Monthly GAAP Bulletin - Grant Thornton...
Transcript of Monthly GAAP Bulletin - Grant Thornton...
Monthly GAAP Bulletin December 2017
Monthly GAAP Bulletin
Introduction
Dear Reader,
Grant Thornton is delighted to present ‘Monthly GAAP Bulletin’, a 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 below each update.
We would be pleased to receive your valuable feedback. Please write to us at
[email protected] with your comments, questions or suggestions.
This edition covers updates for the month of November 2017. Abbreviations used in
the publication are explained at the end of the publication.
Following is the index of updates covered in this bulletin:
Contents Page
A. India updates – Effective
a. Auditing updates
1 Guidance note on report under section 92E of the Income Tax Act 1961 4
(Transfer Pricing) Revised 2017
b. Other regulatory updates
Companies Act, 2013 updates
1 The Companies (Accounts) Amendment Rules, 2017 5
2 The Companies (Filing of documents and forms in extensible business
reporting language) Amendment Rules, 2017
5
SEBI updates
1 Amendments to SEBI (International financial services centres)
Guidelines, 2015
7
2 SEBI circular on enhancing fund governance for mutual funds 7
2
Monthly GAAP Bulletin
Other updates
1 Income-tax (Twenty-fourth amendment) Rules, 2017 8
2 Due Diligence Framework under the Insolvency and Bankruptcy Code,
2016 strengthened
8
3
4
Foreign Exchange Management (Transfer or issue of security by a
person resident outside India) Regulations, 2017
Foreign Exchange Management (Transfer or issue of any foreign
security) (Amendment) Regulations, 2017
9
10
5 Report on Audit Quality Review (2016-17) 10
6 Secretarial standard on dividend 11
7 The Insolvency and Bankruptcy Code (amendment) ordinance 2017 11
B. International updates – Effective
a. US GAAP updates
1 ASU No. 2017-14—Income Statement—Reporting comprehensive income 12
(Topic 220), Revenue recognition (Topic 605), and Revenue from contracts
with customers (Topic 606)
b. Others
1. Staff inspection brief on preview of 2016 inspections findings 12
C. International updates – Proposed
a. US GAAP updates
1. FASB to simplify lease standard implementation 13
b. US GAAS updates
1. AICPA ASB addresses auditor’s report, other information,
standards alignment 13
3
Monthly GAAP Bulletin
A. India updates – Effective a. Auditing updates
Guidance note on report under section
92E of the Income Tax Act 1961
(Transfer Pricing) Revised 2017
ICAI has released Guidance note on Report
under Section 92E of the Income Tax Act,
1961 (Transfer Pricing) Revised 2017
(‘guidance note’). This guidance note
addresses the amendments made by the
Finance Act, 2017 in the IT Act.
These amendments include amendment to
applicability of specified domestic
transactions compliance by excluding
expenditure made to person referred to in
Sec. 40A(2)(b) of the IT Act, from the ambit
of the definition of specified domestic
transactions.
Further, provisions regarding secondary
adjustments and limitation on interest
deduction were introduced and inserted as
new sections (92CE and 94B respectively)
vide Finance Act, 2017. Finance Act 2017
also introduced section 271J for levying
penalty on accountants for furnishing
incorrect information in reports or
certificates furnished under any provisions
of the IT Act or the rules made thereunder.
Click here for the guidance note.
4
Monthly GAAP Bulletin
b. Other regulatory updates
Companies Act, 2013 updates
The Companies (Accounts) Amendment Rules, 2017
MCA has issued the Companies (Accounts)
Amendment Rules, 2017 (‘amended rules’)
which have substituted form no. AOC-4 in
the annexure to the Companies (Accounts)
Rules, 2014 (‘principal rules’).
Form no. AOC-4 is a form for filing financial
statement and other documents with the
Registrar pursuant to section 137 of the
2013 Act and sub-rule (1) of rule (12) of the
principal rules.
The revised Form no. AOC-4 has added
two more segments: Segment V – Auditor’s
Report and Segment VI – Miscellaneous.
Segment V requires disclosure in the form
of qualification, reservation and adverse
remarks by auditors, including auditor’s
comments on items specified under CARO,
and supplementary or test audit of
government company by CAG. These
disclosures were required to be given under
segment I in the erstwhile form no. AOC-4.
Segment V also requires disclosure
regarding whether the auditors have
reported on SBN disclosures by the
company.
