Home FEATURED NEWS Govt amends certain Indian Accounting Standards – Times of India

Govt amends certain Indian Accounting Standards – Times of India

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Govt amends certain Indian Accounting Standards – Times of India

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NEW DELHI: The government has amended certain Indian Accounting Standards (Ind-AS), including the standard relating to leases amid the coronavirus pandemic.
Ind-AS 103, 116 and some other standards have been amended by the Corporate Affairs Ministry.
While Ind-AS 103 pertains to business combinations, Ind-AS 116 relates to principles for recognition, presentation and disclosure of leases.
In the wake of the pandemic, many lessors have extended rent concessions to lessees. However, applying the Ind-AS 116 requirements for changes to lease payments could have posed practical difficulties in the current situation.
Against this backdrop, the ministry has amended the rules whereby entities would get relief from lease modification accounting due to Covid-19 related rent concessions. The amendments can be followed by lessees for annual reporting periods beginning on or after April 1, 2020.
Leading consultancy EY India’s Partner and National Leader (Financial Accounting Advisory Services) Sandip Khetan said the amendment was keenly awaited by Indian companies who were gearing up for their quarterly results.
“Lease modification requires re-computation of lease liability using discount rate on the date of modification. This would have posed significant challenge to company whose volume of leases are very high.
“The amendment to Ind-AS 116 will provide significant relief to such lessees for accounting for rent concessions from lessors specifically arising from the Covid-19 pandemic,” he noted.
Jigar Parikh, Partner (Financial Accounting Advisory Services) at EY India said that while lessees that elect to apply the practical expedient do not need to assess whether a concession constitutes a modification, they still need to evaluate the appropriate accounting for each concession as the terms of the concession granted may vary.
As an example, he noted that there are interpretational issues with respect to whether benefit of rent concession should be accounted for in profit and loss account or adjusted against right of use asset.
Among others, the ministry has also amended rules regarding Ind-AS 103. These are aimed at helping entities to determine whether a transaction needs to be accounted as a business combination or as an asset acquisition.
Sandip Khetan said determining whether an acquired set of activities and assets is a business or not, could result in significantly different accounting outcomes.
“The previous guidance on the definition of a business created some diversity in practice. Therefore, we welcome the amendment to Ind-AS 103 and additional guidance on the definition of a business in Ind-AS 103. Fair value concentration test is likely to simplify the assessment of business considerably,” he said.
A notification was issued on Friday to amend the Companies (Indian Accounting Standards) Rules, 2015 and the amended rules were finalised by the ministry in consultation with the National Financial Reporting Authority (NFRA).
Ind-AS are converged with International Financial Reporting Standards (IFRS).

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