Post on 11-Mar-2020
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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 and focusses on 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 31 March 2017 and hot topic. Abbreviations used in the publication are explained at
the end of the publication.
Following is the index of updates covered in this bulletin:
India
Guidance note on audit of banks Auditing
Companies (Audit and Auditors) Amendment Rules, 2017 Auditing
Deferment of effective date of revised SAs Auditing
Companies (Indian Accounting Standards) (Amendment) Rules, 2017 Accounting
ITFG clarification bulletin 7 Accounting
Amendment in Schedule III of the 2013 Act Accounting
Formats for publishing financial results by listed general insurance companies including standalone health
insurance companies and reinsurersAccounting
Exposure draft of Ind AS compliant Schedule III to the 2013 Act for NBFCs Accounting
Exposure draft of amendments to Ind AS 40, Investment Property - transfers of investment property Accounting
Exposure draft of Appendix B of Ind AS 21, Foreign Currency Transactions and Advance consideration Accounting
Exposure draft of annual improvements to Ind AS 2014-2016 cycle Accounting
Exposure draft of amendments to Ind AS 12, Income taxes - recognition of deferred tax assets for
unrealised lossesAccounting
Exposure draft of IRDAI (Preparation of Financial Statements of Insurers) Regulations, 2017 Accounting
Companies (Meetings of Board and its Powers) Amendment Rules, 2017 Other
Integrated reporting by listed entities Other
Circular on schemes of arrangement by listed entities and relaxation under Rule 19(7) of Securities
Contracts (Regulation) Rules, 1957Other
SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2017 Other
SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2017 Other
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SEBI (Mutual Funds) (Amendment) Regulations, 2017 Other
Circular on SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011 Other
Companies (Transfer of pending proceedings) Amendment Rules, 2017 Other
Companies (Incorporation) Amendment Rules, 2017 Other
Clarification on applicability of Section 391(2) of the 2013 Act Other
Investment in units of REITs and InvITs Other
Clarification on ICDS notified under Section 145(2) of the IT Act Other
Notification of provisions of the Insolvency and Bankruptcy Code, 2016 Other
The Finance Act, 2017 Other
Revised minimum rates of wages Other
The Payment of Wages (Amendment) Act, 2017 Other
Ease of compliance to maintain registers under various Labour Laws Rules, 2017 Other
International
Exposure draft of amendments to IFRS 8, Operating Segments, and IAS 34, Interim Financial Reporting Accounting
Exposure draft of annual improvements to IFRS 2015-2017 cycle Accounting
Discussion paper on disclosure initiative - principles of disclosure Accounting
America
ASU on consolidation - guidance for not-for-profit entities Accounting
ASU on intangibles - goodwill and other - simplifying the test for goodwill impairment Accounting
ASU on other income - gains and losses from the derecognition of non-financial assets - clarifying the
scope of asset derecognition guidance and accounting for partial sales of non-financial assetsAccounting
ASU on plan accounting - employee benefit plan master trust reporting Accounting
ASU on compensation - retirement benefits - improving the presentation of net periodic pension cost and
net periodic post-retirement benefit costAccounting
ASU on receivables - non-refundable fees and other costs - premium amortisation on purchased callable
debt securitiesAccounting
Proposed ASU on compensation - stock compensation - improvements to non-employee share-based
payment accountingAccounting
Hot Topic
Real Estate Investment Trusts and Infrastructure Investment Trusts
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Guidance note on audit of banks
AASB of the ICAI has issued Guidance note on audit of
banks (2017 edition) (‘guidance note’) on 27 February
2017. It discusses in depth the various important items of
the financial statements of banks, its peculiarities, manner
of disclosure in the financial statements, the RBI's
prudential directions thereon, audit procedures etc. The
guidance note contains illustrative formats of audit
reports, engagement letters and written representation
letter.
This guidance note, inter alia, has been updated for the
impact of the master directions and other relevant
circulars issued by the RBI during 2016, guidance on
demonetisation at appropriate places and relevant
pronouncements of the ICAI having bearing on bank
audits.
Click here for guidance note.
Companies (Audit and Auditors) Amendment Rules,
2017
MCA has issued Companies (Audit and Auditors)
Amendment Rules, 2017 (‘amendment rules’) on 30
March 2017 to amend the Companies (Audit and
Auditors) Rules, 2014 (‘Principal rules'). Consequent to
these amendment rules, auditors are required to report on
the following matter in the auditor's report for the year
ended 31 March 2017:
• Whether the company had provided requisite
disclosures in its financial statements as to holdings as
well as dealings in Specified Bank Notes ('SBNs')
during the period from 08 November 2016 to 30
December 2016 and if so, whether these are in
accordance with the books of accounts maintained by
the company.
This amendment is consequent to amendment in
Schedule III of the 2013 Act which requires the
companies to disclose the details of SBNs held and
transacted during the above stated period. This
amendment for disclosure requirements is explained in
more detail in India - Accounting updates section.
Click here for amendment rules.
The ICAI has also published an announcement in regard
to these amendment rules and requested its members to
take care in professional capacity of the disclosure and
reporting requirements while auditing the financial
statements for the year 2016-17.
Click here for announcement.
Deferment of effective date of revised SAs
The ICAI had issued new/ revised SAs. These
new/revised SAs were effective for audits of financial
statements for periods beginning on or after 01 April
2017. Following revised/new SAs were issued:
• Revised SA 700, Forming an Opinion and Reporting
on Financial Statements
• New SA 701, Communicating Key Audit Matters in the
Independent Auditor’s Report
• Revised SA 705, Modifications to the Opinion in the
Independent Auditor’s Report
• Revised SA 706, Emphasis of Matter Paragraphs and
Other Matter Paragraphs in the Independent Auditor’s
Report
• Revised SA 260, Communication with Those Charged
with Governance
• Revised SA 570, Going Concern
Click here for ICAI announcement.
AASB of the ICAI has now issued an announcement
stating that it has been decided that effective date/
applicability of the following SAs be deferred by one year
and hence will be applicable/ effective for audits of the
financial statements for periods beginning on or after 01
April 2018:
• Revised SA 700
• New SA 701
• Revised SA 705
• Revised SA 706
It is further clarified that existing SA 700, SA 705 and SA
706 will continue to apply.
Click here for ICAI announcement.
India - Auditing updates
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Companies (Indian Accounting Standards)
(Amendment) Rules, 2017
MCA has issued Companies (Indian Accounting
Standards) (Amendment) Rules, 2017 ('amendment
rules') to amend Ind AS 102, Share-based Payment and
Ind AS 7, Statement of Cash Flows.
These amendment rules, inter alia, provides the following:
Ind AS 102
New guidance has been provided for:
• Treatment of vesting and non-vesting conditions
in case of cash-settled share-based payment
transactions: Earlier, such guidance was available
only in respect of the equity-settled share-based
payment transactions;
• Classification of equity settled plans where
employers are required to withheld certain shares
to fulfil its obligation of payment of withholding
tax: The amendment states that certain tax laws may
require an entity to withhold an amount for an
employee’s tax obligation in respect of share-based
payment and transfer that amount, normally in cash, to
the tax authority. While this situation is akin to net
settlement plans, as per the amendment such plans
shall continue to be regarded as equity settled plan;
• Accounting for modification of a share-based
payment transaction that changes its
classification from cash-settled to equity-settled: If
a cash-settled share-based payment transaction is
cancelled or settled and entity identifies equity
instruments as a replacement for cancelled cash-
settled share-based payment, the entity will apply this
new guidance introduced. In such scenario, it provides
that:
- equity-settled share-based payment transaction will
be recognised in equity on the modification date to
the extent to which goods or services have been
received;
- liability for cash-settled share-based payment
transaction as at the modification date is
derecognised on that date;
- any difference between the carrying amount of the
liability derecognised and the amount of equity
recognised on the modification date is recognised
immediately in profit or loss;
An entity shall apply amendments introduced in these
amendment rules for annual periods beginning on or after
01 April 2017.
Ind AS 7
• An entity should provide disclosures that enable users
of the financial statements to evaluate changes in
liabilities arising from financing activities, including
both changes arising from cash flows and non-cash
changes. An entity should disclose following changes
in liabilities arising from financing activities:
- Changes from financing cash flows;
- Changes arising from obtaining or losing control of
subsidiaries or other businesses;
- The effect of changes in foreign exchange rates;
- Changes in fair values; and
- Other changes;
• Liabilities arising from financing activities are liabilities
for which cash flows were, or future cash flows will be,
classified in the statement of cash flows as cash flows
from financing activities;
• The above disclosure requirement is also applicable to
changes in financial assets if cash flows from those
financial assets were, or future cash flows will be,
included in cash flows from financing activities;
It further provides that when the entity first applies these
amendments, it is not required to provide comparative
information from preceding periods. An entity shall apply
amendments introduced in these amendment rules for
annual periods beginning on or after 01 April 2017.
Click here for amendment rules.
ITFG clarification bulletin 7
ITFG of Ind AS (IFRS) Implementation Committee has
issued the seventh set of clarifications on various issues
related to the applicability/implementation of Ind ASs
under the Ind AS Rules, which were raised by
preparers/users/other stakeholders.