Further, segment VI, inter alia, includes
reporting on whether secretarial audit is
required.
The revised form has also made changes in
other segments which, inter alia, include
disclosure of nature of financial statements,
nature of revision if any which may be on
financial statements or board’s report or
both, disclosure on whether consolidated
financial statements are required, whether
company is maintaining books of accounts
in electronic form, etc.
The amended rules have come into force
on 7 November 2017.
Click here for the amended rules. The Companies (Filing of documents and forms in extensible business reporting language) Amendment Rules, 2017 MCA has issued the Companies (Filing of
documents and forms in extensible
business reporting language) Amendment
Rules, 2017 (‘amended rules’) to amend the
Companies (Filing of documents and forms
in extensible business reporting language)
Rules, 2015 (‘principal rules’).
The amended rules have substituted rule 3
and Annexure-I, and have inserted
Annexure-II A in the principal rules.
Rule 3 deals with filing of financial
statements with Registrar and prescribes
the classes of companies required to file
their financial statements and other
documents under section 137 of the
Companies Act, 2013 with the Registrar in
e-form AOC-4 XBRL as per Annexure-I.
5
Monthly GAAP Bulletin
The amended rules now, inter alia, provide
that companies which are required to
prepare their financial statements in
accordance with the Companies (Indian
Accounting Standards) Rules, 2015 should
also file the financial statements with the
Registrar as aforesaid.
It has been further prescribed that the
companies preparing their financial
statements under the Companies
(Accounting Standards) Rules, 2006 should
file the statements using the taxonomy
provided in Annexure-II and companies
preparing their financial statements under
Companies (Indian Accounting Standards)
Rules, 2015 should file their statements
using the taxonomy provided in
Annexure-II A.
The amended rules have come into force
on 6 November 2017.
Click here for the amended rules.
6
Monthly GAAP Bulletin
SEBI updates Amendments to SEBI (International financial services centres) Guidelines, 2015 SEBI has issued a circular to amend SEBI
(International financial services centres)
Guidelines, 2015 (‘guidelines’). The circular
amends the definition of issuer given in
clause 2(1)(i) of the guidelines.
The amended definition of issuer reads as
follows:
a. any entity incorporated in India seeking
to raise capital in foreign currency other
than Indian rupee which has obtained
requisite approval under Foreign
Exchange Management Act, 1999
(FEMA) or exchange control
regulations as may be applicable; or
b. an entity incorporated in a foreign
jurisdiction, provided such entity is
permitted to issue securities outside the
country of its incorporation or
establishment or place of business as
per the laws and regulations of its
country of incorporation, jurisdiction or
its constitution, or
c. any supranational, multilateral or
statutory organisation/ institution/
agency provided such organisation/
institution/ agency is permitted to issue
securities as per its constitution.
The term issuer was earlier defined as a
company incorporated in India seeking to
raise capital in foreign currency other than
Indian rupee which has obtained requisite
approval under Foreign Exchange
Management Act, 1999 (FEMA) or
exchange control regulations as may
be applicable, or a company incorporated in
a foreign jurisdiction.
Click here for the circular. SEBI circular on enhancing fund governance for mutual funds SEBI has issued a circular strengthening
the governance structure for mutual funds.
The circular provides implementation
requirements in relation to
i) tenure of independent trustees and
independent directors and
ii) auditors of mutual funds.
Click here for the SEBI circular.
7
Monthly GAAP Bulletin
Other updates Income-tax (Twenty-fourth amendment) Rules, 2017 CBDT has issued Income-tax (Twenty-
fourth amendment) Rules, 2017 (‘amended
rules’) to add new rules 10DA and 10DB,
and new Form no. 3CEAA, Form no.
3CEAB, Form no. 3CEAC, Form no.
3CEAD and Form no. 3CEAE in the IT
Rules.
The new rule 10DA prescribes the
information and documents to be kept and
maintained under proviso to sub-section (1)
of section 92D and to be furnished in terms
of sub-section (4) of section 92D. The new
rule 10DB deals with furnishing of report in
respect of an international group.
Proviso to sub-section (1) of section 92D
provides that a person, being a constituent
entity of an international group, should keep
and maintain such information and
document in respect of an international
group as may be prescribed. Sub-section
(4) of section 92D specifies the authority to
whom the information and document
referred to in the aforesaid proviso is to be
submitted.
