Version 18 - November 2024 (CUD release)
Content update
The India AS corporate template (version 18.0) CUD release focuses on the legislative content changes for the period ending March 2025.
- Financial period type: 12-Months (Annual)
- Target industry type: Manufacturing, Services, Generic (excluding Financial Services)
Legislative updates
Companies (Indian Accounting Standards) Amendment Rules, 2024
Companies (Indian Accounting Standards) Amendment Rules, 2024 - Ind AS 117 – Insurance Contracts
MCA has notified the Ind AS 117, Insurance Contracts vide Companies (Indian Accounting Standards) Amendment Rules, 2024.
Ind AS 117 shall be applicable to entities having (a) insurance contracts, including reinsurance contracts, it issues; (b) reinsurance contracts it holds; and (c) investment contracts with discretionary participation features it issues, provided the entity also issues insurance contracts.
Ind AS 117 is effective from the annual reporting periods beginning on or after
April 1, 2024
and supersedes Ind AS 104, Insurance Contracts.Companies (Indian Accounting Standards) Second Amendment Rules, 2024
The MCA has notified the Companies (Indian Accounting Standards) Second Amendment Rules, 2024, which amend Ind AS 116, Leases, with respect to Lease Liability in a Sale and Leaseback. The amendment specifies the requirements for a seller-lessee in measuring the lease liability arising from a sale and leaseback transaction. It ensures that the seller-lessee doesn't recognize any amount of the gain or loss related to the right of use it retains. The amendment is effective for the annual reporting periods beginning on or after
1 April 2024
. The regulations took effect on
September 9, 2024
, the date they were published in the official gazette.Companies (Indian Accounting Standards) Third Amendment Rules, 2024
The Ministry of Corporate Affairs (MCA) had earlier notified Ind AS 117, Insurance Contracts, vide notification dated 12 August 2024. Ind AS 117 superseded interim insurance standard Ind AS 104 Insurance Contracts and was effective for annual reporting periods beginning on or after
April 1, 2024
. Whilst the MCA had notified Ind AS 117, the roadmap for applicability of Ind AS to insurance companies wasn't notified.Subsequently, the MCA notified the Companies (Indian Accounting Standards) Third Amendment Rules, 2024, to provide relief to the insurers or insurance companies. As per the notification, the insurers or insurance companies may provide their financial statements prepared in accordance with Ind AS 104 to their parent, investor, or venturer for preparation consolidated financial statements by the parent, investor, or venturer, until the Insurance Regulatory and Development Authority notifies Ind AS 117. Additionally, Ind AS 104 has been reissued for use by the insurers or insurance companies.
A reading of this notification suggests that this relief applies only to insurers or insurance companies. Ind AS 117 as originally notified may also impact non-insurance companies with regard to accounting for contracts such as financial guarantee contracts and fixed-fee service contracts. Apparently, no relief has been provided in such cases and non-insurance companies may need to apply Ind AS 117 immediately if they have any such contract.
The notification took effect on
September 28, 2024
, the date it was published in the official gazette.Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2024
The MCA has issued the Companies (Compromises, Arrangements, and Amalgamations) Amendment Rules, 2024. Among other updates, these rules clarify that when a foreign company incorporated outside India, which is a holding company, merges or amalgamates with a wholly owned subsidiary company incorporated in India, both companies must obtain prior approval from the Reserve Bank of India.
Additionally, the transferee Indian company must comply with the provisions of Section 233 of the Companies Act, 2013. These rules took effect on
17 September 2024
.Hon’ble Supreme Court (SC) decision on Electoral Bond Scheme: Impact on disclosures in financial statements
The Hon’ble Supreme Court of India (the “SC”) vide its judgment dated 15 February 2024 has declared the following amendments to section 182 of the Companies Act, 2013 (as amended) (CA 2013’), made vide the Finance Act, 2017 (FA 2017), as unconstitutional:
# | Particular | Pre-amendment by FA 2017 | Post-amendment by FA 2017 |
|---|---|---|---|
1 | First Proviso to section 182(1) of CA 2013: Limits on political contribution | Aggregate contribution to political parties shall not exceed 7.5% of average net profits during the 3 immediately preceding financial years. | The proviso was deleted, permitting unlimited contributions. |
2 | Section182(3) of CA 2013: Disclosure in financial statements | Every company shall disclose in its profit and loss account any amount or amounts contributed by it to any political party during the financial year to which that account relates, giving particulars of the total amount contributed and the name of the party to which such amount has been contributed. | The requirement to disclose the name of the political party and the amount contributed to the party was deleted. A company was required to only total amount contributed to all political parties during the year. |
Since the SC has held amendments in section 182 to be unconstitutional, the requirements as enunciated in the pre-amended section 182 of CA 2013 will become applicable retrospectively.
