph 24 of Ind AS

12 as there is no initial recognition of an asset or

liability arising from the amalgamation of subsidiaries

in the CFS.

• Deemed cost exemption for assets held for sale

If a company had classified a group of assets as

‘assets held for sale’ as per previous GAAP which

were presented separately from other fixed assets,

but on transition date, those assets did not meet the

criteria under Ind AS 105, Non-current assets held

for sale and discontinued operations, then those

assets should be re-classified as ‘Property, plant and

Equipment’ and also be eligible to avail the deemed

cost exemption under paragraph D7AA of Ind AS 101.

• Calculation of basic earnings per share for a first

time adopter who has availed option as per

paragraph 46/46A of AS 11

A first time adopter who had availed the option as per

paragraph 46/46A of AS 11, opted for exemption

under para D13A of Ind AS 101 by debiting exchange

differences arising from translation of long term

foreign currency monetary items to Foreign Currency

Monetary Item Translation Difference Account

(FCMITDA).

For the purpose of calculating basic earnings per

share, only those items of income and expense which

as per Ind AS would have been required to be

recognised in profit or loss but are recognised in

securities premium account/ other reserve, will need

to be deducted from statement of profit or loss.

However, since the option of debiting exchange

differences to FCMITDA as per paragraph 46/46A of

AS 11 is an option which is also available under Ind

AS, the same is not required to be reduced from profit

or loss from continuing operations for the purpose of

calculating basic earnings per share.

• Classification of expenses incurred on providing

free third party goods in case of a company

participating in customer loyalty programme

In respect of a company participating in customer

loyalty programme operated by a third party,

classification of the expense incurred on providing

free third party goods should be as follows:

- If an entity is acting as a principal, then it should

recognise the revenue at gross amount and the

expense of providing free third party goods should

be included in the cost of goods sold.

- If the entity is acting as an agent, it should

measure its revenue at the net amount, i.e. the

difference between the consideration allocated to

the award credits and the amounts payable to the

third party.

Click here for the bulletin.

Clarifications on computation of book profit for the

purposes of levy of MAT under section 115JB of IT

Act for Ind AS compliant companies

The Finance Act 2017 amended section 115JB of the

Income Tax Act, 1961 (‘Act’) to provide a framework,

recommended by MAT Ind AS Committee (‘Committee’),

for computation of book profits for the purpose of levying

MAT, in case of Ind AS compliant companies.

The amendments resulted in representations from

various stakeholders seeking clarifications on certain

implementation issues. CBDT referred the matter to the

Committee. The Committee after duly considering the

representations from stakeholders has issued

clarifications by way of FAQs for these issues vide

Circular No. 24/2017.

India – Effective – Accounting

Updates

14

Summarised below are some of the clarifications

included in the circular:

• Clause (i) of Explanation 1 to section 115JB (2)

requires provision for diminution/ impairment in value

of assets to be added back to the book profit which

computing MAT. CBDT has clarified that such an

adjustment is not required in case of Marked to

Market (MTM) losses on financial instruments

recognised at Fair Value Through Profit and Loss

(FVTPL). In case of assets other than financial

instruments recognised at FVTPL, the existing

provisions of clause (i) of Explanation 1 to section

115JB (2) would apply.

It is also clarified that for financial instruments where

gains or losses are recognised through other

comprehensive income, the provisions of MAT as

amended by Finance Act, 2017 would continue to

apply.

• CBDT has clarified that the starting point for

computation of book profits should be profit before

other comprehensive income [Item number XIII in Part

2 (Statement of Profit and Loss) of Division II of

Schedule III to the Companies Act 2013].

• Under Ind AS, proposed dividend should be

recognised in the year in which it has been declared.

However, under the Indian GAAP, proposed dividend

was accounted for in the year to which it pertained.

Therefore, on transition to Ind AS, amount of

proposed dividend recognised in the statement of

profit and loss should be reversed and credited to

retained earnings. Given this background, CBDT has

clarified that adjustments of proposed dividend would

not form part of the transition amount*.

• Considering adjustments made on transition to Ind AS

may have impact on deferred taxes, CBDT has

clarified that any deferred tax adjustments recorded

on the transition date (as per Ind AS) should be

ignored for the purpose of computing transition

amount*.

• Section 115JB of the Act provides that where a

revaluation/fair value adjustment is made to items of

property, plant and equipment (PPE) under Ind AS,

book profits of the previous year in which the item of

PPE is retired, disposed or realised shall be increased

or decreased, as the case may be, by the revaluation

amount relatable to such item of PPE. In this regard,

CBDT has clarified that revaluation amount to be

considered for adjustment as aforesaid should be the

amount after the adjustment of depreciation on the

revaluation amount relatable to such asset.

• Under Ind AS, investments in preference share is

considered to be a liability and the corresponding

dividend expense is debited to profit and loss account

as an interest cost. CBDT has clarified that for the

purpose of computation of MAT, profit/transition

amount* shall be increased by dividend/interest on

preference share (including dividend distribution

taxes) whether presented as dividend or interest.

*Transition amount - Under section 115JB (2C) of the

Act, transition amount has been defined as the amount or

the aggregate of the amounts adjusted in the ‘other

equity’ (excluding capital reserve and securities premium

reserve) on the convergence date but not including

certain specified items.

Further, the Committee also (vide report dated 17 June

2017) recommended certain amendments to the

provisions of section 115JB of the Act with effect from 1

April 2017. The relevant part of the Committee’s Report

has been released to seek a wider consultation regarding

the Committee’s recommendated amendments.

The last date for comments / suggestions from

stakeholders was 11 August 2017.

Click here for circular.

Click here for the report.

Click here for press release.

Guidance note on Division II - Ind AS Schedule III to

the Companies Act, 2013

ICAI has issued Guidance note on Division II - Ind AS

Schedule III to the Companies Act, 2013 (‘guidance

note’).

The objective of this guidance note is to provide

guidance in the preparation and presentation of the

financial statements in accordance with various aspects

of Division II - Ind AS Schedule III to the Companies Act,

2013, for companies adopting Ind AS.

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15

The guidance note provides guidance, inter alia, on the

following:

• Each item of balance sheet, statement of profit and

loss;

• Major differences in Division I and Division II of

Schedule III to the 2013 Act;

The guidance note also includes illustrative formats for

standalone financial statements and consolidated

financial statements and illustrations to provide guidance

on application of the principles are also given in the

guidance note.

The guidance given in ‘Guidance note on Schedule III to

the Companies Act, 2013’ published in February 2016

will continue to apply for companies not following Ind AS

and required to prepare financial statements as per the

format in Division I - Schedule III to the Companies Act,

2013.

The disclosure requirements under Ind AS, the 2013 Act,

other pronouncements of the ICAI, other statutes etc.,

would be in addition to this guidance note.

Click here for guidance note

Clarification on applicability of Ind AS and rule 4 of

the Ind AS Rules to payment banks, small finance

banks which are subsidiaries of corporates

MCA has issued a circular regarding the applicability of

Ind AS to a payment bank or a small finance bank, which

is a subsidiary of a company covered by MCA roadmap

for implementation of Ind AS.

The circular has clarified that a payment bank or small

finance bank, which is a subsidiary of a company

covered by MCA roadmap, should follow the banking

sector roadmap read with circular on ‘Operating

guidelines for payment banks’, issued by RBI, while the

holding company will continue to follow the MCA

roadmap.

It is to be noted that such payment bank or small finance

bank should, however, provide Ind AS financial data to its

holding company for the purpose of consolidation.

Click here for circular.

Publication: Indian Accounting Standards (Ind AS):

An Overview (Revised 2017) issued by ICAI

The publication contains an overview of various aspects

related to Indian Accounting Standards (Ind AS) such as

roadmap for the applicability of Ind AS, carve-outs from

International Financial Reporting Standards, changes in

financial reporting under Ind AS compared to financial

reporting under accounting standards, summary of all the

Ind AS etc. It also captures all the recent amendments to

Ind AS notified by the MCA in March 2017.

Click here for publication.

Publication: Educational material on Indian

Accounting Standard (Ind AS) 18, Revenue (Revised

2017) issued by ICAI

The educational material includes a summary of Ind AS

18, the key requirements of Ind AS 18 and frequently

asked questions covering issues, which are expected to

be frequently encountered in implementing Ind AS 18.

Click here for publication.

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16

Corrigendum and clarification regarding applicability

of exemption given to certain private companies

under section 143(3)(i) of the 2013 Act

The MCA, vide notification dated 13 June 2017

(‘exemption notification’), inter alia, provided exemption

from reporting on adequacy and operating effectiveness

of internal financial controls in the auditor’s report under

section 143(3)(i) of the 2013 Act in case of a private

company:

i. which is a one-person company or a small company

or;

ii. which has turnover less than INR fifty crores as per

latest audited financial statement or which has

aggregate borrowings from banks or financial

institutions or anybody corporate at any point of

time during the financial year less than INR twenty-

five crore.

Click here for exemption notification.

MCA has issued a corrigendum on 14 July 2017 to the

aforesaid exemption notification which provides that, in

item (ii) above, for the words ‘statement or’, the words

‘statement and’ are to be read.

Accordingly, both the criteria of turnover and borrowings

are to be evaluated for the purpose of aforesaid

exemption.

Click here for corrigendum.

Further, MCA has issued a circular on 25 July 2017

clarifying that the aforementioned exemption will be

applicable for those audit reports in respect of financial

statements pertaining to financial years commencing on

or after 1 April 2016, which are made on or after the date

of the exemption notification.

Click here for circular.

Appointment of statutory central auditors -

modification of rest period

RBI through its notification dated 30 January 2001

provided that an audit firm, subject to fulfilling the

prescribed eligibility norms, will be allowed to continue as

the statutory central auditors for a particular private

sector bank for a period of four years and, thereafter, the

said firm will be compulsorily rested for a period of two

years.