Further the new Form no. 3CEAA, Report
to be furnished under sub-section (4) of
section 92D of the Income-tax Act, 1961
and Form no. 3CEAB, Intimation by a
designated constituent entity, resident in
India, of an international group, for the
purposes of sub-section (4) of section 92D
of the IT Act, have been issued pursuant to
rule 10DA and Form No 3CEAC, Intimation
by a constituent entity, resident in India, of
an international group, the parent entity of
which is not resident in India, for the
purposes of sub-section (1) of section 286
of the IT Act, Form No 3CEAD, Country-by-
country report and Form No 3CEAE,
Intimation on behalf of the international
group for the purposes of the proviso to
sub-section (4) of section 286 of the IT Act
have been issued pursuant to rule 10DB.
Click here for the amended rules. Due Diligence Framework under the Insolvency and Bankruptcy Code, 2016 strengthened IBBI has issued Insolvency and Bankruptcy
Board of India (Insolvency resolution
process for corporate persons) (Third
amendment) Regulations, 2017 and
Insolvency and Bankruptcy Board of India
(Fast track insolvency resolution process
for corporate persons) (Third amendment)
Regulations, 2017 (both referred to as
‘amended regulations’) to amend the
Insolvency and Bankruptcy Board of India
(Insolvency resolution process for corporate
persons) Regulations, 2016 and the
Insolvency and Bankruptcy Board of India
(Fast track insolvency resolution process
for corporate persons) Regulations, 2017
(both referred to as ‘principal regulations’)
respectively.
8
Monthly GAAP Bulletin
As per the amended regulations, the
resolution professional should ensure that
the resolution plan presented to the
committee of creditors contains relevant
details to assess the credibility of the
resolution applicants. The details to be
provided would include details with respect
to the resolution applicant in terms of
convictions, disqualifications, criminal
proceedings, categorisation as wilful
defaulter as per RBI guidelines, debarment
imposed by SEBI, if any, and transaction, if
any, with the corporate debtor in the last
two years. This would enable the committee
of creditors to assess credibility of such
applicant and other connected persons to
take a prudent decision while considering
the resolution plan for its approval.
Further, the amended regulations also
require the resolution professional to submit
to the committee of creditors all resolution
plans which comply with the requirements
of the Code and regulations made
thereunder, along with details of preferential
transactions, undervalued transactions,
extortionate credit transactions, and
fraudulent transactions as given under
various sections of the Code.
Click here for the press release.
Click here for Insolvency and Bankruptcy
Board of India (Insolvency resolution
process for corporate persons) (Third
amendment) Regulations, 2017.
Click here for Insolvency and Bankruptcy Board of India (Fast track insolvency resolution process for corporate persons) (Third amendment) Regulations, 2017.
Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 RBI has issued Foreign Exchange
Management (Transfer or issue of security
by a person resident outside India)
Regulations, 2017 (‘regulations’) to regulate
investment in India by a person resident
outside India.
These regulations supersede notification
no. FEMA 20 /2000-RB dated 3 May 2000
regarding Foreign Exchange Management
(Transfer or issue of security by a person
resident outside India) Regulations, 2000
and notification no. FEMA 24 /2000-RB
dated 3 May 2000 regarding Foreign
Exchange Management (Investment in firm
or proprietary concern in India) Regulations,
2000.
The regulations have come into force on 7
November 2017, except a few provisions
which will come into force on a date to be
notified.
Click here for the regulations.
9
Monthly GAAP Bulletin
Foreign Exchange Management (Transfer or issue of any foreign security) (Amendment) Regulations, 2017 RBI has issued Foreign Exchange
Management (Transfer or issue of any
foreign security) (Amendment) Regulations,
2017 (‘amended regulations’) which
amends the Foreign Exchange
Management (Transfer or issue of any
foreign security) Regulations, 2004
(‘principal regulations’).
The amended regulations modify
Regulation 15(v)(a) of the principal
regulation by requiring the statutory
auditors of the Indian Party to certify that
the law of the host country does not
mandatorily require audit of the books of
accounts of the joint venture/ wholly owned
subsidiary and that the figures in the APR
are as per the un-audited accounts of the
overseas joint venture/ wholly owned
subsidiary. Earlier the statutory auditors of
the Indian party were required to certify that
unaudited financial statements of the joint
venture/ wholly owned subsidiary give a
true and fair view.
