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March 2022

The Ministry of Corporate Affairs (MCA) vide notification dated 23 March 2022 issued the Companies (Indian Accounting Standards) Amendment Rules, 2022. These rules notify certain amendments to Indian Accounting Standards (Ind AS). These amendments will come into effect from 1 April 2022.

Most of these amendments have been made to keep the Ind AS converged with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) except for amendment to Ind AS 16,Property, Plant and Equipment .

An overview of the amendments are given below:

Ind AS Amendments notified
Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets

As per Ind AS 37, a contract is ‘onerous’ when the unavoidable costs of meeting the contractual obligations (i.e. the lower of the costs of fulfilling the contract and the costs of terminating it) outweigh the economic benefits. Ind AS 37 did not define what are the costs of fulfilling a contract.

The amendments have clarified that the cost of fulfilling a contract comprise the costs that relate directly to the contract.

Costs that relate directly to a contract consist of both:

(a) the incremental costs of fulfilling that contract—for example, direct labour and materials; and

(b) an allocation of other costs that relate directly to fulfilling contracts— for example, an allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling that contract among others.

Transition: An entity shall apply these amendments to contracts for which it has not yet fulfilled all its obligations as at 1 April 2022. The entity should not restate comparative information. Instead, the entity should recognise the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings or other component of equity, as appropriate, at the date of initial application.

Ind AS 103, Business Combinations

The amendments have given reference of Conceptual Framework for Financial Reporting under Ind AS for definition of assets and liabilities.

This amendment is applicable to business combinations for which acquisition date is on or after 1 April 2022.

Ind AS 16, Property, Plant and Equipment (PPE) (cont.)

Amendments to Ind AS 16 have clarified the accounting treatment for sale proceeds of items produced by PPE while preparing it for its intended use. These amendments have clarified that excess of net sale proceeds of items produced over the cost of testing, if any, shall not be recognised in the statement of profit or loss, but deducted from the directly attributable costs considered as part of cost of an item of PPE.

(Note: This is a carve out from IAS 16,Property, Plant and Equipment, which requires proceeds from selling items before the related item of PPE is available for use to be recognised in the Statement of Profit and loss.)

Membership category
Ind AS 101, First-time Adoption of Indian Accounting Standards As per the amendment, if a subsidiary adopts Ind AS later than its parent and applies Ind AS 101.D16(a)1, then a subsidiary may elect to measure cumulative translation differences for all foreign operations at amounts included in the consolidated financial statements of the parent, based on the parent’s date of transition to Ind AS. A similar election is available to an associate or joint venture that uses the exemption in paragraph D16(a).
Ind AS 109, Financial Instruments This amendment clarifies that for the purpose of performing the ’10 per cent test’ for derecognition of financial liabilities2 – in determining those fees paid net of fees received, a borrower includes only fees paid or received between the borrower and the lender, including the fees paid or received by either the borrower or lender on the other’s behalf.
This amendment would be applicable to financial liabilities that are modified or exchanged on or after 1 April 2022.
Ind AS 41, Agriculture The amendment removes the requirement to exclude cash flows for taxation when measuring fair value, thereby aligning the fair value measurement requirements in Ind AS 41 with those in Ind AS 113, Fair Value Measurement.
This amendment would be applicable to fair value measurements on or after 1 April 2022.
  1. As per para D16, if a subsidiary becomes a first-time adopter later than its parent, the subsidiary shall, in its financial statements, measure its assets and liabilities at either: (a) the carrying amounts that would be included in the parent’s consolidated financial statements, based on the parent’s date of transition to Ind ASs, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary (this election is not available to a subsidiary of an investment entity, as defined in Ind AS 110, that is required to be measured at fair value through profit or loss);
  2. As per Ind AS 109, an exchange between an existing borrower and lender of debt instruments with substantially different terms or a substantial modification of the terms of an existing financial liability or a part of it shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The terms of a financial liability (post modification) are considered to be substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability.
  3. As per paragraph 30 of Ind AS 8, when an entity has not applied a new Ind AS that has been issued but is not yet effective, the entity shall disclose:
    (a) this fact; and
    (b) known or reasonably estimable information relevant to assessing the possible impact that application of the new Ind AS will have on the entity’s financial statements in the period of initial application.
  4. As per paragraph 31 of Ind AS 8, when complying with paragraph 30, an entity considers disclosing:
    (a) the title of the new Ind AS;
    (b) the nature of the impending change or changes in accounting policy;
    (c) the date by which application of the Ind AS is required;
    (d) the date as at which it plans to apply the Ind AS initially; and
    (e) either: (i) a discussion of the impact that initial application of the Ind AS is expected to have on the entity’s financial statements; or (ii) if that impact is not known or reasonably estimable, a statement to that effect.