This bulletin, inter alia, provides the following
clarifications:
Clarification 1
Clarifications on exemption given under Ind AS 101
regarding option provided in paragraph 46/46A of AS
11, The Effects of Changes in Foreign Exchange
Rates
If the following conditions are fulfilled:
• A first-time adopter entered into a foreign currency
loan agreement for construction of its PPE but has not
drawn the full loan amount up to 31 March 2016;
• It had availed the option given under paragraph
46/46A of AS 11 and hence added or deducted the
exchange gain/loss on such foreign currency loan from
the cost of PPE;
India - Accounting updates
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• On transition to Ind AS, it has opted for the exemption
given under Ind AS 101, First-time Adoption of Ind
AS, (i.e. to continue the same policy adopted for
accounting for exchange differences arising from
translation of long-term foreign currency monetary
items);
In such a scenario, it has been clarified that:
• the exemption under Ind AS 101 is available only on
exchange gain/loss on foreign currency loan which
was drawn up to 31 March 2016 (i.e. period ending
immediately before the beginning of first Ind AS
financial reporting period); and
• such exemption is not available on exchange gain/loss
on foreign currency loan which was drawn after 31
March 2016;
Clarification 2
Clarifications on exemption given under Ind AS 101
regarding option provided in paragraph 46/46A of
AS 11
If a company:
• has opted the option available under paragraph
46/46A of AS 11 and therefore, has added to or
deducted from the cost of PPE, the exchange
gain/loss on foreign currency borrowings; and
• on first-time adoption to Ind AS, has availed the
deemed cost exemption given under Ind AS 101 in
respect of PPE;
In such a scenario, it has been clarified that the company
cannot reverse the impact of paragraph 46A of AS 11
from its PPE, even if it wishes to retrospectively reverse
the effect of paragraph 46/46A from its PPE. Once the
company avails the deemed cost exemption in respect of
PPE, it cannot make any adjustments to the carrying
amount of PPE and it will carry forward the previous
GAAP carrying amount for all of its PPE.
Clarification 3
Preparation of annual financial statements where the
functional currency is different from the currency in
which its financial statements are statutorily required
to present
• If a company is statutorily required to present its
financial statements in INR, which is different from its
functional currency, then it has to prepare its financial
statements in its functional currency and apply the
principles of Ind AS 21, The Effects of Changes in
Foreign Exchange Rates, to translate them to
presentation currency (i.e. INR);
• Since the company is statutorily required to present its
financial statements in INR, the auditor will also be
required to give auditor's report on the financial
statements prepared in INR.
Clarification 4
Dividend declared on a financial instrument classified
as a liability after the reporting period
If a company declares dividend, after the end of the
reporting period, on a financial instrument classified as a
liability, the company is required to accrue the liability of
dividend at the end of the reporting period, even if it is
declared after the end of the reporting period.
Accounting for dividend on financial instrument which is
classified as financial liability is governed by classification
of such instrument under Ind AS 109, Financial
Instruments. If it is classified as subsequently measured
at amortised cost, dividend will be accrued as part of
interest expense recognised based on effective interest
method.
Click here for clarification bulletin.
Amendment in Schedule III of the 2013 Act
The MCA has issued notification amending Part I under
the heading ‘General instructions for preparation of
Balance Sheet’ of both Division I and Division II, in
Schedule III of the 2013 Act. This amendment requires
every company to disclose the details of SBNs held and
transacted during the period from 08 November 2016 to
30 December 2016, as provided in table below:
For the purpose of this amendment, the term ‘Specified
Bank Notes’ shall mean the bank notes of denominations
of the series existing as on 08 November 2016 of the
value of five hundred rupees and one thousand rupees of
which legal tender ceased on the given date.
Click here for amendment.
India - Accounting updates
SBNs Other
denomination
Total
Closing cash
in hand as on
08.11.2016
(+) Permitted
receipts
(-) Permitted
payments
(-) Amount
deposited in
Banks
Closing cash
in hand as on
30.12.2016
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Formats for publishing financial results by listed
general insurance companies including standalone
health insurance companies and reinsurers
IRDAI had issued circular dated 25 October 2016 for
listed life insurance companies (refer circular) providing
following formats for compliance with the disclosure
requirements of SEBI Listing Regulations:
• The quarterly financial results
• Reporting of segment wise revenue, results and
capital employed along with the quarterly results
• Limited review reports to be given by auditors
• In case of audited financial reports, the audit report to
be given by auditors
• Financial results published in the newspapers in terms
of Regulation 47(1)(b) of SEBI Listing Regulations
IRDAI has now issued a circular dated 30 January 2017
providing aforementioned formats for listed general
insurance companies including standalone health
insurance companies and reinsurers (including those
insurers whose securities are listed on the stock
exchanges) for compliance with the disclosure
requirements of SEBI Listing Regulations.
It further states that these requirements do not in any
manner, modify the disclosure requirements or the
manner of preparation of financial statements as required
under the Insurance Act, 1938, the IRDAI Act, 1999 and
the regulations framed thereunder.
Click here for circular.
Exposure draft of Ind AS compliant Schedule III to
the 2013 Act for NBFCs
ASB of the ICAI has issued an exposure draft of Ind AS
compliant Schedule III to 2013 Act for NBFCs (‘exposure
draft’). It, inter alia, includes the following:
• General instructions for preparation of Balance Sheet,
formats of Balance Sheet and Statement of Changes
in Equity in Part I
• General instructions and format for preparation of
Statement of Profit and Loss in Part II
• General instructions for preparation of the
consolidated financial statements and additional
information which shall be disclosed in the
consolidated financial statements in Part III
Further, the exposure draft also provides the following:
• NBFCs preparing the financial statements as per this
Schedule may change the order of presentation of line
items on the face of financial statements or order of
line items within the schedules in order of liquidity, if
appropriate, considering the operations performed by
the NBFCs;
• With respect to hedges and hedge accounting, NBFCs
may provide a description in accordance with the
requirements of Ind ASs, of how derivatives are used
for hedging, explain types of hedges recognised for
accounting purposes and their usage/application by
the entity.
Click here for exposure draft.
Exposure draft of amendments to Ind AS 40,
Investment Property - transfers of investment
property
ASB of the ICAI has issued exposure draft of
‘Amendments to Ind AS 40, Investment Property -
transfers of investment property’ (‘exposure draft’). The
exposure draft, inter alia, provides the following
amendments:
• Paragraph 57 is proposed to be amended clarifying
that list of circumstances that provides evidence of a
change in use set out in paragraph 57(a)–(d) of Ind
AS 40 is not exhaustive;
• It is emphasised that a change in use occurs when the
property meets, or ceases to meet the definition of
investment property and there is evidence of the
change in use. A change in management’s intentions
for the use of a property does not provide evidence of
a change in use;
• Disclose the amounts reclassified to, or from,
investment property. Entity shall disclose those
amounts reclassified as part of reconciliation of the
carrying amount of investment property at the
beginning and end of the period.
• Transitional provisions: Paragraph 84C of the
exposure draft states that these amendments
proposed will be applicable to changes in use that
occur on or after the beginning of the annual reporting
period in which the entity first applies the amendments
(the date of initial application). At the date of initial
application, an entity shall reassess the classification
of property held at that date and, if applicable,
reclassify property applying paragraphs 7-14 to reflect
the conditions that exist at that date. Notwithstanding
the requirements of Paragraph 84C, an entity is
permitted to apply the amendments to paragraphs 57–
58 retrospectively in accordance with Ind AS 8 if, and
only if, that is possible without the use of hindsight. If
in accordance with paragraph 84C, an entity
reclassifies property at the date of initial application,
the entity shall account for such reclassification
without any change in the carrying amount of the
property transferred.
India - Accounting updates
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The amendments proposed in this exposure draft shall
apply for annual periods beginning on or after 01 April
2018.
The last date for submission of comments is 28 April
2017.
Click here for exposure draft.
Exposure draft of Appendix B of Ind AS 21, Foreign
Currency Transactions and Advance consideration
ASB of the ICAI has issued exposure draft of ‘Appendix B
of Ind AS 21, Foreign Currency Transactions and
Advance Consideration’ (‘exposure draft’).
This Appendix applies to a foreign currency transaction
(or part of it) when an entity recognises a non-monetary
asset or non-monetary liability arising from the payment
or receipt of advance consideration before the entity
recognises the related asset, expense or income (or part
of it).
This Appendix does not apply when an entity measures
the related asset, expense or income on initial
recognition:
• at fair value; or
• at the fair value of the consideration paid or received
at a date other than the date of initial recognition of the
non-monetary asset or non-monetary liability arising
from advance consideration.
An entity is not required to apply this Appendix to:
• Income taxes; or
• Insurance contracts (including reinsurance contracts)
that it issues or reinsurance contracts that it holds.
Appendix B addresses how to determine the date of the
transaction for the purpose of determining the exchange
rate to use on initial recognition of the related asset,
expense or income (or part of it) on the derecognition of a
non-monetary asset or non-monetary liability arising from
the payment or receipt of advance consideration in a
foreign currency.
Exposure draft proposes that the date of the transaction
for the purpose of determining the exchange rate to use
on initial recognition of the related asset, expense or
income (or part of it) is the date on which an entity initially
recognises the non-monetary asset or non-monetary
liability arising from the payment or receipt of advance
consideration.
Further, if there are multiple payments or receipts in
advance, the entity shall determine a date of the
transaction for each payment or receipt of advance
consideration
The proposed Appendix shall apply for annual reporting
periods beginning on or after 01 April 2018.
The last date for submission of comments is 28 April
2017.
Click here for exposure draft.