It further adds clause (c) to Regulation 15
which provides that the above exemption of
filling the APR based on unaudited balance
sheet will not be available for joint venture/
wholly owned subsidiary in a country /
jurisdiction which is either under the
observation of the Financial Action Task
Force (FATF) or in respect of which
enhanced due diligence is recommended
by FATF or the any other country/
jurisdiction as prescribed by Reserve Bank
of India.
The amended regulations have come into
force from 14 November 2017.
Click here for the notification. Report on Audit Quality Review (2016-17) The Quality Review Board has issued
Report on Audit Quality Review (2016-17)
which provides findings, analysis and
summary of observations made by the
technical reviewers.
The findings are based on the review of 74 audit files which covered 47 entities and 64 audit firms. The findings were in the following areas: 1) Standards on Quality Control
2) Standards on auditing
3) Accounting standards
4) Revised schedule VI of the 1956 Act/
Schedule III of the 2013 Act
5) Other relevant laws and regulations (for
e.g. Companies (Auditor’s Report)
Order, (CARO))
Click here for the report.
10
Monthly GAAP Bulletin
Secretarial standard on dividend ICSI has issued secretarial standard on
dividend, SS-3. The standard prescribes
the set of principles in relation to
declaration and payment of dividend.
The principles set out in SS-3 relate to
declaration and payment of Dividend on
equity as well as preference share capital in
accordance with the provisions of the 2013
Act and are in respect of dividend as it
relates to a going concern. These are
equally applicable to final as well as interim
dividend unless otherwise stated.
ICSI had earlier also issued revised
secretarial standard on meetings of board
of directors, SS-1 and revised secretarial
standards on general meetings, SS-2. The
revised standards are applicable to all
companies (except the exempted classes of
companies) from 1st October 2017.
Accordingly, all board meetings (including
meetings of committees of Board) and
general meetings in respect of which
Notices are issued on or after 1st October,
2017 need to comply with the revised SS-1
and SS-2.
Click here for SS-3
Click here for revised SS-1
Click here for revised SS-2
The Insolvency and Bankruptcy Code (amendment) ordinance 2017 The president of India has promulgated the
Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2017 amending
the following sections in the Code
i) Section 2, Application
ii) Section 5, Definitions
iii) Section 25, Duties of resolution
professional
iv) Section 30, Submission of resolution
plan
v) Section 35, Powers and duties of
liquidator
vi) Section 240, Power to make
regulations
The ordinance also introduces the following
new sections in the Code:
i) Section 29A, Persons not eligible to be
resolution applicant
ii) 235A, Punishment where no specific
penalty or punishment is provided
This ordinance has come into force
immediately.
Click here for the ordinance.
11
Monthly GAAP Bulletin
B. International updates - Effective
a. US GAAP updates
ASU No. 2017-14—Income Statement—
Reporting comprehensive income (Topic
220), Revenue recognition (Topic 605),
and Revenue from contracts with
customers (Topic 606)
FASB has issued ASU No. 2017-14, that
amends the SEC paragraphs in Topic 220,
Topic 605 and Topic 606 pursuant to the
Staff Accounting Bulletin No. 116 and SEC
Release 33-10403.
The amendments introduced by this ASU
will also result in changes to the U.S. GAAP
Financial Reporting Taxonomy.
Click here for the ASU.
b. US GAAS updates
Staff inspection brief on preview of 2016
inspections findings
The PCAOB has published a staff
inspection brief (Vol. 2017/4 – November
2017) which provides a preview of the
observations from 2016 inspections of
auditors of public companies and other
issuers.
It highlights the three key areas where most
frequent audit deficiencies were observed
in the 2016 inspection cycle.
These three key areas are:
- assessing and responding to risks of
material misstatement;
- auditing internal control over financial
reporting (‘ICFR’); and
- auditing accounting estimates, including
fair value measurements.
It also points out other audit areas with
continued audit deficiencies, which included
areas affected by certain economic risks,
auditing of certain financial reporting areas,
audit work regarding multinational audits,
and certain aspects of a firm's system of
quality control.
Click here for the news release.
Click here for the staff inspection brief.
12
Monthly GAAP Bulletin
C. International updates – Proposed
a. US GAAP updates
FASB to simplify lease standard
implementation
In order to reduce the challenges that
financial statement preparers are facing
while implementing the new leases
standard, FASB has decided to issue an
ASU providing practical expedients in
relation to transition and also clarifying that
the new or modified lease easements
should be evaluated under Topic 842.