To access the text of the MCA notification, please click here

Action Points for Auditors

  • The revised Ind AS will be applicable for financial statements prepared for periods beginning on or after 1 April 2022. Auditors will need to consider the revised Ind AS when they audit the quarterly financial results (in accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015) prepared by companies for periods beginning on or after 1 April 2022.
  • Auditors should also take note of the provisions of paragraphs 303 and 314 of Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors while finalising the financial statements for the year ended 31 March 2022.
There are no updates in April 2022
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August 2022

Rule 3 of the Companies (Accounts) Rules, 2014 (the Accounts Rules) prescribes the manner in which companies are required to maintain the books of account in electronic mode. On 5 August 2022, the Ministry of Corporate Affairs (MCA), notified amendments to the Accounts Rules by issuing the Companies (Accounts) Fourth Amendment Rules, 2022 (the Accounts Amendment Rules). Following amendments have been made to the existing set of requirements in the Accounts Rules:

  • Rule 3(1): The books of account and other relevant books and papers maintained in electronic mode should remain accessible in India, at all times so that they can be used for subsequent reference (requirement to remain accessible at all times was not prescribed earlier)
  • Rule 3(5): The back-up of the books of account and other books and papers of a company maintained in electronic mode, including at a place outside India, if any, should be kept in servers physically located in India on a daily basis (earlier, Rule 3(5) required entities to maintain backup in servers physically located in India on a periodic basis)
  • Rule 3(6): Where a service provider has been used by a company for maintenance of books of accounts in an electronic form, the company is required to intimate to the Registrar of Companies certain details regarding the service provider on an annual basis1.
    The Accounts Amendment Rules now provide that in cases where the service provider is located outside India, in addition to the existing details, companies should intimate the registrar of companies the name and address of the person in control of the books of account and other books and papers in India. (Additional details to be provided to the Registrar of Companies.)

On 21 August 2022, the Institute of Chartered Accountants of India (ICAI) issued an announcement in which they performed a pre and post analysis of the Accounts Rules as a result of the notification of the Accounts Amendment Rules.

To access the text of the MCA notification, please click here

To access the text of the ICAI announcement, please click here

  1. These details are provided at the time of filing of the financial statements. Before the issuance of the Accounts Amendment Rules, the details that were required to be intimated to the registrar of companies on an annual basis included:
    1. the name of the service provider
    2. the internet protocol address of the service provider
    3. the location of the service provider (wherever applicable)
    4. where the books of account and other books and papers are maintained on a cloud, such address as provided by the service provider

Action Points for Auditors

  • From 1 April 2023, companies using accounting software for maintaining books of account, are required to use only such an accounting software which has a feature of recording audit trail of each and every transaction, creates an edit log of each change made in the books of account along with the date when such changes were made and ensures that the audit trail cannot be disabled.
  • In line with this, the new set of requirements (with regard to a daily backup in servers based in India, making electronic records available in India at all times and additional disclosures to the Registrar of Companies in certain cases) issued by MCA may require companies to upgrade their existing infrastructure and control processes.
  • Thus, auditors should actively engage with the management of companies they audit, and discuss the implementation requirements of the additional provisions, as non-compliances with the provisions would entail the fines stipulated in Section 128 of the Companies Act, 2013.
September 2022