Exposure draft of annual improvements to Ind AS
2014 - 2016 cycle
ASB of the ICAI has issued exposure draft of ‘Annual
improvements to Ind AS - Amendments in Ind AS 112
and 28 (‘exposure draft’). These amendments address
following topics:
• Ind AS 112, Disclosure of interests in other entities -
Clarification of the scope of the Standard
Paragraph B17 of Ind AS 112 states that an entity is
not required to disclose summarised financial
information as required by paragraphs B10-B16 for
interests classified as held for sale. New paragraph
5A is added to clarify that the requirements of Ind AS
112 will apply to interests in entities which are
classified as held for sale, held for distribution to
owners in their capacity as owners, or discontinued
operations, except the requirements stated in
paragraph B17;
• Ind AS 28, Investments in associates and joint
ventures - Measuring an associate or joint venture at
fair value
- Paragraph 18 of Ind AS 28 states that when an
investment in an associate or a joint venture is held
by, or is held indirectly through, an entity that is a
venture capital organisation, or a mutual fund, unit
trust and similar entities including investment-
linked insurance funds, the entity may elect to
measure that investment at fair value through profit
or loss. Paragraph 18 is proposed to be amended
to clarify that an entity may elect, at initial
recognition, to measure that investment in an
associate or joint venture at fair value through profit
or loss separately for each associate or joint
venture;
- Paragraph 36A states that an entity that is not an
investment entity may retain the fair value
measurement applied by its associates and joint
ventures when applying the equity method. This
paragraph is also proposed to be amended to clarify
that this option is available, at initial recognition, for
each investment entity associate or joint venture;
- Earlier application of these proposed amendments is
permitted. Entity shall disclose this fact.
An entity shall apply these amendments retrospectively in
accordance with Ind AS 8, Accounting Policies,
Changes in Accounting Estimates and Errors, for
annual periods beginning on or after 1 April 2018.
India - Accounting updates
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The last date for submission of comments is 28 April
2017.
Click here for exposure draft.
Exposure draft of amendments to Ind AS 12, Income
taxes - recognition of deferred tax assets for
unrealised losses
The ASB of the ICAI has issued an exposure draft of
amendments to Ind AS 12, Income taxes - Recognition
of deferred tax assets for unrealised losses (‘exposure
draft’). It, inter alia, proposes the following amendments:
• An example has been added following paragraph 26,
illustrating identification of a deductible temporary
difference;
• Paragraph 27A has been added which provides
guidance on utilisation of deductible temporary
differences in cases where tax law restricts the
sources of taxable profits against which it may make
deductions on the reversal of that deductible
temporary difference and where tax law imposes no
such restrictions.
An entity shall apply the amendments proposed in this
exposure draft retrospectively in accordance with Ind AS
8, Accounting policies, changes in accounting
estimates and errors. However, on initial application of
the amendments, the change in the opening equity of the
earliest comparative period may be recognised in opening
retained earnings (or in another component of equity, as
appropriate), without allocating the change between
opening retained earnings and other components of
equity. If an entity applies this relief, it will disclose the
fact.
Click here for exposure draft.
Exposure draft of IRDAI (Preparation of Financial
Statements of Insurers) Regulations, 2017
The IRDAI had constituted an implementation group on
Ind AS in insurance sector in India (‘group’) for
addressing the implementation issues in the preparation
of Ind AS compliant financial statements. This group
submitted its report on 30 December 2016 (refer report).
Based upon the report of the group, the IRDAI has issued
an exposure draft of IRDAI (Preparation of Financial
Statements of Insurers) Regulations, 2017 (‘draft
regulations’) which proposes to replace the existing
Insurance Regulatory and Development Authority
(Preparation of Financial Statements and Auditor’s Report
of Insurance Companies) Regulations, 2002. The draft
regulations, inter-alia, propose the following:
• Schedule A (for life insurance business) and Schedule
B (for general insurance business, including health
and reinsurance), comprising of:
- Part I: General instructions for preparation of
financial statements;
- Part II: Accounting principles for preparation of
financial statements;
- Part III: Balance sheet including Statement of
Changes in Equity;
- Part IV: Statement of Profit and Loss, Revenue
(Policyholders’), Profit and Loss (Shareholders’)
Accounts
- Part V: Other disclosures
• Segments to be reported by the insurers
• Requirements for life companies to revalue investment
property at a minimum every three years
• Figures in the financial statements to be rounded off to
the nearest rupees in lakhs
• All other disclosures to be made in compliance to Ind
ASs and regulatory stipulations
The IRDAI (Preparation of Financial Statements of
Insurers) Regulations, 2017 have been proposed to be
effective from accounting periods commencing on or after
01 April 2018.
Click here for press release.
Click here for draft regulations.
India - Accounting updates
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Companies (Meetings of Board and its Powers)
Amendment Rules, 2017
The MCA has issued Companies (Meetings of Board and
its Powers) Amendment Rules, 2017 (‘amendment rules’)
to amend the Companies (Meeting of Board and its
Powers) Rules, 2014 (‘principal rules’). Rule 15, Contract
or arrangement with a related party, of the principal
rules state that a company shall enter into any contract or
arrangement with a related party subject to certain
conditions. Further, sub-rule 3(a) of Rule 15 prescribes
the limits exceeding which no transactions stated in
clauses (a) to (e) of Section 188(1) of the 2013 Act can be
entered except with prior approval of the company by a
resolution. These amendment rules have amended such
limits of transactions which are states as follows:
• Sale, purchase or supply of any goods or materials,
directly or through appointment of agent, amounting to
ten percent or more (earlier ‘exceeding ten per
cent’) of the turnover of the company or rupees one
hundred crore, whichever is lower, as mentioned in
clause (a) and clause (e) respectively of sub-section
(1) of Section 188;
• Selling or otherwise disposing of or buying property of
any kind, directly or through appointment of agent,
amounting to ten percent or more (earlier ‘exceeding
ten per cent’) of net worth of the company or rupees
one hundred crore, whichever is lower, as mentioned
in clause (b) and clause (e) respectively of sub-section
(1) of Section 188;
• Leasing of property of any kind amounting to ten
percent or more (earlier ‘exceeding ten per cent’) of
the net worth of the company or ten per cent or more
of turnover (earlier ‘ten per cent of turnover’) of the
company or rupees one hundred crore, whichever is
lower, as mentioned in clause (c) of sub-section (1) of
Section 188;
• Availing or rendering of any services, directly or
through appointment of agent, amounting to ten
percent or more (earlier ‘exceeding ten per cent’) of
the turnover of the company or rupees fifty crore,
whichever is lower, as mentioned in clause (d) and
clause (e) respectively of sub-section (1) of Section
188.
Click here for amendment rules.
Integrated reporting by listed entities
Regulation 34(2)(f) of the SEBI Listing Regulations (refer
regulations) requires submission of Business
Responsibility Report (‘BRR’) describing the initiatives
taken by top 500 listed entities, based on market
capitalisation, from an environmental, social and
governance perspective. With the objective of improving
disclosure standards, SEBI issued circular on 06
February 2017 advising top 500 listed companies which
are required to prepare BRR to adopt Integrated
Reporting (‘IR’) on a voluntary basis from the FY 2017-18.
Framework for IR has been prescribed by Integrated
Reporting Council.
Such listed companies are advised to adhere to the
following:
• The information related to IR may be provided in the
annual report separately or by incorporating in
Management Discussion and Analysis or by preparing
a separate report (annual report prepared as per IR
framework);
• In case the company has already provided the relevant
information in any other report prepared in accordance
with national/international requirement/framework, it
may provide appropriate reference to the same in its
integrated report so as to avoid duplication of
information;
• As a green initiative, the companies may host the
integrated report on their website and provide
appropriate reference to the same in their Annual
Report.
Click here for circular.
Circular on schemes of arrangement by listed entities
and relaxation under Rule 19(7) of Securities
Contracts (Regulation) Rules, 1957
SEBI Listing Regulations place obligations with respect to
scheme of arrangement on (a) listed entities in Regulation
11, Scheme of Arrangement, 37, Draft Scheme of
Arrangement & Scheme of Arrangement and on (b)
stock exchanges in Regulation 94, Draft Scheme of
Arrangement & Scheme of Arrangement. SEBI had
issued a circular dated 30 November 2015 (‘old circular’)
laying down the detailed requirements to be complied
with by listed entities while undertaking schemes of
arrangements. SEBI has decided to revise the regulatory
framework for such schemes of arrangements and issued
a circular with revised requirements on 10 March 2017.
The revised circular, inter alia, provides the following:
• Annexure I
New Requirements to be fulfilled by listed entity
a) Conditions for schemes of arrangement between
listed and unlisted entities are provided, which, inter
alia, includes the following:
India - Other updates
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- Listed entity shall include the applicable
information pertaining to the unlisted entity
involved in the scheme in the format specified for
abridged prospectus as provide in Part D of
Schedule VIII of the ICDR Regulations, in the
explanatory statement or notice or proposal
accompanying resolution to be passed sent to the
shareholders while seeking approval of the
scheme;
- Percentage of shareholding of pre-scheme public
shareholders of the listed entity and the Qualified
Institutional Buyers of the unlisted entity, in the
post scheme shareholding pattern of the ‘merged’
company shall not be less than 25%;
- Unlisted entities can be merged with a listed entity
only if the listed entity is listed on a stock
exchange having nationwide trading terminals;
b) Detailed compliance report as per format specified in
Annexure IV duly certified by the Company Secretary,
Chief Financial Officer and the Managing Director,
confirming compliance with various regulatory
requirements specified for schemes of arrangement
and all accounting standards is also required to be
submitted by listed entity to the Stock exchanges;
c) Scheme of arrangement submitted with NCLT for
sanction provides for voting by public shareholders
only through e-voting. Earlier postal ballot method
was also allowed for such voting on the scheme;
d) Subsequent to filing the draft scheme with SEBI, no
changes to the draft scheme except those mandated
by the regulator/ authorities/ tribunal shall be made
without specific written consent of SEBI;
e) Scheme of arrangement shall be acted upon only if
the votes cast by the public shareholders in favour of
the proposal are more than the number of votes cast
by public shareholders against it under specified
cases. In these cases, following cases are added:
- where the scheme involving merger of an unlisted
entity results in reduction in the voting share of
pre-scheme public shareholders of listed entity in
the transferee/ resulting company by more than
5% of the total capital of the merged entity;
- where the scheme involves transfer of whole or
substantially the whole of the undertaking of the
listed entity and the consideration for such transfer
is not in the form of listed equity shares.