RBI has issued a notification on 27 July 2017 stating that

an audit firm, after completing its four-year tenure in a

particular private/foreign bank, will not be eligible for

appointment as statutory central auditor of the same

bank for a period of six years. These guidelines are also

applicable to foreign banks.

Click here for notification.

Income-Tax (18th Amendment) Rules, 2017

CBDT has issued Income-Tax (18th Amendment) Rules,

2017 (‘amended rules’) substituting serial number 31 and

the entries relating thereto in Form No. 3CD of the

Income-Tax Rules, 1962. This amendment is related to

section 269SS, Mode of taking or accepting certain

loans, deposits and specified sum, and section 269T,

Mode of repayment of certain loans or deposits, of

the IT Act.

The amended rules include the option of taking or

depositing loans via use of electronic clearing system

through a bank account. Further, the amended rules also

require the following particulars to be stated in serial

number 31 of Form No. 3CD:

• Particulars of each specified sum in an amount

exceeding the limit specified in section 269SS taken

or accepted during the previous year. section 269SS

defines ‘Specified sum’ as any sum of money

receivable, whether as advance or otherwise, in

relation to transfer of an immovable property, whether

or not the transfer takes place.

• Particulars of each repayment of any specified

advance in an amount exceeding the limit specified in

section 269T made during the previous year. Section

269T defines ‘Specified advance’ as any sum of

money in the nature of advance, by whatever name

called, in relation to transfer of an immovable

property, whether or not the transfer takes place.

• Particulars of repayment of loan or deposit or any

specified advance in an amount exceeding the limit

specified in section 269T received otherwise than by a

cheque or bank draft or use of electronic clearing

system through a bank account during the previous

year.

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17

• Particulars of repayment of loan or deposit or any

specified advance in an amount exceeding the limit

specified in section 269T received by a cheque or

bank draft which is not an account payee cheque or

account payee bank draft during the previous year.

CBDT has also issued a corrigendum dated 6 July 2017

related to these amended rules.

The amended rules have come into force from 19 July

2017.

Click here for amended rules.

Click here for corrigendum.

Technical guide on ICDS

The Central Government notified ten ICDS on 29

September 2016 which are applicable to the AY 2017-18

and subsequent AYs. Taxable profits will now be

determined after making appropriate adjustments to the

financial statements (whether prepared under existing AS

or Ind AS) to bring them in conformity with the provisions

of ICDS. With respect to this recent development, the

Direct Taxes Committee of the ICAI has issued a

technical guide on ICDS. While a technical guide is not

an authoritative pronouncement, it aims to assist

stakeholders in understanding the significant changes,

their impact and providing implementation guidance.

Click here for technical guide.

India – Effective – Auditing

Updates

18

Companies (Appointment and Qualification of

Directors) Amendment Rules, 2017

MCA has issued Companies (Appointment and

Qualification of Directors) Amendment Rules, 2017

(‘amended rules’) to amend Companies (Appointment

and Qualification of Directors) Rules, 2014 (‘principal

rules’). The amended rules have amended Rule 4,

Number of Independent Directors, of the principal

rules and, inter alia, provide the following:

• Sub-rule (2) has been inserted which states that the

following classes of unlisted public company will not

be covered under sub-rule (1):

- a joint venture;

- a wholly owned subsidiary; and

- a dormant company as defined under section 455

of the 2013 Act.

• These amended rules have also substituted existing

Form DIR-5, Application for surrender of director

identification number, with new Form DIR-5.

The amended rules have come into force on 6 July 2017.

Click here for amended rules.

Amendments to Schedule IV, Code for independent

directors of the 2013 Act

The Central Government has issued notification to

amend Schedule IV, Code for Independent Directors,

of the 2013 Act. The notification, inter alia, provides the

following amendments:

• An independent director who resigns or is removed

from the Board of the company will be replaced by a

new independent director within three months (earlier

it was one hundred and eighty days) from the date of

such resignation or removal, as the case may be;

• The independent directors of the company will hold at

least one meeting in a financial year (earlier, the term

‘year’ was used), without the attendance of non-

independent directors and members of management.

The notification has come into force on 6 July 2017.

Click here for notification.

Clarification on meaning of joint venture with respect

to specific exemption under the Companies

(Appointment and qualification of directors) Rules,

2014

MCA issued the Companies (Appointment and

qualification of directors) Amendment Rules, 2017 on 5

July 2017, amending rule 4 of the Companies

(Appointment and qualification of directors) Rules, 2014.

The amended Rule 4 exempted an unlisted public

company which is a joint venture, a wholly owned

subsidiary or a dormant company from appointing

independent directors.

MCA was asked to clarify the term ‘joint venture, since it

is not defined under Companies Act, 2013. As a result,

MCA has issued a circular dated 5 September 2017,

clarifying that a ‘joint venture’ as “a joint arrangement,

entered into in writing, whereby the parties that have joint

control of the arrangement, have rights to the net assets

of the arrangement.” This clarification aligns the definition

to the definition in the accounting standards.

Click here for circular.

Commencement of proviso to clause (87) of section

2 of the 2013 Act

The provisions of proviso to clause (87) of section 2 of

the 2013 Act have come into force on 20 September

2017.

Sub-section (87) of section 2 of the 2013 Act defines

“subsidiary company” or “subsidiary’ and the proviso to

this sub-section provides that such class or classes of

holding companies as may be prescribed shall not have

layers of subsidiaries beyond such numbers as may be

prescribed.

Click here for notification.

The Companies (Restriction on number of layers)

rules, 2017

With the notification of commencement of proviso to

clause (87) of section 2 of the 2013 Act, MCA has issued

the Companies (Restriction on number of layers) rules,

2017 (‘rules’), under the said proviso.

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The rules provide that no company shall have more than

two layers of subsidiaries on and from the date of

commencement of these rules except the following class

of companies:

i. a banking company as defined in clause (c) of

section 5 of the Banking Regulation Act, 1949;

ii. an NBFC as defined in clause (f) of Section 45-I of

the RBI Act, 1934 which is registered with the RBI

and considered as systematically important NBFC

by the RBI;

iii. an insurance company being a company which

carries on the business of insurance in accordance

with provisions of the Insurance Act, 1938 and the

Insurance Regulatory Development Authority Act,

1999;

iv. a Government company referred to in clause (45) of

section 2 of the 2013 Act.

The rules have clarified that the above requirement shall

not affect a company from acquiring a company

incorporated outside India with subsidiaries beyond two

layers as per the laws of such country.

The rules have further clarified that for computing the

number of layers as stated above, one layer which

consists of one or more wholly owned subsidiary or

subsidiaries shall not be taken into account.

The rules also provide specific requirements for

companies existing on or before the commencement of

these rules which have number of layers of subsidiaries

in excess of the layers specified in these rules including

filing returns with the Registrar.

The rules have come into force on 21 September 2017.

Click here for rules.

Companies (Meetings of board and its powers)

Second Amendment Rules, 2017

MCA has issued Companies (Meetings of board and its

powers) Second Amendment Rules, 2017 (‘amended

rules’) to amend Companies (Meetings of board and its

powers) Rules, 2014 (‘principal rules’). The amended

rules amend Rule 3, Meetings of Board through video

conferencing or other audio visual means, and Rule

6, Committees of the Board, of the principal rules.

The amended rules, inter alia, provide the following:

• Rule 3(3)(e) of the principal rules has been

substituted by the following:

Any director who intends to participate in the meeting

through electronic mode may intimate about such

participation at the beginning of the calendar year and

such declaration shall be valid for one year:

Provided that such declaration shall not debar him

from participation in the meeting in person in which

case he shall intimate the company sufficiently in

advance of his intention to participate in person.

Earlier, such prior intimation was required for each

meeting.

• Rule 6 of the principal rules has been substituted by

the following:

The Board of directors of every listed company and a

company covered under Rule 4, Number of

independent directors, of the Companies

(Appointment and qualification of directors) Rules,

2014 will constitute an 'Audit Committee' and a

'Nomination and Remuneration Committee of the

Board’. Thresholds stated in both Rule 6 and Rule 4

stated above are same for applicability for constitution

of Committees. But by virtue of provisions of Rule

4(2) of the Companies (Appointment and Qualification

of Directors) Rules, 2014 constitution of committee

will not be applicable on following unlisted public

company:

- a joint venture;

- a wholly owned subsidiary; and

- a dormant company as defined under section 455

of the 2013 Act.

The amended rules have come into effect from 14 July

2017.

Click here for amended rules.

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Regulatory Updates: Companies

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20

The Companies (Acceptance of deposits) Second

Amendment Rules, 2017

MCA has notified the Companies (Acceptance of

deposits) Second Amendment Rules, 2017(‘amended

rules’) which substitutes proviso to sub-rule (3) of rule (3)

of Companies (Acceptance of deposits) Rules, 2014. The

substituted proviso earlier provided that a private

company might accept from its members monies not

exceeding one hundred per cent of aggregate of the paid

up share capital, free reserves and securities premium

account and such company should file the details of

monies so accepted to the registrar in such manner as

may be specified.

The amended proviso provides that a specified IFSC

public company may also accept monies, as aforesaid,

from its members and further clarifies that the details of

monies so accepted should be filed to the registrar in

form DPT-3, Return of deposits. This form has also

been substituted by the amended rules.

The amended rules have also added further provisos to

aforesaid sub-rule (3) of rule (3), which inter alia, provide

that the maximum limit in respect of deposits to be

accepted from members, as discussed above, will not

apply to certain classes of private companies specified

therein.

The amended rules have come into force on 20

September 2017.

MCA further issued a circular on 27 September 2017 to

clarify that the new form DPT-3 will be made available for

e-filing after the month of November 2017. It was also

clarified that till such time the new e-form is made

available, the existing e-form can be used.

Click here for amended rules.

Click here for circular on availability of the new e-form.