FASB has also decided to issue a proposed
ASU with regard to transition and provide a
practical expedient with regard to
separation of non-lease components from
lease components.
Click here for the news
b.US GAAS updates
AICPA ASB addresses auditor’s report,
other information, standards alignment
To enhance the relevance and usefulness
of the auditors reports for audits of non-
issuers, AICPA ASB has issued three
proposals, 1) Proposed Statement on
Auditing Standards: Auditor Reporting and
Proposed Amendments—Addressing
Disclosures in the Audit of Financial
Statements, 2) Proposed Statement on
Auditing Standards: The Auditor’s
Responsibilities Relating to Other
Information Included in Annual Reports and
3) Proposed Statement on Auditing
Standards: Omnibus Statement on Auditing
Standards—2018.
Comments on the above proposals can be
submitted by 15 May 2018.
Click here for the news.
13
Monthly GAAP Bulletin
Abbreviations used in this publication
1956 Act Companies Act, 1956
2013 Act Companies Act, 2013
ASU Accounting Standards Update
CAG Comptroller and Auditor General of India
CARO Companies (Auditor's Report) Order
CBDT Central Board of Direct Taxes
Code Insolvency and Bankruptcy Code, 2016
FASB Financial Accounting Standards Board
GAAP Generally Accepted Accounting Principle
IBBI Insolvency and Bankruptcy Board of India
ICAI Institute of Chartered Accountants of India
IFSC International financial services centres
IT Act Income-tax Act, 1961
IT Rules Income-tax Rules, 1962
MCA Ministry of Corporate Affairs
NCLT National Company Law Tribunal
PCAOB Public Company Accounting Oversight Board
RBI Reserve Bank of India
SBN Specified Bank Notes
SEBI Securities and Exchange Board of India
SEC Securities and Exchange Commission
XBRL Extensible Business Reporting Language
14
Monthly GAAP Bulletin
Contact us
To know more, please visit www.grantthornton.in
or contact any of our offices as mentioned below:
NEW DELHI
National Office Outer Circle L 41 Connaught Circus, New Delhi 110001 T +91 11 4278 7070
AHMEDABAD
7th Floor, Heritage Chambers, Nr. Azad Society, Nehru Nagar, Ahmedabad - 380015
BENGALURU
5th Floor, 65/2, Block A, Bagmane Tridib, Bagmane Tech Park, C V Raman Nagar, Bengaluru – 560093 T+91 80 4243 0700
CHANDIGARH
B-406A, 4th Floor, L&T Elante office Industrial area, Phase-I Chandigarh 160002 T +91 172 4338 000
CHENNAI
7th Floor, Prestige Polygon 471, Anna Salai, Teynampet Chennai - 600 018 T +91 44 4294 0000
GURGAON
21st Floor DLF Square, Jacaranda Marg, DLF Phase II, Gurgaon 122002 T +91 124 462 8000
HYDERABAD
7th Floor, Block III White House Kundan Bagh, Begumpet Hyderabad 500016 T +91 40 6630 8200
KOCHI
7th Floor, Modayil Centre Point, Warriam road junction, M.G. Road Kochi 682016 T +91 484 406 4541
KOLKATA
10C Hungerford Street 5th Floor, Kolkata 700017 T +91 33 4050 8000
MUMBAI 16th Floor, Tower II Indiabulls Finance Centre SB Marg, Elphinstone (W) Mumbai 400013 T +91 22 6626 2600
MUMBAI
9th Floor, Classic Pentagon, Nr Bisleri, Western Express Highway, Andheri (E) Mumbai 400099 T +91 22 6176 7800
NOIDA
Plot No. 19A, 7th Floor Sector – 16A, Noida 201301 T +91 120 7109 001
PUNE
3rd Floor, Unit No 309 to 312, West Wing, Nyati Unitree Nagar Road, Yerwada Pune- 411006 T +91 20 6744 8800
For more information or for any queries, write to us at [email protected]
Follow us @GrantThorntonIN
© 2017 Grant Thornton India LLP. All rights reserved.
“Grant Thornton in India” means Grant Thornton India LLP, a member firm within Grant Thornton International Ltd, and those legal entities which are its related parties as defined by the Companies Act, 2013.
Grant Thornton India LLP is registered with limited liability with identity number AAA-7677 and has its registered office at L-41 Connaught Circus, New Delhi, 110001.
References to Grant Thornton are to Grant Thornton International Ltd (Grant Thornton International) or its member firms. Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by the member firms.
15