The Ministry of Corporate Affairs (MCA), vide a notification dated 24 March 2021 had issued various key amendments to Schedule III of the Companies Act, 2013. As a part of the amendments issued, companies were required to mandatorily round off the figures appearing in the financial statements, based on their ‘total income’4

In this regard, MCA, vide a clarification dated 26 September 2022 has stated that if the companies provide absolute figures in various e-forms i.e., AOC-4, etc., the same would not be treated as incorrect certification by the professionals.

To access the text of the Schedule III amendments, please click here

  1. As per Schedule III (Divisions I, II and III), the rounding off requirements are as below:
    • Total Income < Rs. 100 Crores - Round off to the nearest hundreds, thousands, lakhs or millions or decimal thereof
    • Total Income >= Rs. 100 Crores - Round off to the nearest lakhs, millions or crores, or decimal thereof.

Action Points for Auditors

Few companies have prepared their financial statements and submitted annual returns providing absolute amounts. With this clarification, auditors of such companies, need not highlight the fact that amounts have not been rounded off, and need not report it as a non-compliance of Schedule III in their audit report.

There are no updates in October 2022
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There are no updates in January 2023
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March 2023

The Ministry of Corporate Affairs (MCA) vide a notification dated 31 March 2023 issued the Companies (Indian Accounting Standards) Amendment Rules, 2023 (2023 amendments). These Rules notify certain amendments to the Indian Accounting Standards (Ind AS) which would be effective from 1 April 2023.

The 2023 amendments are in line with the amendments issued by the International Accounting Standards Board (IASB) to the International Financial Reporting Standards (IFRS). An overview of the key amendments issued is given below:

Ind AS Amendments notified
Ind AS 1,Presentation of Financial Statements In 2021, certain amendments were introduced to International Accounting Standard (IAS) 1, Presentation of Financial Statements, in order to help companies, provide useful accounting policy disclosures. These amendments were applicable from 1 January 2023. In line with these, certain changes have now been made to Ind AS 1. The key amendments introduced include:
  • Companies should disclose their material accounting policy information1 The 2023 amendments have clarified that accounting policy information is expected to be material if users of an entity’s financial statements would need it to understand other material information in the financial statements. rather than significant accounting policies,
  • Accounting policies related to immaterial transactions, other events or conditions which are themselves immaterial are not required to be disclosed, and
  • It has been clarified that not all accounting policies that relate to material transactions, other events or conditions are material to a company’s financial statements.
Corresponding amendments have also been prescribed to Ind AS 34, Interim Financial Reporting, and Ind AS 107, Financial Instruments: Disclosures, wherein instead of disclosing significant accounting policies, entities would be required to disclose their material accounting policy information in the interim financial statements and regarding financial instruments respectively. The amendments would apply for annual reporting periods beginning on or after 1 April 2023.
Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors The 2023 amendments have introduced certain key changes to Ind AS 8, which include:
  • Replacing the definition of ‘change in accounting estimate’ with the definition of ‘accounting estimates’. The definition of accounting estimates states: “Accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty”
  • The 2023 amendments also clarify the relationship between accounting policies and accounting estimates by stating that a company develops an accounting estimate to achieve the objectives set out by an accounting policy
  • Developing an accounting estimate includes the use of both, measurement techniques and inputs (for example, expected cash outflows for determining a provision for warranty obligations when applying Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets). Measurement techniques include selection of estimation techniques (for example, techniques used to measure a loss allowance for expected credit losses applying Ind AS 109, Financial Instruments) or valuation techniques (for example, techniques used to measure the fair value of an asset or liability applying Ind AS 113, Fair Value Measurement)
  • The effects of changes in such inputs or measurement techniques are changes in accounting estimates, unless they result from the correction of prior period errors
  • The definition of accounting policy remains unchanged
These amendments would apply for annual reporting periods beginning on or after 1 April 2023. The amendments would be applicable to changes in accounting estimates and changes in accounting policies occurring on or after the beginning of the first annual reporting period in which the company applies the amendments.
Ind AS 12, Income Taxes Key amendments issued to Ind AS 12 include:
  • The amendments clarify how companies should account for deferred tax on certain transactions – for example, leases and decommissioning provisions
  • The amendments narrow the scope of the initial recognition exemption, so that it does not apply to transactions that give rise to equal and offsetting temporary differences, such as leases and decommissioning provisions. Thus, companies should recognise a deferred tax asset and deferred tax liability for temporary differences arising on initial recognition in such transactions.
These amendments would apply for annual reporting periods beginning on or after 1 April 2023. For leases and decommissioning liabilities, the associated deferred tax asset and liabilities would be recognised from the beginning of the earliest comparative period presented, with any cumulative effect recognised as an adjustment to retained earnings or other components of equity at that date. If a company previously accounted for deferred tax on leases and decommissioning liabilities under the net approach, then the impact on transition is likely to be limited to the separate presentation of the deferred tax asset and the deferred tax liability.
Ind AS 101, First-time Adoption of Indian Accounting Standards The 2023 amendments have provided an exception to the retrospective application of the amendments made to Ind AS 12 on first-time adoption of Ind AS, by adding paragraph 14 to Appendix B2 Appendix B: Exceptions to the retrospective application of other Ind ASs of Ind AS 101. The amendments to Ind AS 101 clarify that though paragraphs 15 and 24 of Ind AS 12 exempt an entity from recognising a deferred tax asset or liability in particular circumstances, at the date of transition to Ind AS, a first-time adopter should recognise a deferred tax asset and a deferred tax liability associated with:
  1. Right-of-use assets and lease liabilities, and
  2. Decommissioning, restoration and similar liabilities and the corresponding amounts recognised as part of the cost of the related asset.

To access the text of the 2023 amendments, please click here

Action Points for Auditors

The revised Ind AS would be applicable for the financial statements prepared for periods beginning on or after 1 April 2023. Auditors should consider the revised Ind AS when they audit the quarterly financial results (in accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 prepared by the companies for periods beginning on or after 1 April 2023.

There are no updates in April 2023
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There are no updates in July 2023
There are no updates in August 2023
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There are no updates in January 2024
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There are no updates in March 2024
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August 2024

With an aim to align Indian Accounting Standards (Ind AS) with International Financial Reporting Standards (IFRS), the Ministry of Corporate Affairs (MCA) issued a notification on 12 August 2024, introducing significant amendments to the Companies (Indian Accounting Standards) Rules, 2015 (the amendments). Through the amendments, MCA introduced Ind AS 117, Insurance Contracts for accounting of insurance contracts and replaces current standard Ind AS 104, Insurance Contracts.

Ind AS 117 sets out detailed guidelines for the recognition, measurement, presentation, and disclosure of insurance contracts. Additionally, amendments have been made to Ind AS 101, First-time Adoption of Indian Accounting Standards, Ind AS 103, Business Combinations, Ind AS 105, Non-current Assets Held for Sale and Discontinued Operations , Ind AS 107, Financial Instruments: Disclosures, Ind AS 109, Financial Instruments and Ind AS 115, Revenue from Contracts with Customers to align them with Ind AS 117. The amendments also introduce enhanced disclosure requirements, particularly in Ind AS 107, enhance the clarity regarding financial instruments associated with insurance contracts.

Effective date: Ind AS 117 is effective from 1 April 2024.