National Company Law Tribunal (Amendment) Rules,

2017

MCA has issued National Company Law Tribunal

(Amendment) Rules, 2017 (‘amended rules’) to amend

the National Company Law Tribunal Rules, 2016. The

amended rules have inserted new Rule 87A, Appeal or

application under sub-section (1) and (3) of section

252, which provide, inter alia, the following:

• An appeal may be filed before the NCLT in Form No.

NCLT 9, with such modifications as may be

necessary, under the following sections of the 2013

Act:

- Section 252(1): If a person is aggrieved by an

order of the Registrar, notifying a company as

dissolved under section 248 of the 2013 Act.

- Section 252(3): If a company, or any member or

creditor or workman thereof feels aggrieved by the

company having its name struck off from the

register of companies, such company, member,

creditor or workman may file application to the

NCLT.

The amended rules have come into force on 6 July 2017.

Click here for amended rules.

National Company Law Appellate Tribunal

(Amendment) Rules, 2017

MCA has issued National Company Law Appellate

Tribunal (Amendment) Rules, 2017 (‘amended rules’) to

amend rule 63, Appearance of authorised

representative, of the National Company Law Appellate

Tribunal Rules, 2016 (‘principal rules’).

Rule 63 of the principal rules states that subject to

provisions of section 432, Right to legal

representation, of the 2013 Act, a party to any

proceedings or appeal before the NCLAT may either

appear in person or authorise one or more chartered

accountants or company secretaries or cost accountants

or legal practitioners or any other person to present his

case before the NCLAT.

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21

The amended rules have inserted new sub-rules to rule

63. These sub-rules deal with authorisation of an officer

or an advocate by the Central Government, the Regional

Director or the Registrar of Companies or Official

Liquidator to represent in the proceedings before the

NCLAT.

The amended rules have come into force on 24 August

2017.

Click here for amended rules.

Commencement of provisions of sub-sections (8), (9)

and (10) of section 212 of the 2013 Act

MCA has issued a notification appointing 24 August 2017

as the date of commencement of the provisions of sub-

sections (8), (9) and (10) of section 212, Investigation

into affairs of company by Serious Fraud

Investigation Office, of the 2013 Act.

These sub-sections deal with arrest of any person if the

Director, Additional Director or Assistant Director of

Serious Fraud Investigation Office (‘SFIO’) has reason to

believe that such person is guilty of offence punishable

under sub-section (6) of Section 212 of the 2013 Act (i.e.

offence covered under section 447, Punishment for

fraud), on the basis of the material in his possession.

Click here for notification.

Companies (Arrests in connection with investigation

by Serious Fraud Investigation Office) Rules, 2017

With the notification of commencement of the provisions

of sub-sections (8), (9) and (10) of section 212 of the

2013 Act, MCA has also issued the Companies (Arrests

in connection with investigation by Serious Fraud

Investigation Office) Rules, 2017 (‘rules’), which provide

the procedural requirements to be followed during and

after the arrest under aforementioned sub-sections.

These rules deal with, among other matters, the following

matters:

• In the case of investigation into the affairs of a

company other than a government company or a

foreign company, arrest of any person where SFIO

has reason to believe, on the basis of material in his

possession, that such person is guilty of any offence

punishable under section 212 of the 2013 Act;

• Arrest of a person in connection with a Government

company or a foreign company under investigation

only with the prior written approval of the Central

Government.

These rules have also clarified that the provisions of the

Code of Criminal Procedure, 1973, relating to arrest shall

be applied mutatis mutandis to every arrest made under

the 2013 Act.

These rules have come into force on 24 August 2017.

Click here for rules.

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SEBI (Issue of capital and disclosure requirements)

(Third amendment) Regulations, 2017

SEBI has issued the SEBI (Issue of Capital and

Disclosure Requirements) (‘ICDR’) (Third Amendment)

Regulations, 2017 (‘amended regulations’) to amend

clause (b) of proviso to Regulation 37 of the SEBI (ICDR)

Regulations, 2009.

Regulation 37 states that in case of an initial public offer,

the entire pre-issue capital held by persons other than

promoters shall be locked-in for a period of one year.

Clause (b) of the proviso provides that nothing contained

in this regulation shall apply to equity shares held by a

venture capital fund or alternative investment fund of

category I or a foreign venture capital investor.

The amended regulations state that Alternate Investment

Fund of category II shall also be considered for the

purpose of aforementioned proviso.

The amended regulations have come into force on 31

July 2017.

Click here for amended regulations.

SEBI (Issue of capital and disclosure requirements)

(Fourth amendment) Regulations, 2017

SEBI has issued SEBI (Issue of capital and disclosure

requirements) (Fourth amendment) Regulations, 2017

(‘amended regulations’) to amend SEBI (Issue of capital

and disclosure requirements) Regulations, 2009

(‘principal regulations’). These amended regulations

have changed the applicability of regulation 70, Chapter

VII (Preferential Issue) not to apply in certain cases,

of the principal regulations. These amendments, inter-

alia, provide the following:

• The conditions for exemption from applicability of

provisions of Chapter VII where preferential issue of

specified securities is made to the lenders pursuant to

conversion of their debt as a part of debt restructuring

schemes has been amended. Specified securities

means equity shares and convertible securities.

Earlier such exemption was provided for preferential

issue of equity shares only. Some of these revised

conditions are stated below:

- Guidelines for determining the conversion price

shall be in compliance with the applicable

provisions of the 2013 Act;

- There is change in the qualification of the valuers

who are required to certify the conversion price.

Prior to the amendment, valuer used to mean the

one defined in SEBI (Issue of Sweat Equity)

Regulations, 2002. Now, valuer will mean a person

registered under section 247, Valuation by

registered valuers, of the 2013 Act and the

relevant rules framed thereunder;

- Lock-in period will be one year from the date of

allotment of specified securities as against the

earlier requirement of ‘date of trading approval’.

The lock-in period of equity shares allotted

pursuant to conversion of convertible securities

issued on preferential basis shall be reduced to

the extent the convertible securities have already

been locked-in;

• Specifies the conditions for exemption from

applicability of provisions of Chapter VII where the

preferential issue of specified securities is made to a

person(s) at the time of lenders selling their holding of

specified securities or enforcing change in ownership

in favour of such person(s) pursuant to a debt

restructuring scheme. The conditions in this case are

more exhaustive (and include the disclosure

requirements) as compared to the exemptions in case

of conversion.

These amended regulations have come into force on 14

August 2017.

Click here for amended regulations.

Amendments to the SEBI (Infrastructure Investment

Trusts) Regulations, 2014 and SEBI (Real Estate

Investment Trusts) Regulations, 2014

In its board meeting held on 18 September 2017, SEBI

board has approved certain changes in SEBI

(Infrastructure investment trusts) regulations, 2014

and SEBI (Real estate investment trusts) regulations,

2014 to facilitate the growth of infrastructure investment

trusts (InvITs) and real estate investment trust (REITs).

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Following are the changes approved by the SEBI board:

i. Allowing REITs and InvITs to raise debt capital by

issuing debt securities;

ii. Introducing the concept of Strategic Investor for

REITs on similar lines of InvITs;

iii. Allowing single asset REIT on similar lines of InvIT;

iv. Allowing REITs to lend to underlying Holdco/SPV;

v. Amending the definition of valuer for both REITs

and InvITs.

On a proposal of allowing REITs to invest at least 50% of

the equity share capital or interest in the underlying

Holdco/SPVs, and similarly allowing Holdco to invest with

at least 50% of the equity share capital or interest in the

underlying SPVs, the SEBI board has decided to have

further consultation with the stakeholders.

Click here for press release.

SEBI (Substantial acquisition of shares and

takeovers) (Amendment) Regulations, 2017

Further to the amendment to regulation 70, Chapter VII

(Preferential Issue) not to apply in certain cases, of

the SEBI (Issue of capital and disclosure requirements)

Regulations, 2009 (as amended), as referred above,

SEBI has issued SEBI (Substantial acquisition of shares

and takeovers) (Amendment) Regulations, 2017

(‘amended regulations’) to amend SEBI (Substantial

acquisition of shares and takeovers) Regulations, 2011

(‘principal regulations’). Regulation 10 of the principal

regulations provides exemptions from the obligation to

make an open offer under regulation 3, Substantial

acquisition of shares or voting rights, and regulation

4, Acquisition of control, of the principal regulations to

certain specific acquisitions subject to fulfilment of the

conditions stipulated therefor. The amended regulations,

inter-alia, provide that the following nature of acquisitions

will also be exempt under regulation 10:

• Acquisition pursuant to a resolution plan approved

under section 31 of the Code;

• In line with the provisions inserted by new regulation

70(6) of the SEBI (Issue of capital and disclosure

requirements) (Fourth amendment) Regulations,

2017, as referred above, acquisition of shares by the

person(s), by way of allotment by the target company

or purchase from the lenders at the time of lenders

selling their shareholding or enforcing change in

ownership in favour of such person(s),pursuant to a

debt restructuring scheme implemented provided it

complies with the conditions specified in regulation

70(6) of the SEBI (Issue of capital and disclosure

requirements) Regulations, 2009 (as amended).

Further, it requires certain additional conditions which

need to be complied with in such cases.

These amended regulations have come into force on 14

August 2017.

Click here for amended regulations.

Acquisition of ‘control’ under the SEBI (Substantial

acquisition of shares and takeovers) Regulations,

2011

Ascertaining acquisition of control under the SEBI

(Substantial acquisition of share and takeovers)

Regulations, 2011 (‘regulations’) required consideration

of facts on a case to case basis. This resulted in varied

opinions.

As a result, SEBI decided to explore adoption of bright-

line tests for acquisition of ‘control’ under the regulations,

by seeking public comments on a discussion paper.

However, this exercise did not result in an overwhelming

support from the stakeholders for any particular option of

ascertaining acquisition of control.

