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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.

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