To access the text of the amendments, please click here

Action points for auditors

  • It is to be noted that currently, the Insurance Regulatory Development Authority of India (IRDA) has not made Ind AS applicable for insurance companies, accordingly, while filing statutory books of account, insurance companies would need to continue to report under the existing accounting standards. However, insurance companies that are a part of a wider group, with the ultimate holding company preparing accounts in accordance with Ind AS, will now be required to comply with Ind AS 117 while preparing accounts for consolidation.
  • Given that the amendments are effective from the date of their notification in the official gazette (i.e. 12 August 2024). However, Ind AS 117 is applicable from 1 April 2024, the transitional impacts of adoption of Ind AS 117 would need to be considered and discussed with insurance companies.
  • It is to be noted that Ind AS 117 would also have implications for non-insurers, as the scope of an ‘insurance contract’ is wide. Accordingly, auditors would need to analyse, discuss with the companies and determine which contracts would fall under the purview of Ind AS 117. Some contracts or components which could fall under the purview of insurance contracts or insurance components include various types of guarantees, credit cards, lease contracts, boiler breakdown contracts, loans (like loans with death waivers), phone repair contracts, product and extended warranties, etc.
September 2024

As per IFRS 16, Leases or Ind AS 116, Leases1Ind AS 116 is converged with IFRS, variable lease payments that are not based on an index or a rate are not considered as a part of ‘lease liability’, and instead would be recognized directly in the statement of profit or loss. However, globally, it was discussed, on how to measure the right-of-use asset and lease liability if variable lease payments arise in a sale-and-leaseback transaction2 The IFRS Interpretations Committee (IFRIC) discussed of a situation where all of the lease payments in the leaseback depend on the future sales of the seller-lessee. In such a case it was discussed whether it would be it acceptable for the lessee to measure the right-of-use asset and lease liability at zero and, therefore, recognise a full gain or loss on the sale at the date of the transaction. and subsequent accounting of the lease liability. Consequently, amendments were issued to IFRS 16 on this matter.

The Ministry of Corporate Affairs (MCA) through its notification dated 9th September 2024 issued similar amendments to Ind AS 116 vide the Companies (Indian Accounting Standards) Second Amendment Rules, 2024 (Amendment Rules).

The amendments prescribe the following On initial recognition, the seller lessee includes variable lease payments when it measures a lease liability arising from a sale and leaseback transaction

For this purpose, a seller-lessee may adopt different approaches – i.e. estimate the expected lease payments at the commencement date or consider that there will be equal lease payments over the lease term.

After initial recognition, the seller lessee applies the general requirements for subsequent accounting of the lease liability such that it recognizes no gain or loss relating to the right of use it retains.

Accordingly, any difference between the payments made for the lease and the lease payments that reduce the carrying amount of the lease liability would be recognized in profit or loss.

Effective date and transition: The amendments are effective for annual reporting periods beginning on or after 1 April 2024. As per Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors, a seller-lessee will need to apply the amendments retrospectively to sale-and-leaseback transactions entered into on or after the date of initial application of Ind AS 116.

To access the text of the amendments, please click here

Action points for auditors

  • As per Ind AS 8, seller-lessees will need to identify and re-examine sale-and-leaseback transactions entered into since implementation of Ind AS 116, and potentially restate those that included variable lease payments. Considering the implications in the profit and loss, auditors of companies which would be impacted by such amendments should start their discussions with management.
  • Since these amendments are effective from 1 April 2024 and have been issued in September 2024, the adjustments pertaining to Q1 2024 (i.e. for the period from 1 April 2024 to 30 June 2024) would need to be evaluated where a company prepares quarterly financial statements.
  • Under IFRS, the following amendments are effective from 1 January 2024, however, are yet to be notified under Ind AS:
  • Amendments to Ind AS 1, Presentation of Financial Statements, with regard to current and non-current classification of liabilities
  • Amendments to Ind AS 7, Statement of Cash Flows and Ind AS 107, Financial Instruments: Disclosure with regard to disclosure requirements in case of supplier finance arrangements.
There are no updates in October 2024
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