In view of the above, SEBI has issued a press release on

8 September 2017 thereby clarifying to continue with the

practice of ascertaining acquisition of ‘control’ as per the

extant definition in the regulations. This clarification

ensures that the definition of control continues to be

consistent with the definition used in the 2013 Act and

other laws.

Click here for press release.

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Amendment to circular regarding schemes of

arrangement by listed entities and relaxation under

sub-rule (7) of rule 19 of the Securities contracts

(Regulation) Rules, 1957

SEBI had issued a circular on 10 March 2017 regarding

the framework for schemes of arrangement by listed

entities and relaxation under rule 19(7) of the Securities

contracts (regulation) Rules, 1957 (‘rules’).

Certain provisions specified in the aforesaid circular

relating to post-scheme minimum public shareholding

were not in line with the requirements specified under

rule 19(2)(b) of the rules.

SEBI has, therefore, issued a circular on 21 September

2017 to align the requirements of aforementioned circular

dated 10 March 2017 with those specified under rule

19(2)(b) of the rules.

Click here for circular dated 10 March 2017.

Click here for circular dated 21 September 2017.

Issuance, listing and trading of debt securities on

exchanges in IFSC

SEBI has issued a circular on 31 August 2017 on

issuance, listing and trading of debt securities on

exchanges in IFSC. It, inter alia, provides the following:

• Issue: In continuation of guidelines on debt securities

contained in Chapter V, Issue of debt securities, of

the SEBI (International financial services centres)

Guidelines, 2015, SEBI has decided that for issuing

debt securities in IFSC, stock exchanges have to

evolve a detailed framework prescribing:

- the eligibility criteria for the issuers: and

- the issue requirements to be complied with by

such eligible issuers for issuing debt securities in

IFSC.

Such framework and the subsequent changes made

thereto, if any, has to be submitted to SEBI for

approval.

• Listing: In addition to mandatory listing of debt

securities that are issued in IFSC, SEBI now permits

listing of those debt securities on stock exchanges in

IFSC, which are issued outside IFSC. However, listing

of only those debt securities will be permitted which

are issued in, and by issuers resident in Financial

Action Task Force (FATF) member jurisdictions.

Further, stock exchanges in IFSC should evolve a

detailed framework prescribing the initial and

continuous listing requirements including corporate

governance to be complied with by the issuers whose

securities are listed/proposed to be listed on stock

exchanges in IFSC.

• ‘Person resident in India’ will not invest or trade in

rupee denominated bonds issued and/or listed in

IFSC, except to the extent as permitted by the RBI.

Further, ‘Person resident in India’ will also not invest

or trade in other debt securities, issued and/or listed in

IFSC, by Indian entities;

• Trading: Guideline 21 of SEBI (IFSC) Guidelines,

2015 earlier provided that the debt securities listed in

stock exchanges need to be traded on the platform of

the stock exchange and such trades had to be cleared

and settled through clearing corporation set up in

IFSC as specified. It has now been decided to permit

over the counter trading of debt securities in IFSC

subject to clearing and settlement through clearing

corporations in IFSC.

Click here for circular.

SEBI (International financial services centres)

Guidelines, 2015 – Amendments

SEBI had issued SEBI (International financial services

centres) Guidelines, 2015 (‘IFSC guidelines’) on 27

March 2015. These IFSC guidelines came into force on 1

April 2015. SEBI has issued a circular dated 31 August

2017 amending, inter alia, the following provisions of the

IFSC guidelines:

Guideline 17 - Credit rating requirement

• The circular now provides that for debt securities

listed on the stock exchanges in IFSC, the credit

rating needs to be obtained either from a credit rating

agency registered with SEBI or from any other credit

rating agency registered in FATF (earlier it could have

been obtained from any other credit agency registered

in foreign jurisdiction).

India – Effective – Other

Regulatory Updates: SEBI

25

Guideline 18 - Agreement with depository or

custodian

• An issuer of debt securities needs to enter into an

agreement with a depository or custodian, registered

in FATF member jurisdiction (earlier it was required

with depository or custodian eligible to operate in

IFSC) for issue of debt securities etc.

Guideline 19 - Reporting of financial statements

• The IFSC guidelines earlier required the issuer of debt

securities in IFSC to prepare its statement of accounts

in accordance with the 2013 Act as applicable in

IFSC;

• This circular now provides that the entities issuing

and/or listing their debt securities in IFSC need to

prepare their statement of accounts in accordance

with IFRS/US GAAP or accounting standards as

applicable to them in their place of incorporation;

• It further provides that, in case an entity does not

prepare its statement of accounts in accordance with

IFRS/US GAAP, a quantitative summary of significant

differences between the national accounting

standards and IFRS need to be prepared by such

entity and incorporated in the relevant disclosure

documents to be filed with the stock exchange.

Click here for circular.

Disclosures by listed entities of defaults on payment

of interest/ repayment of principal amount on loans

from banks/ financial institution, debt securities, etc.

SEBI has issued a circular on 4 August 2017 under

regulation 101, Power to remove difficulties, of SEBI

(Listing obligations and disclosure requirements)

Regulations, 2015, which inter-alia provides that all

specified listed entities shall make disclosures to the

stock exchange on default in payment of

interest/instalment obligations on debt securities

(including commercial paper), medium term notes,

foreign currency convertible bonds, loans from banks and

financial institutions, external commercial borrowings etc.

The entities are required to make disclosures within one

working day from the date of default at the first instance

of default in the format specified in the circular. Further,

entities are also required to disclose specified details if

there is any outstanding amount under default as on the

last date of any quarter within 7 days from the end of

such quarter.

The circular is applicable to all listed entities which have

listed any of the following:

• Specified securities (equity and convertible

securities);

• Non-convertible debt securities; and

• Non-convertible and redeemable preference shares.

The circular was to come into force on 1 October 2017.

Click here for circular.

However, on 29 September 2017, SEBI released a press

release deferring the implementation of the aforesaid

circular dated 4 August 2017, until further notice.

Click here for press release.

India – Effective – Other

Regulatory Updates: SEBI

26

Clarification regarding IRDAI (Other forms of capital)

Regulations, 2015 - Creation of debenture

redemption reserve

The IRDAI had permitted insurers to raise capital in other

forms such as preference shares and subordinated debt

by issue of IRDAI (Other forms of capital) Regulations,

2015. In this regard, the IRDAI has issued a circular on 4

August 2017 clarifying that the insurers who have raised

capital by issue of debentures should create a debenture

redemption reserve (DRR), in terms of the 2013 Act and

rules made thereunder. DRR is presently required to be

created at 25 per cent of the value of outstanding

debentures. It has also been clarified that the DRR will

be ignored and not considered as a liability for the

purpose of computation of solvency margin and ratio.

Click here for circular.

Income-Tax (20th Amendment) Rules, 2017

CBDT has issued Income-Tax (20th Amendment) Rules,

2017 (‘amended rules’) which substitutes Rule

11UA(1)(c)(b) of the Income-Tax Rules, 1962 (‘principal

rules’) for determination of the fair market value of

unquoted equity shares.

Section 56(2)(x) and section 50CA have been inserted by

the Finance Act, 2017 (‘Act’) in the IT Act. Section

56(2)(x) widens the scope of taxability of receipt of sum

of money or property without/inadequate consideration.

Section 50CA provides that where consideration for

transfer of unquoted equity share of a company is less

than the FMV of such share determined in accordance

with the prescribed manner, the FMV shall be deemed to

be the full value of consideration for the purpose of

computing income under the head ‘Capital Gains’.

The amended rules require to take into account the FMV

of jewellery, artistic work, shares and securities and

stamp duty value in case of immovable property and

book value for the rest of the assets. Earlier for the

purpose of valuation of unquoted equity shares, book

value was taken into consideration for determining the

value of such shares.

The amended rules will come into force from 1 April 2018

and will apply in relation to AY 2018-19 and subsequent

years.

Click here for amended rules.

Income-tax (22nd Amendment) Rules, 2017

The Finance Act, 2017 introduced the relevant guidance

for computation of book profit for the companies that are

preparing financial statements in compliance with Ind AS.

For this purpose, the adjustments to the book profits for

MAT computation were introduced in the form of sections

115JB (2A) and 115JB (2C) of the IT Act. The CBDT has

issued the Income-tax (22nd Amendment) Rules, 2017

on 18 August 2017 (‘amended rules’). The amended

rules relate to the following matters:

• Form No. 29B, Report under section 115JB of the

Income-tax Act, 1961 for computing the book profits of

the company, has been revised to align it with the

requirements of Ind AS. Two new parts have been

introduced in the revised form which are applicable to

Ind-AS compliant companies:

- Part B, Details of the amount required to be

increased or decreased in accordance with sub-

section (2A) of section 115JB;

- Part C, Details of the amount required to be

increased or decreased in accordance with sub-

section (2C) of section 115JB. This part is to be

filled-up for the year of convergence and each of

the following four previous years only:

• An assessee required to furnish a report of audit

specified under section 115JC of the IT Act, Special

provisions for payment of tax by certain persons other

than a company, shall furnish the same electronically

along with the return of income.

These amended rules have come into force on 18 August

2017.

Click here for amended rules.

Clarifications in respect of section 269ST of the IT

Act

The new section 269ST inserted in the IT Act prohibits

receipt of an amount of INR two lakh or more by a

person, in the circumstances specified therein, through

modes other than by way of an account payee cheque or

an account payee bank draft or use of electronic clearing

system through a bank account.

India – Effective – Other Regulatory

Updates: Others

27

CBDT has now issued a circular clarifying that in respect

of receipt in the nature of repayment of loan by NBFCs or

housing finance companies, the receipt of one instalment

of loan repayment in respect of a loan shall constitute a

‘single transaction’ as specified in clause (b) of section

269ST of the IT Act and all the instalments paid for a

loan will not be aggregated for the purposes of

determining applicability of the provisions of section

269ST.

Click here for notification.