• Annexure II: Format for auditor’s certificate;
• Annexure III: Format for reports on complaints;
• Annexure IV: Format of the compliance report to be
submitted along with the draft scheme
• Provisions of this circular shall not apply to schemes
which solely provide for merger of a wholly owned
subsidiary with the parent company; however, such
draft schemes shall be filed with the stock exchanges
for the purpose of disclosures. Relevant amendment to
SEBI Listing Regulations in this regard has been
notified on 15 February 2017. Click here for
amendment.
• Issuance of shares under schemes in case of
allotment of shares only to a select group of
shareholders or shareholders of unlisted companies
pursuant to such schemes, shall follow the pricing
provisions of Chapter VII of SEBI ICDR Regulations.
Relevant amendment to ICDR Regulations in this
regard has been notified on 15 February 2017. Click
here for amendment.
The schemes filed after the date of this circular will be
governed under this circular. The schemes already
submitted to the stock exchanges in terms of old circular
will be governed by the requirements specified in that
circular.
Click here for revised circular.
SEBI has further issued circular on 23 March 2017 to
clarify that the ‘relevant date’ for the purpose of
computing pricing as per the provisions of Chapter VII of
SEBI ICDR Regulations shall be the date of board
meeting in which the scheme is approved.
Click here for circular.
SEBI (Listing Obligations and Disclosure
Requirements) (Amendment) Regulations, 2017
Regulation 37 of SEBI Listing Regulations, inter alia,
provides that the listed entity desirous of undertaking a
scheme of arrangement or involved in a scheme of
arrangement will file the draft scheme of arrangement
proposed to be filed before any Court or Tribunal under
relevant sections of the Companies Act, whichever is
applicable, with the stock exchange(s) for obtaining
observation letter or no-objection letter, before filing such
scheme with any Court or Tribunal.
SEBI has now issued SEBI (Listing Obligations and
Disclosure Requirements) (Amendment) Regulations,
2017 (‘amendment regulations’) which provides that
provisions of Regulation 37 will not apply to draft
schemes which solely provide for merger of a wholly
owned subsidiary with its holding company. It further
provides that such draft schemes will be filed with the
stock exchange(s) for the purpose of disclosures.
These amendment regulations have come into force from
15 February 2017.
Click here for amendment regulations.
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SEBI (Issue of Capital and Disclosure Requirements)
(Amendment) Regulations, 2017
SEBI has issued SEBI (Issue of Capital and Disclosure
Requirements) (Amendment) Regulations, 2017
(‘amendment regulations’) to amend SEBI ICDR
Regulations (refer regulations). It, inter alia, provides the
following:
• Pricing provisions of Chapter VII ‘Preferential Issue’
of SEBI ICDR Regulations will apply to the issuance of
shares under schemes approved by a High Court
under Sections 391 to 394 of the Companies Act, 1956
or a Tribunal under Sections 230 to 234 of the 2013
Act, whichever is applicable, in case allotment of
shares is only to a select group of shareholders or
shareholders of unlisted companies pursuant to
schemes stated above.
Earlier, provisions of Chapter VII ‘Preferential Issue’
were not applicable where the preferential issue of
equity shares is made pursuant to schemes stated
above.
• Following regulations have been added:
- Regulation 111A, Liability for contravention of Act,
rules or the regulations;
- Regulation 111B, Failure to pay fine.
These amendment regulations have come into force from
15 February 2017.
Click here for amendment regulations.
SEBI (Mutual Funds) (Amendment) Regulations, 2017
SEBI has issued SEBI (Mutual Funds) (Amendment)
Regulations, 2017 (‘amendment regulations’) to further
amend SEBI (Mutual Funds) Regulations, 1996 (refer
regulations). In seventh schedule ‘Restrictions on
Investments’ of the regulations, a new clause has been
inserted. It provides that a mutual fund may invest in the
units of REITs and InvITs subject to the following:
• No mutual fund under all its schemes shall own more
than 10% of units issued by a single issuer of REIT
and InvIT; and
• A mutual fund scheme shall not invest:
- more than 10% of its NAV in the units of REIT and
InvIT; and
- more than 5% of its NAV in the units of REIT and
InvIT issued by a single issuer.
Provided that the limits mentioned in sub-clauses (i) and
(ii) above shall not be applicable for investments in case
of index fund or sector or industry specific scheme
pertaining to REIT and InvIT.
These amendment regulations have come into force from
15 February 2017.
Click here for amendment regulations.
Further, SEBI has issued a circular on mutual funds on 28
February 2017 which states that:
• investments restrictions stated in amendment
regulations will be applicable to all fresh investments
by all schemes, including an existing scheme;
• for investment in units of REITs/InvITs by an existing
mutual fund scheme, unitholders of the scheme shall
be given a time period of at least 15 days for the
purpose of exercising the exit option as per the
provisions of Regulation 18 (15A) of SEBI (Mutual
Funds) Regulations, 1996.
This circular is effective with immediate effect.
Click here for circular.
Circular on SEBI (Substantial Acquisition of Shares &
Takeovers) Regulations, 2011
SEBI had issued a circular issuing the format for
submitting the draft letter of offer (DLOF) with SEBI in
terms of SEBI (Substantial Acquisition of Shares &
Takeovers) Regulations, 2011 and certain instructions to
be followed by merchant bankers while filing the DLOF.
SEBI has issued a circular on 15 March 2017 to revise
the time period for which information is required to be
filed with SEBI, in line with the provisions relating to
maintenance of records under the 2013 Act. The format
and instructions prescribed vide aforementioned circular
will stand modified as given in Annexure of this circular.
This circular provides amendments in some general
instructions and format of the standard letter of offer.
This circular will be applicable to all the offers where the
draft letter of offer is filed with SEBI after the date of this
circular.
Click here for circular.
Companies (Transfer of pending proceedings)
Amendment Rules, 2017
The MCA had issued Companies (Transfer of Pending
Proceedings) Rules 2016 (‘principal rules’). The principal
rules, inter alia, laid down provisions regarding transfer of
pending petitions of winding-up on the ground of inability
to pay debts, pending before High Court to the Bench of
the Tribunal.
It states that all such transferred petitions shall be treated
as applications under Section 7, Initiation of Corporate
insolvency resolution process by financial creditor,
Section 8, Insolvency resolution by operational
creditor and Section 9, Application for initiation of
corporate insolvency resolution process by
operational creditor of the Insolvency and Bankruptcy
Code, 2016 (Code).
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It further provides that the petitioner shall need to submit
all information required to be submitted under Sections 7,
8 and 9 of the Code including details of the proposed
insolvency professional to the Tribunal within sixty days
from the date of notification.
MCA has now issued Companies (Transfer of pending
proceedings) Amendment Rules, 2017 (‘amendment
rules’) to amend the principal rules. It provides that sixty
days will be substituted with six months.
These amendment rules have come into force from 28
February 2017.
Click here for amendment rules.
Companies (Incorporation) Amendment Rules, 2017
MCA has issued Companies (Incorporation) Amendment
Rules, 2017 (‘amendment rules’). These amendment
rules, inter alia, provide the following:
• The certificate of incorporation shall be issued by the
registrar in the Form No. INC 11 and the certificate of
incorporation shall mention permanent account
number of the company where if it is issued by the
Income-tax Department;
• Form No. INC 11, Certificate of Incorporation, is
substituted by new Form No. INC 11, Certificate of
Incorporation.
These amendment rules have come into force from 30
January 2017.
Click here for amendment rules.
Clarification on applicability of Section 391(2) of the
2013 Act
Section 391 (2) of the 2013 Act states that the provisions
of Chapter XX, Winding Up, shall apply mutatis
mutandis for closure of the place of business of a foreign
company in India as if it were a company registered in
India. These provisions came into force on 15 December
2016.
MCA has now clarified that the provisions of sub-sections
(1) and (2) of Section 391 of the 2013 Act need to be read
harmoniously. The provisions of Section 391(2) will apply
only in case of a foreign company which has issued
prospectus or Indian Depository Receipts pursuant to the
provisions of Chapter XXII, Companies Incorporated
Outside India of the 2013 Act.
Click here for circular.
Investment in units of REITs and InvITs
The IRDAI has issued circular to amend the Master
Circular - Investment, 2016. The circular states that the
insurers can invest in units of REITs and InvITs and
provides the following:
• Conditions which are required to be ensured, inter alia,
are:
- An insurer can invest not more than 3% of
respective fund size of the insurer(or) not more
than 5% of the units issued by a single REIT / InvIT,
whichever is lower;
- No investment shall be made in REIT /InvIT where
the Sponsor is under the promoter group of the
insurer.
• Investment in units of REITs/InvITs shall be valued at
market value (last quoted price should not be later
than 30 days). Where market quote is not available for
the last 30 days, the units shall be valued as per the
latest net asset value (not more than 6 months old) of
the units published by the trust;
• The concurrent auditor in his quarterly report to the
audit committee/board of the insurer shall confirm
compliance to the norms and disclosure requirements
provided in this circular.
The amendments stated in this circular have come into
force from 14 March 2017.
Click here for circular.