Minimum disclosure requirements for current year and prior year in standalone financial statements (SFS) and consolidated financial statements (CFS):
- The name of the political party, party-wise amount, and total amount are given for the current year and previous period considering only 2 years accounts are presented
- If the current or any previous year has breached the 7.5% limit, disclose the total amount contributed, the percentage of average net profit, the amount paid exceeding 7.5% of the average net profit for the relevant preceding 3 years, the financial year it relates to, and any possible implications.
Other clarifications
The Ministry of Corporate Affairs (MCA) issued Notification G.S.R. 492(E) on August 12, 2024, announcing amendments to the Companies (Indian Accounting Standards) Rules, 2015. These changes, effective from the publication date, impact several Indian Accounting Standards (Ind AS), including Ind AS 101, 103, 105, and 107.The amendments involve updates to the treatment of insurance contracts as per Ind AS 117.
- Modifications to Ind AS 101:This amendment updates the guidelines for first-time adoption of Ind AS, aiming to simplify and clarify reporting requirements for companies transitioning to these standards. Changes have been made to paragraphs related to insurance contracts and the transition provisions.
- Revisions to Ind AS 103:Changes in Ind AS 103 pertain to business combinations, refining the principles for accounting for acquisitions and mergers to ensure more accurate financial reporting. Updates include exceptions to the classification and measurement of assets and liabilities, particularly those related to insurance contracts.
- Revisions to Ind AS 105:Updates include changes to transitional provisions and effective dates related to Ind AS 117. These ensure a smoother transition for entities applying these standards.
- Revisions to Ind AS 107:Revised paragraphs address fair value disclosures, including specific updates related to insurance contracts and financial instruments.
- Revisions to Ind AS 109:Significant updates include amendments related to insurance contracts and financial liabilities, reflecting the integration of Ind AS 117 provisions.
- Revisions to Ind AS 115:Adjustments have been made to address the scope of contracts within Ind AS 117, enhancing clarity on the application of revenue recognition principles.
- The notification also omits Ind AS 104, reflecting its incorporation into other standards.
These amendments ensure alignment with international standards while considering the specific context of Indian financial reporting.
Indian Accounting Standards (Ind AS): Disclosures Checklist (Revised April, 2024)
The Accounting Standards Board (ASB) of the ICAI has brought the revised edition of Ind AS: Disclosure Checklist. Subsequent to the last edition in November 2022, Companies (Ind AS) Amendments Rules, 2023, have been notified by the Ministry of Corporate Affairs (MCA). Therefore, this publication has been updated covering these developments which are applicable for the accounting periods beginning on or after
1 April 2023
.Format of annual secretarial compliance report
The ICSI has issued a format of annual secretarial compliance report for the listed entity, which is to be printed on the letter head of the Practicing Company Secretary.
Climate related matters & Macroeconomic and geopolitical uncertainty
In India, there has been an increased focus from certain regulators on specific Sustainability related disclosures outside the financial statements, like from the financial year 2022-23, the Securities and Exchange Board of India (SEBI) requiring top 1,000 listed companies by the market capitalization to provide Business Responsibility and Sustainability Reporting against 9 principles covering both environmental and social aspects such as climate action. The SEBI has also mandated the BRSR Core Reporting and reasonable assurance thereon for the top 150 companies by market capitalization from FY 2023-24 onwards. The applicability of this requirement will be gradually extended to the top 1,000 listed entities by FY 2026-27.
However, the entities should ensure consistency between information communicated in the financial statements and the information communicated to stakeholders outside the financial statements, such as in press releases, investor updates and disclosures in other parts of the annual report.
Considering the recent sustainability framework related developments, the IFRS Foundation republished its educational material on climate related disclosures to reiterate requirements in the IFRS Accounting Standards to report on the effects of climate-related matters in the financial statements when those effects are material.
Given the current economic environment, entities should consider whether additional disclosures are necessary to explain macroeconomic and geopolitical events and related transactions subsequent to the previous reporting period that are significant to their financial statements.
For instance, the current macroeconomic and geopolitical environment affects the assumptions and estimation uncertainty associated with the measurement of assets and liabilities. Therefore, entities should carefully consider whether additional disclosures are necessary to help users of financial statements understand the impact of those uncertainties and corresponding judgements applied in the financial statements.
The education material also highlights that information is material if omitting, misstating, or obscuring it could reasonably be expected to influence decisions that primary users of financial statements (hereafter, investors) make on the basis of those financial statements, which provide financial information about a specific company. For example, information about how management has considered climate-related matters in preparing a company’s financial statements may be material with respect to the most significant judgements and estimates that management has made.
Several Ind AS, such as Ind AS 1, 2, 12, 16, 36, 38, 107, and 113, require disclosures and estimates that climate-related matters and macro-economic uncertainty could impact.
Is early adoption available for these accounting standards?
The company may voluntarily provide disclosure regarding Climate related & macro-economic uncertainty matters stated in the
Climate related matters & Macroeconomic and geopolitical uncertainty
section.Related content
-
India AS
Format:
Article,
1 min read