Extension of due date for filing return of income and

audit reports

CBDT has issued an order on 31 August 2017 extending

the ‘due date’ for filing of return of income as well as

various audit reports prescribed under the IT Act which

are required to be filed by the said ‘due date’ from 30

September 2017 to 31 October 2017.

This extension is available for all the following

assessees, other than an assessee who is required to

furnish a report referred to in section 92E of the IT Act:

• a company;

• a person (other than a company) whose accounts are

required to be audited under the IT Act or under any

other law for the time being in force; or

• a working partner of a firm whose accounts are

required to be audited under the IT Act or under any

other law for the time being in force.

Click here for the order.

Disclosure of divergence in the asset classification

and provisioning by banks

RBI, vide its notification dated 18 April 2017, requires

disclosures by banks in a prescribed format in certain

cases of divergence in the asset classification and

provisioning. The notification requires the disclosures to

be made in the notes to accounts in the ensuing annual

financial statements published immediately after the

communication of such divergence by RBI to the banks.

Click here for notification.

Accordingly, SEBI has issued circular requiring all banks

which have listed specified securities, to comply with the

following requirements:

• The banks will disclose to the stock exchanges,

divergences in the asset classification and

provisioning wherever:

- the additional provisioning requirements assessed

by RBI exceed 15 per cent of the published net

profits after tax for the reference period; and/or

- the additional gross NPAs identified by RBI

exceed 15 per cent of the published incremental

gross NPAs for the reference period.

• The disclosures will be made in the format specified in

the aforesaid RBI’s notification.

• The aforesaid disclosures will be placed as an

annexure to the annual financial results filed with the

stock exchanges in accordance with Regulation

33(3)(d) of the SEBI (Listing Obligations and

Disclosures Requirements) Regulations, 2015. Such

disclosures will be made along with the annual

financial results filed immediately following

communication of such divergence by RBI to the

banks.

Click here for circular.

Inclusion of peer to peer lending platforms under

NBFC norms

The RBI has specified a non-banking institution that

carries on ‘the business of a peer to peer lending

platform’ to be an NBFC.

The RBI has further clarified that the term “the business

of a peer to peer lending platform” shall mean the

business of providing under a contract, the service of

loan facilitation, via online medium or otherwise, to the

participants who have entered into an arrangement with

that platform to lend on it or to avail of loan facilitation

services provided by it.

Click here for notification.

Amendments to Master Direction- Reserve Bank of

India (Financial services provided by banks)

Directions, 2016

RBI has issued amendments to Master Direction -

Reserve Bank of India (Financial Services provided by

Banks) Directions, 2016 dated 26 May 2016. The

amendments include amendments to the paragraphs

dealing with the investments that can be made by a

bank.

Click here for notification.

India – Effective – Other Regulatory

Updates: Others

28

IBBI (Insolvency resolution process for corporate

persons) (Amendment) Regulations, 2017 and IBBI

(Fast track insolvency resolution process for

corporate persons) (Amendment) Regulations, 2017

The IBBI has issued IBBI (Insolvency resolution process

for corporate persons) (Amendment) Regulations, 2017

and IBBI (Fast track insolvency resolution process for

corporate persons) (Amendment) Regulations, 2017

(‘amended regulations’) to amend the IBBI (Insolvency

resolution process for corporate persons) Regulations,

2016 and the IBBI (Fast track insolvency resolution

process for corporate persons) Regulations, 2017

respectively. These amended regulations inter-alia lay

down the requirements relating to submission of claims

by creditors other than those covered under regulation 7

(claims by operational creditors), regulation 8 (claims by

financial creditors) and regulation 9 (claims by workmen

and employees) of the Code. These amended

regulations also provide that the financial creditors shall

submit their proof of claims by electronic means only and

all other creditors may submit the proof of claims in

person, by post or by electronic means.

These amended regulations have come into force on 16

August 2017.

Click here for amended regulations.

Banking Regulation (Amendment) Act, 2017

The Banking Regulation (Amendment) Act, 2017

(‘amended act’) received the assent of Honourable

President of India on 25 August 2017. The amended act

replaces the Banking Regulation (Amendment)

Ordinance, 2017 (‘ordinance’) that was promulgated on 4

May 2017. This amended act has inserted new sections

in the Banking Regulations Act, 1949 enabling RBI to

handle cases related to stressed assets of the banks and

to initiate recovery proceedings against defaulters under

the Insolvency and Bankruptcy Code, 2016 (‘Code’). The

amended act provides, inter alia, the following:

• Section 35AA: The Central Government may

authorise the RBI to issue directions to any banking

company or banking companies to initiate insolvency

resolution process in respect of a default, under the

provisions of the Code. Section 3(12) of the Code

defines term ‘default’ as non-payment of debt when

whole or any part or instalment of the amount of debt

has become due and payable and is not repaid by the

debtor or the corporate debtor, as the case may be;

• Section 35AB: RBI may issue directions to any

banking company or banking companies for resolution

of stressed assets.

The amended act is deemed to have come into force on

4 May 2017.

Click here for ordinance.

Click here for amended act.

Click here for Code.

Applicability of Payment of Wages Act, 1936

Section 1(6) of the Payment of Wages Act, 1936 (‘Act’)

states that the Act applies to wages payable to an

employed person in respect of a wage period if such

wages for that wage period do not exceed INR 6,500 per

month or such other higher sum as may be specified on

the basis of figures of the consumer expenditure survey

published by the Central Government, after every five

years, by notification in the Official Gazette.

The Central Government has issued a notification on 29

August 2017 specifying INR 24,000 per month (earlier

INR 18,000 per month) as wages for the purpose of the

aforementioned section.

Click here for notification.

Employees’ State Insurance (General) Amendment

Regulations, 2017

Employees’ State Insurance Corporation has issued

Employees’ State Insurance (General) Amendment

Regulation, 2017 (‘amended regulation’) amending

Regulation 31 of Employees’ State Insurance (General)

Regulations, 1950. The amended regulation provides

that due date of contribution payable of employee state

insurance will be 15 days of the next month (earlier due

date was 21 days of the next month). The amended

regulation has come into force with effect from the

contribution payable for the month of June 2017, i.e. 15

July 2017.

Click here for amended regulation.

India – Effective – Other Regulatory

Updates: Others

29

Revised secretarial standards on meetings of the

board of directors (SS-1) and general meetings (SS-

2)

Secretarial standards on meetings of the board of

directors (SS-1) and general meetings (SS-2) were

approved by the Central Government on 10 April 2015

and were published on 23 April 2015 by the ICSI. These

secretarial standards were effective from 1 July 2015.

Click here for notification.

These secretarial standards have now been revised by

the ICSI and approval of the Central Government has

been obtained for the revised SS-1 and SS-2. The

revised SS-1 and SS-2 shall be applicable for

compliance by all the companies (except the exempted

class of companies) with effect from 1 October 2017.

Most of the amendments are made to make the

provisions of these secretarial standards consistent with

the provisions of the 2013 Act, Companies (Amendment)

Act, 2015 and rules made thereunder, and MCA’s

exemption notification dated 5 July 2015 in respect to

private companies. Following are the key amendments in

revised SS-1 and SS-2:

Revised SS-1:

• Revised SS-1 exempts section 8 companies from its

scope. It is further clarified that section 8 companies

need to comply with the applicable provisions of the

2013 Act relating to board meetings. This amendment

is made to reflect the effect of the MCA’s exemption

notification dated 5 June 2015 in respect of section 8

companies as these are exempted from the

compliance of section 118 of the 2013 Act;

• It is applicable on only those committees which are

mandatorily required to be constituted by the board

under the 2013 Act. Hence, such provisions will not

apply to various other committees constituted under

other laws/regulations;

• A board meeting can be convened on ‘national

holiday’. Section 174(4) of the 2013 Act prohibits

conduct of meetings adjourned for want of quorum on

national holidays, but it is silent about the original

board meeting. Accordingly, the restriction on

meetings on national holidays is removed from this

standard also;

• Section 173(2) of the 2013 Act provides for option to a

director to participate in a meeting either in person or

through video conferencing. The intention of law is

that if a director opts to attend through video

conferencing, the company shall provide the facility.

The standard is reworded accordingly to reflect the

intention of law makers;

• According to SS-1, board meeting should be held at

least once in every calendar quarter with maximum

interval of 120 days between two consecutive

meetings. Revised SS-1 now provides that board shall

hold at least four meetings in each calendar year with

maximum interval of 120 days between any two

consecutive meetings. The amendment aims to

provide relaxation from holding meeting of the board

in each calendar quarter, in alignment with the

provisions of law. This provision is also relevant for

listed companies;

• Existing SS-1, provided that director should not be

reckoned for quorum in respect of an item in which he

is interested and shall not be present during the

discussions and voting on such item. Revised SS-1

provides that in case of a private company, a director

shall be entitled to participate in respect of such item

after disclosure of his interest. Further, revised SS-1

provides that for this purpose a director shall not be

treated as interested in a contract or arrangement

entered into or proposed to be entered into by the

company with the director himself or his relative. Such

amendment is made to reflect the effect of MCA’s

exemption notification dated 5 June 2015 in respect of

private companies and to bring more clarity in

alignment with the provisions of law as the term

‘Director himself or his relative’ is not prescribed

under section 184(2) of the 2013 Act;

• Report of the board of directors has to include a

statement on compliances of applicable secretarial

standards. This amendment is made to align the

disclosure requirement with the provisions of section

134(5)(f) of the 2013 Act which provides that the

directors responsibility statement shall state that the

directors have devised proper systems to ensure

compliances with the provisions of all applicable laws

and that such systems are adequate and operating

effectively.

India – Effective – Other Regulatory

Updates: Others

30

• All appointments made one level below key

managerial personnel is no longer required to be

noted by the Board. The amendment has been made

pursuant to amendment made in rule 8 of the

Companies (Meetings of board and its powers) Rules,

2014.