Clarification on ICDS notified under Section 145(2) of
the IT Act
The Central Government had notified amended ICDS on
29 September 2016 which are effective from assessment
year 2017-18. Certain provisions brought to the notice of
the CBDT that may require clarification for proper
implementation of ICDS. CBDT has issued a circular
providing some clarifications which, inter alia, are as
follows:
• Provisions of ICDS are applicable for computation of
income under the regular provisions of the IT Act. The
provisions of ICDS shall not apply for computation of
MAT. Provisions of ICDS shall apply for computation
of Alternate Minimum Tax;
• ICDS VI, Effects of Changes in Foreign Exchange
Rates, provides guidance on accounting for derivative
contracts such as forward contracts and other similar
contracts. For derivatives not covered in the scope of
ICDS VI, provisions of ICDS I, Accounting Policies,
would apply;
• At present no specific ICDS has been notified for real
estate developers, Build-Operate -Transfer projects
and leases. Therefore, relevant provisions of the IT Act
and ICDS shall apply to these transactions as may be
applicable.
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• ICDS I provides that MTM loss or an expected loss
shall not be recognised unless the recognition is in
accordance with the provisions of any other ICDS. It
has been clarified that principles applicable to MTM
loss shall be applicable for recognition of MTM gain or
expected gain;
• It has been clarified that ICDS shall apply for
computation of taxable income of all companies
irrespective of the fact whether they are following
Indian GAAP or newly introduced Ind AS;
• ICDS I provides that an accounting policy shall not be
changed without ‘reasonable cause’. In this regard, the
clarification provides that ‘reasonable cause’ is an
existing concept under the IT Act and has evolved
over a period of time, conferring desired flexibility to
the taxpayer in deserving cases and the same is to be
followed;
• It has been clarified that balance in foreign currency
translation reserve account as on 01 April 2016
pertaining to exchange difference on monetary items
for non-integral operations, shall be recognised in the
FY 2016-17 to the extent not recognised in the income
computation in the past.
Click here for circular.
Notification of provisions of the Insolvency and
Bankruptcy Code, 2016
The Central Government has appointed 01 April 2017 as
the date on which the provisions of the following sections
of the Insolvency and Bankruptcy Code, 2016 (‘code’)
have come into force:
• Section 59 - Voluntary liquidation of corporate
persons;
• Sections 209 to 215 (both inclusive) and Section
216(1) - Information utilities;
• Section 234 - Agreement with foreign countries; and
• Section 235 - Letter of request to a country outside
India in certain cases.
Click here for code.
Click here for notification.
The Finance Act, 2017
The Finance Act, 2017 (‘Act’) has received the assent of
the President of India on 31 March 2017. It, inter alia,
provides the following amendments:
• Amendment with respect to Section 115JB: New
sub-sections are inserted in Section 115JB, Special
provision for payment of tax by certain companies,
for companies whose financial statements are drawn
up in compliance with the Ind AS specified in Ind AS
Rules, 2015. It states the following:
- Book profit will be computed in accordance with
explanation I to Section 115JB(2);
- It shall be further increased by all amounts credited
to OCI in the statement of profit and loss under the
head “Items that will not be re-classified to profit or
loss;
- Decreased by all amounts debited to OCI in the
statement of profit and loss under the head “Items
that will not be re-classified to profit or loss;
- Increased by amounts or aggregate of the amounts
debited to the statement of profit and loss on
distribution of non-cash assets to shareholders in a
demerger in accordance with Appendix A of the Ind
AS 10;
- Decreased by all amounts or aggregate of the
amounts credited to the statement of profit and loss
on distribution of non-cash assets to shareholders
in a demerger in accordance with Appendix A of the
Ind AS 10;
It further provides that nothing contained in clause (a) or
clause (b) shall apply to the amount credited or debited to
OCI under the head “Items that will not be re-classified to
profit or loss” in respect of revaluation surplus for assets
in accordance with the Ind AS 16, Property, Plant and
Equipment and Ind AS 38, Intangible Assets; or gains
or losses from investments in equity instruments
designated at fair value through OCI in accordance with
the Ind AS 109
• For companies referred above, the book profit of the
year of convergence and each of following four
previous years, shall be further increased or
decreased, as the case may be, by one-fifth of the
transition amount. Definition of ‘transition amount’ is
inserted.
‘Transition amount’ means the amount or aggregate of
the amounts adjusted in the other equity (excluding
capital reserve and securities premium reserve) on the
convergence date but not including the following:
- amount or aggregate of the amounts adjusted in the
OCI on the convergence date which shall be
subsequently re-classified to the profit or loss;
- revaluation surplus for assets in accordance with
the Ind AS 16 and Ind AS 38 adjusted on the
convergence date;
- gains or losses from investments in equity
instruments designated at fair value through OCI in
accordance with the Ind AS 109 adjusted on the
convergence date;
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- adjustments relating to items of property, plant and
equipment and intangible assets recorded at fair
value as deemed cost in accordance with
paragraphs D5 and D7 of the Ind AS 101 on the
convergence date;
- adjustments relating to investments in subsidiaries,
joint ventures and associates recorded at fair value
as deemed cost in accordance with paragraph D15
of the Ind AS 101 on the convergence date;
- adjustments relating to cumulative translation
differences of a foreign operation in accordance
with paragraph D13 of the Ind AS 101 on the
convergence date;
• Amendment with respect to Section 271J: Section
271J, Penalty for furnishing incorrect information
in reports or certificates, is inserted in the IT Act
which states that where the Assessing Officer or the
Commissioner (Appeals), in the course of any
proceedings under the IT Act, finds that an accountant
or a merchant banker or a registered valuer has
furnished incorrect information in any report or
certificate furnished under any provision of the IT Act
or the rules made thereunder, the Assessing Officer or
the Commissioner (Appeals) may direct that such
accountant or merchant banker or registered valuer,
as the case may be, shall pay, by way of penalty, a
sum of INR ten thousand for each such report or
certificate.
Click here for Act.
Revised minimum rates of wages
The Ministry of Labour and Employment has issued
notification on revised minimum rates of wages per day
payable to various categories of employees prescribed in
the schedule of such notification.
These revised minimum rates of wages are effective from
19 January 2017.
Click here for notification.
The Payment of Wages (Amendment) Act, 2017
The President of India had passed ‘The Payment of
Wages (Amendment) Ordinance, 2016’ (‘ordinance’) on
28 December 2016. The Payment of Wages
(Amendment) Act, 2017 (‘amendment act’) has now
received the assent of the President of India. The
ordinance issued stands repealed with issue of this
amendment act.
The amendment act has substituted Section 6, Wages to
be paid in current coin or currency notes, of the
Payment of Wages Act, 1936 with new Section 6, Wages
to be paid in current coin or currency notes or by
cheque or crediting in bank account. It states that:
• all wages shall be paid in current coin or currency
notes or by cheque or by crediting the wages in the
bank account of the employee;
• the appropriate Government may, by notification in the
Official Gazette, specify the industrial or other
establishment, the employer of which shall pay to
every person employed in such industrial or other
establishment, the wages only by cheque or by
crediting the wages in his bank account.
The amendment act shall be deemed to have come into
force from 28 December 2016.
Click here for amendment act.
Ease of compliance to maintain registers under
various Labour Laws Rules, 2017
The Central Government has issued 'Ease of compliance
to maintain registers under various Labour Laws Rules,
2017’ (‘rules’). These rules are issued for the ease of, and
for the expedient compliance of the requirement of
various labour related laws referred to in these rules and
for the purpose of maintaining combined registers for all
such laws.
Combined registers provided under these rules will
facilitate ease of compliance, maintenance and
inspection, and will also make the information provided
thereunder easily accessible to the public through
electronic means, thereby increasing transparency.
Combined registers in the Forms specified in the
Schedule to these rules shall be maintained either
electronically or otherwise.
Consequential amendments are also made in various
labour related laws referred to in these rules.
These rules have come into force from 21 February 2017.
Click here for rules.
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Exposure draft of amendments to IFRS 8, Operating
Segments, and IAS 34, Interim Financial Reporting
The IASB has issued exposure draft of Amendments to
IFRS 8, Operating Segments and IAS 34, Interim
Financial Reporting. It proposes, inter alia, following
amendments:
• IFRS 8, Operating Segments
- It proposes to emphasise that the chief operating
decision maker is a function that makes the
operating decisions and decisions about allocating
resources to, and assessing the performance of,
the operating segments of an entity;
- Require companies to disclose the title and
description of the role of the individual or group
which is identified as the chief operating decision
maker;
- Paragraphs 19A and 22(d) are proposed to be
amended which would require entities to explain in
the financial statements how and why the
reportable segments identified in the financial
statements differ from those segments identified in
the annual reporting package (such as Annual
reports, investor presentations, etc.);
- Require to disclose in the notes any judgment
made by management in applying the aggregation
criteria in paragraphs 12 and paragraph 12A;
- Paragraph 20A is introduced stating that the entity
may disclose additional information about the
reportable segments if helps the entity to meet the
core principle of the standard. This additional
information may include information not reviewed
by, or regularly provided to, the chief operating
decision maker;
- It is proposed that all material reconciling items
shall be separately identified and described in
sufficient details to enable users of the financial
statement to understand the nature.
• IAS 34, Interim Financial Reporting
- When entity changes the composition of its
reportable segments in accordance with IFRS 8,
the entity shall, in the first interim financial report
after that change, restate and disclose the segment
information required by paragraph 16A(g) of IAS 34
for each previously reported interim period both of
the current FY and of prior FYs, unless the
information is not available and the cost to develop
it would be excessive;
- The determination of whether the information is not
available and the cost to develop it would be
excessive shall be made for each individual item of
disclosure. The entity shall disclose whether it has
restated the segment information for earlier periods.
The last date for submission of comments is 31 July
2017.
Click here for press release.