Revised SS-2:

• Revised SS-2 exempts section 8 companies from its

scope. It is further clarified that section 8 companies

need to comply with the applicable provisions of the

2013 Act relating to general meetings. This

amendment is made to reflect the effect of the MCA’s

exemption notification dated 5 June 2015 in respect to

section 8 Companies as these are exempted from the

compliance of section 118 of the 2013 Act;

• It is now clarified that the notice of general meeting is

to be hosted on the website till the conclusion of the

meeting. In case of a private company, the notice

shall be hosted on the website of the company, if any,

unless otherwise provided in the articles of

association. This provision has been introduced to

reflect the effect of MCA’s exemption notification

dated 5 July 2015 in respect of private companies;

• As per SS-2, it was mandatory to mention the

resolution at notice of each general meeting whenever

the new auditor or director was being appointed other

than retiring auditor/director. Now, according to

revised SS-2, there is no need to give the resolution in

notice. It provides greater clarity of the provision that

in case of ordinary business resolutions are not

required to be stated in the notice;

• SS-2 provides that a member who is a related party is

not entitled to vote on a resolution relating to approval

of any contract or arrangement in which such member

is a related party. Revised SS-2 further provides that

in case of a private company, a member who is a

related party is entitled to vote on such resolution.

This provision has been introduced to reflect the effect

of MCA’s exemption notification dated 5 July 2015 in

respect of private companies.

• The qualifications, observations or comments or other

remarks, if any, mentioned in the auditor’s report on

the financial transactions/secretarial audit report

which has any adverse/material adverse effect on the

functioning of the company should only be read at the

AGM.

Click here for announcement.

Click here for revised SS-1.

Click here for revised SS-2.

India – Effective – Other Regulatory

Updates: Others

31

Exposure draft on Ind AS 116, Leases

ICAI has issued an exposure draft on Ind AS 116,

Leases, which will supersede Ind AS 17, Leases. Ind AS

116 sets out the principles for the recognition,

measurement, presentation and disclosure of leases and

is based on IFRS 16. The proposed standard is

converged with IFRS 16 except for changes necessitated

due to removal of fair value model option for investment

property under Ind AS and a couple of other areas where

the other alternate options given under IFRS have been

removed.

The key changes proposed by Ind AS 116 are as follows:

• Ind AS 116 largely retains the definition of lease in Ind

AS 17 but changes the guidance on how to apply it.

Under Ind AS 116, the definition of a lease is much

more driven by the question of which party to the

contract controls the use of the underlying asset for

the period of use. Since all leases will be recognised

in the balance sheet of the lessee under Ind AS 116,

there is likely to be a greater focus on identifying

whether a contract is/contains a lease.

• Ind AS 116 modifies the accounting for leases in the

books of a lessee. A lessee will be required to

recognise assets and liabilities for all leases with term

of more than twelve months, unless the underlying

asset is of a low value.

• Under Ind AS 17, a lessee was required to classify the

lease as an operating or finance lease. Accounting

requirements varied depending on the classification.

• Ind AS 116 introduces increased disclosure

requirements in the books of the lessee and lessor.

• Ind AS 116 includes guidance on accounting for lease

modification in the books of the lessee and lessor,

which was not there under Ind AS 17.

It is relevant to note that accounting for leases in the

books of the lessor is substantially similar to the

requirements of Ind AS 17.

Ind AS 116 is proposed to be effective from annual

periods beginning on or after 1 April 2019.

Comments were invited on the exposure draft and the

last date for submission of comments was 31 August

2017.

Click here for exposure draft.

India – Proposed – Accounting

Updates

32

Exposure draft of guidance note on report under

section 92E of the Income-Tax Act, 1961 (Transfer

pricing)

The ICAI has issued the exposure draft of guidance note

on report under section 92E of the IT Act (Transfer

Pricing) (‘proposed GN’) for comments. The proposed

GN introduces the changes made by the Finance Act,

2017 in the IT Act in respect to transfer pricing.

Following are the amendments made by the Finance Act,

2017 in respect to which changes are introduced in the

proposed GN:

• Amendment in the applicability of specified domestic

transactions compliance by excluding expenditure

made to person referred to in section 40A(2)(b) of the

IT Act, from the ambit of the definition;

• New sections 92CE and 94B regarding secondary

adjustments and limitation on interest deduction

respectively introduced;

• Revised safe harbour rules in India notified by CBDT

vide notification dated 7 June 2017.

Comments were invited on the exposure draft and the

last date for submission of comments was 11 September

2017.

Click here for exposure draft.

India – Proposed – Auditing

Updates

33

The Companies (Amendment) Bill 2017 passed by

Lok Sabha

The Companies (Amendment) Bill 2016 (‘original bill’)

was introduced in Lok Sabha on 16 March 2016. The Lok

Sabha has passed the Companies (Amendment) Bill

2017 (‘amended bill’) on 27 July 2017 with certain

amendments in the original bill introduced.

Click here for amended bill.

Draft notification for self-reporting of estimated

current income, tax payments and advance tax

liability on voluntary compliance basis

For tax payers liable to discharge part of their tax liability

by way of advance taxes, arriving at a reasonably

accurate estimate of their current income and advance

tax liability is essential to avoid the additional burden of

interest on default/ deferment of advance tax. At the

same time, a reliable and advance estimate of tax

revenues for the year is also essential for the

Government in order to plan allocation of resources.

As a result, it is proposed to create a mechanism for self-

reporting of estimates of current income, tax payments

and advance tax liability by certain taxpayers (companies

and tax audit cases) on voluntary compliance basis. The

proposed reporting mechanism is sought to be created

by way of inserting a new rule 39A and Form No. 28AA in

the Income-tax Rules, 1962.

The draft notification has proposed that the

aforementioned category of taxpayers shall furnish an

intimation of estimated income and payment of taxes as

on 30 September of the previous year, on or before 15

November of the previous year.

However, if the income estimated as on 30 September of

the previous year is less than the income of the

corresponding period of the immediately preceding

previous year by an amount of INR 5 Lakh or 10 percent,

whichever is higher, then the such taxpayer shall be

required to furnish an intimation of estimated income and

payment of taxes as on 31 December of the previous

year, on or before 31 January of the previous year.

Comments were invited from stakeholders and general

public on the proposed draft notification and the

comment period ended on 29 September 2017.

Click here for press release

Click here for proposed draft notification.

Draft Companies (Cost records and audit)

Amendment Rules, 2017

MCA has issued draft Companies (Cost records and

audit) Amendment Rules, 2017 (‘proposed

amendments’) to amend the Companies (Cost records

and audit) Rules, 2014 for comments. These proposed

amendments have been issued pursuant to the

implementation of Ind AS to bring parity between

financial records and cost records. These proposed

amendments have substituted old Form CRA-1,

Particulars relating to the items of costs to be

included in the books of accounts, and Form CRA-3,

Form of the cost audit report, with new forms.

Click here for notice inviting comments.

Click here for notification.

India – Proposed – Others

Regulatory Updates

34

IFRS Practice statement 2: Making materiality

judgements

The IASB has issued IFRS practice statement 2:

Making materiality judgements (‘practice statement’)

which provides companies with guidance on how to

make materiality judgements when preparing their

general purpose financial statements in accordance with

IFRS. The practice statement represents a non-

mandatory guidance on making materiality judgments.

Therefore, compliance with the practice statement is not

required to ensure compliance with IFRS. To help

companies decide whether information is material, the

practice statement gathers all the materiality

requirements in IFRS standards and adds practical

guidance and examples.

Companies tend to follow the requirements in IFRS as a

checklist rather than applying judgement to decide what

information should be provided in the financial

statements. This practice statement, therefore

encourages a behavioural change in making disclosures

in financial statements.

The guidance in the practice statement can be applied to

the financial statements prepared any time after 14

September 2017.

Click here for news.

Click here for project summary of the practice statement.

International – Effective – IFRS

Updates

35

ASU 2017-11 - Earnings per share (Topic 260);

Distinguishing liabilities from equity (Topic 480);

Derivatives and hedging (Topic 815): (Part I)

Accounting for certain financial instruments with

down round features, (Part II) Replacement of the

indefinite deferral for mandatorily redeemable

financial instruments of certain non-public entities

and certain mandatorily redeemable non-controlling

interests with a scope exception

FASB has issued ASU 2017-11 with two parts.

Part I simplifies the accounting for certain financial

instruments with down round features.

Down round features are features of certain equity-linked

instruments (or embedded features) that result in the

strike price being reduced on the basis of the pricing of

future equity offerings. Under the existing guidance, an

equity-linked financial instrument (or embedded feature)

with a down round provision that is not classified as a

liability under Topic 480, Distinguishing liabilities from

equities is evaluated under Topic 815, Derivatives and

hedging, to determine whether the instrument meets the

definition of a derivative. If the instrument meets that

definition, it is evaluated further to determine whether it

qualifies for a scope exception from derivative accounting

because it is both (1) indexed to the entity’s own stock,

and (2) classified in equity.

For embedded features in certain financial instruments

with a debt host, an instrument is not considered to be

indexed to the entity’s own stock if a down round feature

exists. As a result, under the existing guidance, the entity

is then required to classify the freestanding financial

instrument (or the bifurcated conversion option) as a

liability that is initially measured at fair value and is re-

measured at each reporting date in the future.

ASU 2017-11 requires companies to disregard the down

round feature when assessing whether the instrument is

indexed to its own stock, for purposes of determining

liability or equity classification. Thus the classification

analysis of certain equity-linked financial instruments (or

embedded features) with down round features is

changed with the introduction of ASU 2017-11.

Therefore, a freestanding equity-linked financial

instrument (or embedded conversion option) no longer

would be accounted for as a derivative liability at fair

value as a result of the existence of a down round

feature.

The ASU further requires the entities providing earnings

per share (‘EPS’) data to adjust the effect of the down

round feature in their basis EPS calculation only when

triggered and the effect of trigger is also to be recognised

within equity.

The amendments in Part II, which do not have an

accounting effect, address the difficulty of navigating the

guidance in Topic 480, due to the existence of extensive

pending content in the Codification. This pending content

has resulted from the indefinite deferral of accounting

requirements related to mandatorily redeemable financial

instruments of certain non-public entities and certain

mandatorily redeemable non-controlling interests. As a

result, the amendments in Part II re-characterise the

pending content related to the indefinite deferral of

certain provisions of Topic 480 as a scope exception.

The amendments in Part I of the ASU 2017-11 are

effective for public business entities for fiscal years, and

interim periods within those fiscal years, beginning after

15 December 2018. For all other entities, the

amendments in Part I are effective for fiscal years

beginning after 15 December 2019, and interim periods

within fiscal years beginning after 15 December 2020.

Early adoption is permitted for all entities, including

adoption in an interim period. If an entity early adopts the

amendments in an interim period, any adjustments

should be reflected as of the beginning of the fiscal year

that includes that interim period.

The amendments in Part I should be applied

retrospectively to outstanding financial instruments with a

down round feature in either of the following ways:

• By means of a cumulative-effect adjustment to the

statement of financial position as at the beginning of

the first fiscal year and interim period(s) in which the

pending content that links to this paragraph is

effective.

• For each prior reporting period presented in

accordance with the guidance on accounting changes

prescribed in specified paragraphs of ASU 250,

Accounting changes and error corrections.

The amendments in Part II of the ASU do not require any

transition guidance because those amendments do not

have an accounting effect.

Click here for news release.

Click here for ASU.

International – Effective – USGAAP

Updates

36

ASU 2017-12 - Derivatives and hedging (Topic 815):

Targeted improvements to accounting for hedging

activities

FASB has issued an ASU with the objective of improving

the financial reporting of hedging relationships to better

portray the economic results of an entity’s risk

management activities in its financial statements. In

addition to that main objective, the amendments in this

ASU make certain targeted improvements to simplify the

application of the hedge accounting guidance in current

GAAP based on the feedback received from various

stakeholders.

Following are the key amendments introduced in ASU:

• Alignment of hedge accounting with risk

management activities: The ASU will expand hedge

accounting for both financial and nonfinancial risk

components to better align hedge accounting with a

company’s risk management activities.

• Risk component hedging: The ASU permits more

flexibility in hedging interest rate risk for both variable

rate and fixed rate financial instruments, and

introduces the ability to hedge risk components for

non-financial hedges.

• Accounting for the hedged item in fair value

hedges of interest rate risk: The ASU has changed

the guidance for designating fair value hedges of

interest rate risk and measuring the change in fair

value of the hedged item in fair value hedges of

interest rate risk. Specifically, the ASU, inter alia:

− Permits an entity to measure the change in fair

value of the hedged item on the basis of the

benchmark rate component of the contractual

coupon cash flows determined at hedge

inception, rather than on the full contractual

coupon cash flows as required by current GAAP.

− Permits an entity to measure the hedged item in

a partial-term fair value hedge of interest rate

risk by assuming the hedged item has a term

that reflects only the designated cash flows

being hedged. Current GAAP does not allow this

methodology.

• Recognition and presentation of the effects of

hedging instruments: ASU also aligns the

recognition and presentation of the effects of the

hedging instrument and the hedged item in the

financial statements to increase the understandability

of the results of an entity’s intended hedging

strategies.

• Amounts excluded from the assessment of hedge

effectiveness: Current GAAP permits an entity to

exclude option premiums and forward points from the

assessment of hedge effectiveness. The ASU

continues to allow an entity to exclude those

components. Additionally, the ASU permits an entity

to exclude the portion of the change in fair value of a

currency swap that is attributable to a cross-currency

basis spread from the assessment of hedge

effectiveness.

• Disclosures: ASU will enhance the presentation of

hedge results in the financial statements and

disclosures about hedging activities. The ASU also

requires new tabular disclosures related to cumulative

basis adjustments for fair value hedges.

The ASU is effective for public companies from fiscal

years beginning after 15 December 2018 and interim

periods within those fiscal years. For all other entities,

the ASU is effective for fiscal years beginning after 15

December 2019 and interim periods beginning after 15

December 2020.

Early application is permitted in any interim period after

issuance of the ASU.

Click here for news release.

Click here for ASU.

International – Effective – USGAAP

Updates

37

SEC conforms staff guidance to new FASB revenue

recognition rules

SEC has issued a SAB No. 116 to modify interpretive

guidance included in previous staff accounting bulletins

to make the interpretations consistent with ASC Topic

606, Revenue from contracts with customers, issued

by the FASB in 2014.

SAB No. 116 has made clear that Topic 13 in the

codification of SEC SAB; the guidance in Securities

Exchange Act Release No. 23507 and Accounting and

Enforcement Release No. 108, for criteria to be met to

recognise revenue when delivery has not occurred (‘bill-

and-hold’ arrangements) and SEC Topic 8 guidance are

no longer applicable. Topic 13 provided SEC staff views

on then-existing general revenue recognition guidance in

ASC Topic 605, Revenue recognition and Topic 8

provided the SEC staff’s views on the prohibition of

presenting sales of a leased or licensed department

within a retailer’s statement of comprehensive income,

and the staff’s views on the disclosure of finance charges

imposed by retailers on credit sales. These topics have

been eliminated upon adoption of Topic 606. Similarly,

ASC Topic 606 provides specific guidance for bill-and-

hold arrangements.

SAB No. 116 has also stated that SEC Topic 11.A is

modified to clarify that revenues from operating-

differential subsidies presented under a revenue caption

should be presented separately from revenue from

contracts with customers accounted for under ASC Topic

606.

SAB No.116 has come into force on 29 August 2017.

Click here for news.

Click here for SAB No. 116.

International – Effective – USGAAP

Updates

38

Exposure draft to clarify how to distinguish

accounting policies from accounting estimates:

Proposed amendments to IAS 8

The IASB has proposed narrow-scope amendments to

IAS 8, Accounting Policies, Changes in Accounting

Estimates and Errors and has invited comments from

the public.

The objective of these proposed amendments is to

enable entities to distinguish accounting policies from

accounting estimates.

The distinction is important because accounting

requirements for changes in accounting policies and

accounting estimate in the financial statements are

different.

Key highlights of the exposure draft are as follows:

• Changed definition of accounting policy and new

definition of accounting estimated inserted

• Clarification on how accounting policies and

accounting estimates relate to each other, by:

− explaining that accounting estimates are used in

applying accounting policies; and

− making the definition of accounting policies

clearer and more concise;

• Clarification that selection of an estimation technique,

or valuation technique, used when an item in the

financial statements cannot be measured with

precision, constitutes making an accounting estimate;

and

• Clarification that selection of cost formula

interchangeable inventories constitutes selecting an

accounting policy.

The exposure draft is open for comments until 15

January 2018.

Click here for news.

Click here for exposure draft.

Exposure draft on definition of material: proposed

amendments to IAS 1 and IAS 8

IASB has published the exposure draft: definition of

material (‘exposure draft’) relating to proposed

amendments to the definition of 'material' and has invited

comments on the same. The exposure draft proposes

minor amendments to IAS 1, Presentation of financial

statements, and IAS 8, Accounting policies, changes

in accounting estimates and errors, to clarify the

definition and improve understanding of the current

requirements.

The proposed amendments in the exposure draft is

expected to improve understanding of the existing

requirements. The exposure draft has proposed the

following amendments:

• align the definition in IFRS standards and the

definition in the Conceptual Framework for Financial

Reporting. These definitions are though similar but not

identical;

• some of the existing supporting requirements in IAS 1

to be included as the definition to give them additional

prominence; and

• improve the clarity of the explanation that

accompanies the definition of material.

The exposure draft is open for comments until 15

January 2018.

Click here for news.

Click here for exposure draft.

International – Proposed – IFRS

Updates

39

Proposed ASU: Leases (Topic 842) – Land

easements practical expedient for transition to topic

842

The FASB issued ASU No. 2016-02, Leases (Topic 842)

in February 2016 to increase transparency and

comparability among entities. ASU 2016-02, substantially

similar to IFRS 16 issued by IASB, required entities to

recognize lease assets and lease liabilities on the

balance sheet and disclose key information about leasing

transactions. A number of stakeholders raised concerns

on the application of Topic 842 to land easements. Land

easements, also known as rights of way, represent the

right to use, access, or cross another entity’s land for a

specified purpose.

Land easements are currently accounted for differently

by different entities. While some entities account for them

as leases under Topic 840, Leases, some entities apply

other Topics within the FASB Accounting Standards

Codification, such as Topic 350, Intangibles - Goodwill

and Other, or Topic 360, Property, Plant, and

Equipment.

The FASB has issued purposed ASU: Leases (Topic

842) - Land easement practical expedient for

transition to Topic 842, which provides a practical

expedient permitting entities to continue applying their

current policy for accounting for land easements that

existed as of, or expired before, the effective date of

Topic 842.

The last date for submitting comments is 25 October

2017

.

Click here for news release.

Click here for proposed ASU.

Proposed ASU - Not-for-profit entities (Topic 958) -

Clarifying the scope and the accounting guidance for

contributions received and contribution made

FASB has issued a proposed ASU intended to clarify and

improve the scope and the accounting guidance for

contributions received and made, primarily by NFP. The

amendments in this proposed ASU would clarify and

improve guidance about whether a transfer of assets is

an exchange transaction or a contribution.

The amendments in this proposed ASU would apply to all

organisations that receive or make contributions of cash

and other assets, including other business enterprises.

The proposed amendments would not apply to transfer of

assets from the government to business enterprises.