Click here for exposure draft.
Exposure draft of annual improvements to IFRS
2015-2017 cycle
The IASB has issued an exposure draft of annual
improvements to IFRS 2015-17 cycle (‘exposure draft’). It
proposes amendments to the following standards:
• IAS 12, Income Taxes: Paragraph 52B (now
proposed as paragraph 58A) states that in the
circumstances described in paragraph 52A of IAS 12
(i.e. when there are different tax rates for distributed
and undistributed profits), the income tax
consequences of dividends are recognised in profit or
loss for the period. This exposure draft proposed to
clarify that the requirements in paragraph 52B (now
proposed as paragraph 58A) apply to all income tax
consequences of dividends. IASB require to apply
these amendments retrospectively in accordance with
IAS 8, Accounting Policies, Changes in
Accounting Estimates and Errors, from the annual
periods beginning the date then these amendments
will become effective;
• IAS 23, Borrowing Costs: Exposure draft proposes to
amend Paragraph 14 to clarify that when a qualifying
asset is ready for its intended use or sale, an entity
treats any outstanding borrowing made specifically to
obtain that qualifying asset as part of the funds that it
has borrowed generally. IASB proposes to require
prospective application of the proposed amendments,
i.e. these proposed amendments would apply only to
borrowing costs incurred on or after the date of first
applying the amendments;
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17
• IAS 28, Investments in Associates and Joint
Ventures: It proposes to clarifies that an entity is
required to apply IFRS 9, Financial
Instruments, including its impairment requirements, to
long-term interests in an associate or joint venture
that, in substance, form part of the net investment in
the associate or joint venture but to which the equity
method is not applied. An entity is proposed to apply
these amendments retrospectively in accordance with
IAS 8 for annual periods beginning on or after 01
January 2018 except as specified in paragraph 45F.
Paragraph 45F states that an entity shall restate
comparative information to reflect the proposed
amendments if the entity restates comparative
information in accordance with IFRS 9. If an entity
does not restate comparative information in
accordance with IFRS 9, the entity may choose to
restate comparative information to reflect the
application of IAS 39, Financial Instruments:
Recognition and Measurement. Similarly, if an
insurer applies the temporary exemption from IFRS 9
in accordance with IFRS 4, Insurance Contracts, the
insurer may choose to restate comparative information
to reflect the application of IAS 39.
The last date for submission of comments is 12 April
2017.
Click here for press release.
Click here for exposure draft.
Discussion paper on disclosure initiative - principles
of disclosure
IASB has issued a discussion paper that suggests
principles to make disclosures in financial statements
more effective. Some specific suggestions in the
discussion paper include:
• Seven principles of effective communication, which
could be included in a general disclosure standard or
described in non-mandatory guidance;
• Possible approaches to improve disclosure objectives
and requirements in IFRS; and
• Principles of fair presentation and disclosure of
performance measures and non-IFRS information in
financial statements, to ensure that such information is
not misleading.
The principles of disclosure project complements a
number of other projects already taken by the Board,
including amendments to IAS 1, Presentation of
Financial Information, and IAS 7, Statement of Cash
Flows, and the development of guidance to help
companies make materiality judgements when preparing
their financial statements.
The last date for submission of comments is 02 October
2017.
Click here for press release.
Click here for discussion paper.
International - Accounting updates
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ASU on consolidation - guidance for not-for-profit
entities
FASB has issued ASU 2017-02, Clarifying when a not-
for-profit (NFP) entity that is a general partner or a
limited partner should consolidate a for-profit limited
partnership or similar entity. It has amended the
consolidation guidance in subtopic 958-810, Not-for-
Profit Entities - Consolidation to clarify when a NFP
entity, that is a general partner or a limited partner, should
consolidate a for-profit limited partnership or similar legal
entity once the amendments in ASU 2015-02,
Consolidation (Topic 810): Amendments to the
Consolidation Analysis, become effective.
The amendments in this ASU retain the existing guidance
on how NFP entity general partners apply the
consolidation guidance that was in subtopic 810-20 by
including it within subtopic 958-810. Therefore, NFP
entities that are general partners are still presumed to
control for-profit limited partnership, regardless of the
extent of their ownership interest, unless that presumption
is overcome by either substantive kick-out rights or
substantive participating rights.
The amendments in this ASU also add guidance to
subtopic 958-810 on when NFP limited partners should
consolidate a for-profit limited partnership.
This ASU is effective for fiscal years beginning after 15
December 2016, and interim periods within fiscal years
beginning after 15 December 2017. Early adoption is
permitted.
NFPs that have already adopted the amendments in ASU
2015-02 are required to apply the amendments in this
ASU retrospectively to all relevant prior periods beginning
with the fiscal year in which the amendments in ASU
2015-02 were initially adopted.
NFPs that have not yet adopted the amendments in ASU
2015-02 are required to adopt the amendments in this
ASU at the same time they adopt the amendments in
ASU 2015-02 and should apply the same transition
method elected for the application of ASU 2015-02.
Click here for ASU.
ASU on intangibles - goodwill and other - simplifying
the test for goodwill impairment
FASB has issued ASU 2017-04, Simplifying the test for
goodwill impairment, to simplify how an entity is
required to test goodwill for impairment by eliminating
step 2 from the goodwill impairment test.
Step 2 in the goodwill impairment test involves computing
the implied fair value of goodwill, by determining the fair
value, at the impairment testing date, of its assets and
liabilities (including unrecognised assets and liabilities)
following the procedure that would be required in
determining the fair value of assets acquired and liabilities
assumed in a business combination.
To simplify the subsequent measurement of goodwill, this
ASU has eliminated step 2 from the goodwill impairment
test. The amendments in this ASU require entities to
perform its annual or interim goodwill impairment test by
comparing the fair value of a reporting unit with its
carrying amount. An impairment charge should be
recognised for the amount by which the carrying amount
of the reporting unit exceeds its fair value. The
impairment charge should not exceed the total amount of
goodwill allocated to that reporting unit. Additionally, an
entity should consider income tax effects from any tax
deductible goodwill on the carrying amount of the
reporting unit when measuring the goodwill impairment
loss, if applicable.
An entity should apply the amendments in this ASU on a
prospective basis. An entity is required to disclose the
nature of and reason for the change in accounting
principle upon transition. That disclosure should be
provided in the first annual period and in the interim
period within the first annual period when the entity
initially adopts the amendments in this ASU.
A public business entity that is a SEC filer should adopt
the amendments in this ASU for its annual or any interim
goodwill impairment tests in fiscal years beginning after
15 December 2019.
A public business entity that is not an SEC filer should
adopt the amendments in this ASU for its annual or any
interim goodwill impairment tests in fiscal years beginning
after 15 December 2020.
All other entities, including not-for-profit entities that are
adopting the amendments in this ASU should do so for
their annual or any interim goodwill impairment tests in
fiscal years beginning after 15 December 2021.
Early adoption is permitted for interim or annual goodwill
impairment tests performed on testing dates after 01
January 2017.
Click here for ASU.
ASU on other income - gains and losses from the
derecognition of non-financial assets - clarifying the
scope of asset derecognition guidance and
accounting for partial sales of non-financial assets
FASB has issued ASU 2017-05, Clarifying the scope of
asset de-recognition guidance and accounting for
partial sales of non-financial assets, included in
Subtopic 610-20, Other income - Gains and losses
from the de-recognition of non-financial assets.
Subtopic 610-20 was issued in May 2014 as part of ASU
2014-09, Revenue from Contracts with Customers
(Topic 606) and provided guidance for recognising gains
and losses from the transfer of non-financial assets in
contracts with non-customers.
America - Accounting updates
19
The scope of Subtopic 610-20 included de-recognition of
an ‘in substance non-financial asset’, but it did not define
the term ‘in substance non-financial asset’. This ASU
defines the term ‘in substance non-financial asset’, in
part, as a financial asset promised to a counterparty in a
contract if substantially all of the fair value of the assets
(recognised and unrecognised) that are promised to the
counterparty in the contract is concentrated in non-
financial assets. If substantially all of the fair value of the
assets that are promised to the counterparty in a contract
is concentrated in non-financial assets, then all of the
financial assets promised to the counterparty are in
substance non-financial assets within the scope of
Subtopic 610-20.
This ASU also clarify that non-financial assets within the
scope of Subtopic 610-20 may include non-financial
assets transferred within a legal entity to a counterparty.
The amendments in this ASU exclude all businesses and
non-profit activities from the scope of Subtopic 610-20.
Therefore, de-recognition of all businesses and non-profit
activities (except those related to conveyances of oil and
gas mineral rights or contracts with customers) should be
accounted for in accordance with Subtopic 810-10,
Consolidation-Overall.
This ASU also provides additional guidance for partial
sales of non-financial assets. This ASU requires an entity
to de-recognise a distinct non-financial asset or distinct in
substance non-financial asset in a partial sale transaction
when it:
• does not have (or ceases to have) a controlling
financial interest in the legal entity that holds the asset
in accordance with Topic 810; and
• transfers control of the asset in accordance with Topic
606.
Once an entity transfers control of a distinct non-financial
asset or distinct in substance non-financial asset, it is
required to measure any non-controlling interest it
receives (or retains) at fair value.
The amendments in this ASU are effective at the same
time as the amendments in ASU 2014-09. Therefore, for
public entities, the amendments are effective for annual
reporting periods beginning after 15 December 2017,
including interim reporting periods within that reporting
period. Public entities may apply the guidance earlier but
only as of annual reporting periods beginning after 15
December 2016, including interim reporting periods within
that reporting period.