The amendments in this proposed ASU would provide a

more robust framework to determine when a transaction

should be accounted for as a contribution under subtopic

958-605 or as an exchange transaction accounted for

under other guidance (for example, Topic 606). The

proposed amendments also would provide additional

guidance about how to determine whether a contribution

is conditional or unconditional. Stakeholders have

indicated that additional guidance would help reduce

diversity in practice and ease the application of judgment

because the current guidance is open to differences in

interpretation and can be difficult to apply. The proposed

amendments would provide for additional clarifying

guidance for the evaluation of such arrangements,

resulting in greater consistency in application of the

guidance, and would make the accounting for

contributions more operable.

The amendments in this proposed ASU would apply to

both contributions received by a recipient and

contributions made by a resource provider.

The proposed ASU follows the same effective dates as

the revenue recognition standard i.e., the proposed ASU

would be effective for public business entities and NFP

that have issued, or are conduit bond obligors for,

securities that are traded, listed or quoted on an

exchange or an over-the-counter market for annual

periods beginning after 15 December 2017, and for

interim periods therein. For all other entities, it would be

effective for annual periods beginning after 15 December

2018, and interim periods within annual periods

beginning after 15 December 2019.

Early adoption of the amendments in this proposed ASU

would be permitted irrespective of the early adoption of

the amendments in the revenue recognition standard.

Comments on the proposed ASU are due by 1 November

2017.

Click here for proposed ASU.

International – Proposed –

USGAAP Updates

40

Proposed ASU – Consolidation (Topic 812) –

Reorganization

The FASB has issued a proposed ASU, Consolidation

(Topic 812)—Reorganization (‘proposed ASU’), to

reorganize and clarify certain items within the existing

consolidation guidance in ASC 810, Consolidation. The

FASB has issued the proposal in response to

stakeholders’ concerns that the existing consolidation

guidance is difficult to understand and navigate.

The proposed amendments would:

• Reorganize the existing consolidation guidance in

ASC 810 into a new topic, ASC 812, Consolidation

• Create separate subtopics for variable interest entities

in ASC 812-20, Variable Interest Entities, and for

voting interest entities in ASC 812-30, Voting Interest

Entities

• Move the existing guidance in ASC 810 for

consolidation of entities controlled by contract to ASC

958, Not-for-Profit Entities because this guidance only

applies to not-for-profit entities

• Supersede the existing guidance in ASC 810-30,

Research and Development Arrangements

• Clarify certain areas of the existing consolidation

guidance to make it easier to understand, but not

change any of the analyses performed under the

existing guidance

FASB will determine the effective dates for the

amendments for public business entities and all other

entities after it considers feedback on the proposal.

Although the Board does not anticipate changes in

accounting practices or outcomes from the proposed

amendments, it has provided the following transition

guidance:

• Entities that have not adopted the amendments in

ASU 2015-02, Amendments to the Consolidation

Analysis, would be required to adopt the amendments

in the proposal at the same time that they adopt the

amendments in ASU 2015-02, and should apply the

same transition method (a modified retrospective

approach by recording a cumulative effect adjustment

to beginning retained in the year of adoption, or a

retrospective approach) that it elects for ASU 2015-

02.

• Entities that have adopted the amendments in ASU

2015-02 would be required to apply the proposed

amendments retrospectively to all prior periods

presented, beginning with the period that the

amendments in ASU 2015-02 were initially adopted.

The comment period on the proposed ASU ends on

December 4 2017.

Click here for proposed ASU.

Two proposed ASUs: Technical corrections and

improvements to ASU No. 2016-01, Financial

Instruments - Overall (Subtopic 825-10): Recognition

and Measurement of Financial Assets and Financial

Liabilities and ASU No. 2016-02, Leases (Topic 842)

FASB has issued a proposed ASU that contains

proposed technical corrections and clarifications for

separate standards issued in 2016, ASU No. 2016-01,

Financial Instruments - Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets

and Financial Liabilities and ASU No. 2016-02, Leases

(Topic 842).

The FASB issued ASU No. 2016-01, Financial

Instruments - Overall (Subtopic 825-10): Recognition

and Measurement of Financial Assets and Financial

Liabilities in January 2016, which retained the current

framework for accounting for financial instruments but

made targeted improvements to address certain aspects

of recognition, measurement, presentation, and

disclosure of financial instruments. In addition to

amending Topic 825, Financial Instruments, the FASB

added Topic 321, Investments - Equity Securities, and

made a number of consequential amendments to the

Codification.

Similarly, in February 2016, the FASB issued ASU No.

02, Leases (Topic 842), to increase transparency and

comparability among organizations by recognizing lease

assets and lease liabilities on the balance sheet and

disclosing key information about leasing transactions.

This proposed ASU for technical correction is an ongoing

project about technical corrections and improvements to

clarify the Codification or to correct unintended

application of guidance and generally are not expected to

have a significant effect on current accounting practice or

create a significant administrative cost for most entities.

The amendments in the proposed ASU are as a result of

the items brought to the attention of FASB by

stakeholders

.

The last date for submitting comments is 13 November

2017.

Click here for proposed ASU.

International – Proposed –

USGAAP Updates

41

Exposure draft of proposed statements on standards

for attestation engagements (SSAE) - Selected

Procedures

The Exposure draft of proposed statements on

standards for attestation engagements - Selected

Procedures (‘‘exposure draft’) is a result of deliberations

on expansion of a practitioner’s ability to perform

procedures and report in a procedures and findings

format beyond that currently provided by AT-C section

215, Agreed-Upon Procedures Engagements.

The exposure draft has proposed the following matters:

• Abolishing the requirements for specified parties to

either establish the procedures or agree to the

sufficiency of the procedures for their purposes. This

is intended to provide greater flexibility as, in a

selected procedures engagement, the practitioner

may determine the procedures to be performed and

no party would be required to take responsibility for

the sufficiency of the procedures. This will enable the

practitioner to perform engagements when the

specified parties are not able or willing to fully develop

or determine the procedures, without having to

perform a separate consulting services engagement.

• Excluding the requirement to either request an

assertion or disclose in the accountant’s report when

the practitioner does not obtain a written assertion.

This is because the appropriate party may not have

the ability or may not otherwise be willing to perform

its own measurement or evaluation of the subject

matter.

• To exclude the requirement for a practitioner to

restrict the use of the report. This will ensure the

report can be used by a wider audience including

parties who are unwilling or unable to agree to the

sufficiency of the procedures for their purposes.

The SSAE is proposed to be effective for reports dated

on or after 1 May 2019. This effective date is provisional,

but will not be earlier than 1 May 2019. Earlier

implementation will be permitted.

The due date for giving comments on the exposure draft

is 1 December 2017.

Click here for exposure draft.

Exposure draft of proposed statements on standards

for accounting and review services (SSARS) -

Omnibus statement on standards for accounting and

review services – 2018

The AICPA’s Accounting and Review Services

Committee (ARSC) proposed omnibus Statement on

Standards for Accounting and Review Services,

Omnibus Statement on Standards for Accounting and

Review Services – 2018, on international reporting

issues. The proposed SSARS:

• Creates a new AR-C Section 100, International

Reporting Issues. This new section provides

standards for a compilation or review when either (a)

the financial statements were prepared in accordance

with a financial reporting framework generally

accepted in another country not adopted by an AICPA

designated body, or (b) the review or compilation

engagement is to be performed in accordance with

both SSARS and another set of compilation or review

standards.

• Revises paragraph .06 of AR-C Section 60, General

Principles for Engagements Performed in Accordance

With Statements on Standards for Accounting and

Review Services, to add a new definition of the term

“fair presentation framework” and revises the

definition of the term “financial reporting framework” to

the SSARS.

• Adds guidance from Interpretation No. 1,

Considerations Related to Reviews Performed in

Accordance With International Standard on Review

Engagements (ISRE) 2400 (Revised), of AR-C

section 90 to new AR-C Section 100 and withdraws

Interpretation No. 1

• Revises AR-C Section 90, Review of Financial

Statements, paragraph .39 to make the requirements

regarding the contents of the accountant’s review

report consistent with the illustrative examples in

exhibit C of AR-C Section 90.

The proposed SSARS will be effective for compilations

and reviews of financial statements for periods ending on

or after 15 June 2019. This effective date is provisional;

however, it will not be effective before this date. The

technical corrections for AR-C Section 90, paragraph .39,

will be effective upon issuance.

The due date for giving comments on the exposure draft

is 14 December 2017.

Click here for exposure draft.

International – Proposed – Auditing

Updates

42

Glossary

1956 Act Companies Act, 1956

2013 Act Companies Act, 2013

AGM Annual General Meeting

ASI Accounting Standard Interpretation

ASU Accounting Standards Update

AY Assessment Year

CBDT Central Board of Direct Taxes

EPCG Export Promotion Capital Goods

EPS Earnings Per Share

ESOP Employee Stock Option Plan

FAQ Frequently Asked Question

FASB Financial Accounting Standards Board

FMV Fair Market Value

GAAP Generally Accepted Accounting Principles

IASB International Accounting Standards Board

IBBI Insolvency and Bankruptcy Board of India

ICAI Institute of Chartered Accountants of India

ICDR Issue of Capital and Disclosure Requirements

ICDS Income Computation and Disclosure Standard(s)

IFRS International Financial Reporting Standard(s)

IFSC International Financial Services Centres

Ind AS Indian Accounting Standard(s)

Ind AS RulesCompanies (Indian Accounting Standards) Rules,

2015

IRDAIInsurance Regulatory and Development Authority of

India

IT Act Income Tax Act, 1961

ITFG Ind AS Transition Facilitation Group

MAT Minimum Alternate Tax

MCA Ministry of Corporate Affairs

NBFC Non-Banking Financial Company

NCLAT National Company Law Appellate Tribunal

NCLT National Company Law Tribunal

NFP Not-for-Profit

NPA Non Performing Asset

PCAOB Public Company Accounting Oversight Board

PPE Property, plant and equipment

RBI Reserve Bank of India

SEBI Securities and Exchange Board of India

SEC Securities and Exchange Commission

SPV Special Purpose Vehicle

43

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