For all other entities, the amendments in this ASU are
effective for annual reporting periods beginning after 15
December 2018, and interim reporting periods within
annual reporting periods beginning after 15 December
2019. All other entities may apply the guidance earlier as
of annual reporting periods beginning after 15 December
2016, including interim reporting periods within that
reporting period. All other entities also may apply the
guidance earlier as of annual reporting periods beginning
after 15 December 2016, and interim reporting periods
within annual reporting periods beginning one year after
the annual reporting period in which the entity first applies
the guidance.
An entity is required to apply the amendments in this ASU
at the same time that it applies the amendments in ASU
2014-09.
An entity may elect to apply the amendments in this ASU
either:
• Retrospectively to each period presented in the
financial statements (retrospective approach);
• Retrospectively with a cumulative-effect adjustment to
retained earnings as of the beginning of the fiscal year
of adoption (modified retrospective approach).
An entity may elect to apply all of the amendments in this
ASU and ASU 2014-09 using the same transition method.
Alternatively, an entity may elect to apply a different
transition method to transactions with customers (for
example, transactions within the scope of Topic 606) than
to transactions with non-customers (for example,
transactions within the scope of Subtopic 610-20).
Click here for ASU.
ASU on plan accounting - employee benefit plan
master trust reporting
FASB has issued ASU 2017-06, Employee Benefit Plan
Master Trust Reporting, which primarily relates to the
reporting by an employee benefit plan (‘plan’) for its
interest in a master trust.
A master trust is a trust for which a regulated financial
institution (bank, trust company, or similar financial
institution that is regulated, supervised, and subject to
periodic examination by a state or federal agency) serves
as a trustee or custodian and in which assets of more
than one plan sponsored by a single employer or by a
group of employers under common control are held.
The current guidance on disclosures about an employee
benefit plan’s interest in a master trust in Topic 960, Plan
Accounting - Defined Benefit Pension Plans, and
Topic 962, Plan Accounting - Defined Contribution
Pension Plans were considered limited and incomplete.
The amendments in this ASU clarify presentation
requirements for a plan’s interest in a master trust and
require more detailed disclosures of the plan’s interest in
the master trust.
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20
The main provisions of this ASU, inter alia, are as follows:
• For each master trust in which a plan holds an interest,
the amendments in this ASU requires the plan’s
interest in that master trust and any change in that
interest to be presented in separate line items in the
statement of net assets available for benefits and in
the statement of changes in net assets available for
benefits respectively;
• This ASU removes the requirement to disclose the
percentage interest in the master trust for plans with
divided interests and requires that all plans disclose
the dollar amount of their interest in each of those
general types of investments, which supplements the
existing requirement to disclose the master trust’s
balances in each general type of investments;
• It requires all plans to disclose their master trust’s
other asset and liability balances, and the dollar
amount of the plan’s interest in each of those
balances;
• This ASU does not require the health and welfare
benefit plans to include investment disclosures relating
to the 401(h) account assets, in their financial
statements. It requires the health and welfare benefit
plan to disclose the name of the defined benefit
pension plan in which those investment disclosures
are provided, so that participants can easily access
those statements for information about the 401(h)
account assets, if needed.
The amendments in this ASU are effective for fiscal
years beginning after 15 December 2018. Early
adoption is permitted. An entity should apply the
amendments in this ASU retrospectively to each
period for which financial statements are presented.
Click here for ASU.
ASU on compensation - retirement benefits -
improving the presentation of net periodic pension
cost and net periodic post-retirement benefit cost
FASB has issued ASU 2017-07, Compensation -
Retirement benefits - improving the presentation of
net periodic pension cost and net periodic post-
retirement benefit cost, to improve the presentation of
net periodic pension cost and net periodic post-retirement
benefit cost.
The amendments in this ASU require that an employer
report the service cost component in the same line item
or items as other compensation costs arising from
services rendered by the pertinent employees during the
period. The other components of net benefit cost as
defined in paragraphs 715-30-35-4 and 715-60-35-9 are
required to be presented in the income statement
separately from the service cost component and outside a
subtotal of income from operations, if one is presented. If
a separate line item or items are used to present the
other components of net benefit cost, that line item or
items must be appropriately described. If a separate line
item or items are not used, the line item or items used in
the income statement to present the other components of
net benefit cost must be disclosed.
The amendments in this ASU also allow only the service
cost component to be eligible for capitalisation when
applicable (for example, as a cost of internally
manufactured inventory or a self-constructed asset).
The amendments in this ASU apply to all employers,
including not-for-profit entities that offer to their
employees defined benefit pension plans, other post-
retirement benefit plans, or other types of benefits
accounted for under Topic 715, Compensation -
Retirement Benefits.
The amendments in this ASU are effective for public
business entities for annual periods beginning after 15
December 2017, including interim periods within those
annual periods. For other entities, the amendments in this
ASU are effective for annual periods beginning after 15
December 2018, and interim periods within annual
periods beginning after 15 December 2019. Early
adoption is permitted as of the beginning of an annual
period for which financial statements (interim or annual)
have not been issued or made available for issuance.
Disclosures of the nature of and reason for the change in
accounting principle are required in the first interim and
annual periods of adoption.
The amendments in this ASU should be applied
retrospectively for the presentation of the service cost
component and the other components of net periodic
pension cost and net periodic post-retirement benefit cost
in the income statement and prospectively, on and after
the effective date, for the capitalisation of the service cost
component of net periodic pension cost and net periodic
post-retirement benefit in assets.
Click here for ASU.
ASU on receivables - non-refundable fees and other
costs - premium amortisation on purchased callable
debt securities
FASB has issued ASU 2017-08, Receivables - non-
refundable fees and other costs (Subtopic 310-20) to
amend the amortisation period for certain purchased
callable debt securities held at a premium. FASB is
shortening the amortisation period for the premium to the
earliest call date.
America - Accounting updates
21
Under current GAAP, premiums and discounts on callable
debt securities generally are amortised to the maturity
date. An entity must have a large number of similar loans
to consider estimates of future principal prepayments
when applying the interest method. However, an entity
that holds an individual callable debt security at a
premium may not amortise that premium to the earliest
call date. If that callable debt security is subsequently
called, the entity records a loss equal to the unamortised
premium. The amendments in this ASU more closely
align the amortisation period of premiums and discounts
to expectations incorporated in market pricing on the
underlying securities. In most cases, market participants
price securities to the call date that produces the worst
yield when the coupon is above current market rates (that
is, the security is trading at a premium) and price
securities to maturity when the coupon is below market
rates (that is, the security is trading at a discount) in
anticipation that the borrower will act in its economic best
interest. As a result, the amendments more closely align
interest income recorded on bonds held at a premium or
a discount with the economics of the underlying
instrument.
The amendments in this ASU affect all entities that hold
investments in callable debt securities that have an
amortised cost basis in excess of the amount that is
repayable by the issuer at the earliest call date (that is, at
a premium).
For public business entities, the amendments in this ASU
are effective for fiscal years, and interim periods within
those fiscal years, beginning after 15 December 2018.
For all other entities, the amendments 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, 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.
An entity should apply the amendments in this Update on
a modified retrospective basis through a cumulative-effect
adjustment directly to retained earnings as of the
beginning of the period of adoption.
Click here for ASU.
Proposed ASU on compensation - stock
compensation - improvements to non-employee
share-based payment accounting
FASB has issued a proposed ASU intended to maintain
or improve the usefulness of the information provided to
the users of the financial statements while reducing cost
and complexity in the financial reporting. It involve several
aspects of the accounting for non-employee share based
payment transactions resulting from expanding the scope
of Topic 718, Compensation - Stock Compensation, to
include share-based payment transactions for acquiring
goods and services from non-employees. The
amendments in this proposed ASU would expand the
scope of Topic 718 to include share-based payment
transactions for acquiring goods and services from non-
employees. An entity would apply the requirements of
Topic 718 to non-employee awards except for specific
guidance on inputs to an option pricing model and the
attribution of cost.
An entity would apply the amendments in this proposed
ASU through a cumulative-effect adjustment to retained
earnings as of the beginning of the annual period of
adoption. However, a non-public entity that substitutes
calculated value for expected volatility when measuring
share-based payment awards would apply the proposed
amendments prospectively to all awards that are
measured at fair value after the effective date. The
proposed amendments would be applied to only
outstanding awards.
Disclosures required at transition would include the
nature of and reason for the change in accounting
principle and, if applicable, quantitative information about
the cumulative effect of the change on retained earnings
or other components of equity.
The last date for submission of comments is 05 June
2017.
Click here for ASU.
America - Accounting updates
22
Real Estate Investment Trusts and Infrastructure
Investment Trusts
Background
Real estate and infrastructure are two of the most crucial
and influential sectors of the Indian economy. In this topic,
we cast our lens on the most-talked about regulated
mechanism which helps investors channelise their
investment into real estate and infrastructure sector
through REITs and InvITs respectively.
If real estate and infrastructure projects are physical
assets, REITs and InvITs help break these assets into
several small parts in the form of securitised investment.
It provides a more accessible platform for the individual
investors to reap the benefits of owning an interest in
securitised real estate and infrastructure market. In other
words, investment in units of Business Trusts ('BTs')
enable small-budget investors to put money in the real
estate and infrastructure projects with the benefit of
ongoing returns and without having to deal with the
shortcomings/difficulties of investing directly in such
physical assets.
Evolution in India
Such BTs have been in existence in developed
economies for several years and provide a stable
investment alternative for retail investors. This concept of
alternate investment structure in the real estate and for
the infrastructure sector has been into deliberations for
quite some time now. The formation of the REITs and
InvITs in India was first approved in the year 2014. On 26
September 2014, SEBI notified the SEBI (Real Estates
Investment Trusts) Regulations, 2014 (‘REITs
regulations’) and SEBI (Infrastructure Investment Trusts)
Regulations, 2014 (‘InvITs regulations’), thereby paving
the way for introduction of an internationally acclaimed
investment structure in India. Further, Government of
India also made necessary amendments to the Indian
taxation regime to provide incentives for the formation of
REITs and InvITs in India. REITs in India are mainly of
hybrid type. Hybrid REITs invest in both properties and
mortgages.
Most developers and investors didn’t go ahead with their
BT's plans, perhaps due to the onerous tax implications.
To address this issue, certain tax benefits have been
rolled-out in the finance budgets of the years 2015 and
2016 with the aim to improve the investment climate in
the country. With the aim to ease the path for REITs and
InvITs in India, pass-through status has been provided for
rental income and capital gains tax has been rationalised
for the sponsors exiting at the time of listing of the units of
REITs, subject to payment of securities transaction tax,
which is more extensively discussed later in this topic.
Hot Topic
While mutual funds invest in equities and other stocks, BTs invest directly in real estate and infrastructure assets
How are BTs different from mutual funds?
Business Trusts
REITs and InvITs
Though the government has been in
the process of making it easier to
invest in real estate and infrastructure
projects in India, the fact remains that
these sectors are yet to witness any
benefits from any REITs and InvITs
REITs and InvITs are
mandatorily required to be
listed on recognised stock
exchanges in India
REITs distribute a major part of their
earnings to their investors
23
Business model - A broad overview
Regulatory requirements:
REITs regulations and InvITs regulations state that no person shall act as REIT and InvIT respectively unless it is
registered with the SEBI. BT shall be a trust set up under the Indian Trust Act, 1882. As per these regulations, sponsor,
manager and trustee will be designated under the regulations and all such person will be separate entities.
Hot Topic
REIT/InvIT
- holds controlling interest in
HoldCo and SPV
- invests in properties
through HoldCo, SPV or
directly
Holding company (HoldCo)
- in which REIT/InvIT holds
controlling interest
- not engaged in any other
activity other than holding of
underlying SPV
Special purpose vehicle
(SPV):
- in which either REIT/ InvIT
or HoldCo holds controlling
interest
- does not investment in any
other SPV
Real estate and
infrastructure projects
Sponsor and sponsor group set-up the BT and appoint trustee
Trustee holds the assets of BT for benefits of the unit holders and enter into investment
management agreement with manager
Investment managermakes investment
decisions with respect to underlying assets of the
BT
Issue of units of BT
REIT: It shall make an initial offer of its units by way of
public issue only. Any subsequent issue of units by the
REIT may be by way of follow-on offer, preferential
allotment, qualified institutional placement, rights issue,
bonus issue, offer for sale or any other mechanism and in
the manner as may be specified by the SEBI.
InvIT: These entities may raise fund by way of private
placement or public issue through initial public offer.
Unit holders shall have the rights to receive income or
distributions as provided for in the offer document or trust
deed.
SEBI has allowed BT to invest in two level SPV structure
through holding company (HoldCo), subject to sufficient
shareholding in the HoldCo and the underlying SPV and
other safeguards. These provisions have enabled
companies to be able to move with the option of
constituting BT with making much changes in their
existing group structure.
Disclosure of financial information in offer document
for BTs
REITs regulations and InvITs regulations prescribe
disclosures to be made in an offer document. SEBI has
also issued circulars to provide detailed requirements for
disclosure of financial information in offer document for
REITs and InvITs.
These circulars, inter alia, provide that:
• Financial information to be disclosed in offer document
shall comply with the following:
- Period of financial information: Offer document
shall contain financial information for a period of
last three completed financial years immediately
preceding the date of offer document. Further, if
closing date of the last completed financial year
falls more than six months before the date of offer
document, then the BT shall also disclose interim
financial information;
24
- Nature of financial information: If BT has been in
existence for the last three completed financial
years, then the historical financial statements of the
BT, on both standalone as well as consolidated
basis) for last three years, and interim period, if
any, shall be disclosed. If BT has been in existence
for a period lesser than the last three completed
financial years and the historical financial
statements of BT are not available for the reporting
period of three years and interim period, then the
combined financial statements need to be disclosed
for the periods when such historical financial
statements are not available;
- Content and basis of preparation: Financial
information shall be prepared in accordance with
Ind AS Rules. Financial information presented by
the BT can be in the form of condensed financial
statement;
- Additional financial disclosures: In addition to
the financial statements, BT shall also disclose
property wise operating income/project wise
operating cash flows, earning per share, contingent
liabilities, commitments etc. as a part of the audited
financial information and shall also be subjected to
audit;
- Audit of financial information: Financial
information shall be audited. In providing report, the
auditor shall be guided by the requirements of the
'Guidance Note on Reports in Company
Prospectuses' issued by the ICAI, to the extent
applicable;
• Projections of BT's revenue/income and operating
cash flows over the next three years including related
assumptions;
• Management discussion and analysis of BT's
operations;
• Framework for calculation of Net Distributable Cash
Flows ('NDCFs').
Disclosure requirements to stock exchanges on
continuous basis
• BT is required to submit half yearly and annual
financial information to the stock exchanges;
• Financial information shall be disclosed on both
standalone and consolidated basis;
• Financial information shall be prepared in accordance
with Ind AS notified under Ind AS Rules;
• In addition to above stated financial information, BT
shall also disclose their statement of NDCFs as well
as of all the underlying HoldCos and SPVs.
Audit of Financial Information
• Annual financial information shall be audited, whereas
the half yearly financial information may be either
audited or unaudited;
• As part of the audit report, in addition to the opinion on
the financial statements of the BT, auditor shall give
his opinion as to whether:
- the statement of net assets value gives a true and
fair view of the net assets as at the balance sheet
date;
- the statement of total returns at fair value gives a
true and fair view of the total returns;
- the statement of NDCFs gives a true and fair view
of NDCFs for the years/periods ended at the
balance sheet dates.
Taxation regime - A bird’s eye view
• Shares of SPV are exchanged with the units of the
BT:
Sponsors: Capital gains shall not be taxable at the
time of transfer of such shares.
• Interest income: Flow of interest from SPV to the BT.
SPV: Not applicable
BT: Exempt, considered as pass through
Unit holders: Taxable as interest income and tax
withholding tax to be deducted by BT.
• Income from real estate assets and investment
property:
SPV: If such assets are held by SPV, taxable as
business income or rental income
BT: If such assets are directly hold by BT, exempt (in
case of REITs) and Taxable (in case of InvITs)
Unit holders: Taxable for unitholders of REITs and
withholding tax to be deducted by REIT on distribution.
In case of InvITs, such income will be exempt.
Hot Topic
Audit Requirement
Minimum once in a year
Audit report on annual financial
information to be submitted within 60
days
Half yearly audited/reviewed financial
information within 45 days
25
• Dividend:
SPV: When SPV will distribute dividend to BT (DDT
not required to be paid subject to certain conditions)
BT: Exempt
Unit holders: Exempt
• Capital gains earned on sale of assets, share of
SPVs or units of BT:
SPV: On sale of real estates and investment property
held by them, capital gain shall be computed as per
provisions of the IT Act.
BT: On sale of real estates and shares in SPVs held
by them, capital gain shall be computed as per
provisions of the IT Act.
Unit holders: On sale of units of BT, following are the
tax implications:
For unit holders and Sponsors: Long term capital gain
is exempt; short term capital gain is taxable at 15%
• Any other income
SPV: Taxable
BT: Taxable
Unit holders: Exempt
Hot Topic
The final word
India is an untapped market for these asset classes and these are the sectors that will
continue to evolve. Largely, the Indian REIT/InvIT regime is at par with the international
format and seems to have what is needed to provide the right impetus to the Indian real
estate and infrastructure sector. But tax efficiency, at this point, is quite critical to the
success of these investment vehicles. Though the recent budgetary amendments could give
the much-needed push to the REITs and InvITs by making this alternative investment
opportunity more lucrative to the common man, but the regulators must ensure that the
REIT/InvIT regime is appraised periodically to keep pace with the changing dynamics of the
economy.
Withholding tax
BT to deduct tax on interest income and income from real estate /investment property,
payable to the unit holders on payment or credit (whichever is earlier), as per the rates
specified.
26
Abbreviations used in this publication2013 Act Companies Act, 2013 (as amended)
AASB Auditing and Assurance Standards Board
AS Accounting Standard
AS RulesCompanies (Accounting Standards) Rules 2006 (as
amended)
ASB Accounting Standards Board
ASU Accounting Standards Update
CBDT Central Board of Direct Taxes
FASB Financial Accounting Standards Board
FY Financial year
GAAP Generally Accepted Accounting Principles
IAS International Accounting Standard
IASB International Accounting Standards Board
ICAI Institute of Chartered Accountants of India
ICDR
Regulations
SEBI (Issue of Capital and Disclosure Requirements)
Regulations, 2009 (as amended)
ICDS Income Computation and Disclosure Standards
IFRS International Financial Reporting Standard
Ind AS Indian Accounting Standard
Ind AS
Rules
Companies (Indian Accounting Standards) Rules,
2015 (as amended)
InvIT Infrastructure Investment Trust
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
MTM Mark to Market
NAV Net Asset Value
NBFC Non-Banking Financial Company
NCLT National Company Law Tribunal
OCI Other Comprehensive Income
PPE Property, Plant and Equipment
RBI Reserve Bank of India
REIT Real Estate Investment Trust
SA Standard on Auditing
SEBI Securities and Exchange Board of India
SEBI Listing
Regulations
SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 (as amended)
SEC U.S. Securities and Exchange Commission
27
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