In the year 2018, we announced almost all important updates on Accounts and Audit. These updates include constitution of the National Financial Reporting Authority (NFRA) by the Government, analysis of exposure drafts on new Accounting Standards, amendments to notified Ind AS, amendments to International Financial Reporting Standards (IFRS), etc.
We have carefully investigated every update we announced in the Year 2018 in accounting and auditing and have recognized the following 10 key highlights to brush up your knowledge.
The Central Government constituted the National Financial Reporting Authority (NFRA) under section 132 of the Companies Act, 2013 w.e.f. October 01, 2018. Following this, the functions and duties of the NFRA as specified in section 132 had been made applicable w.e.f October 24, 2018. After that, the Government has notified the National Financial Reporting Authority Rules, 2018.
The power of the Institute of Chartered Accountants of India (ICAI) to investigate into the matter of professional misconduct by its members or CA firms for the specified class of companies is now vested with NFRA. The inherent regulatory role of ICAI as provided in the Chartered Accountants Act, 1949 shall continue with respect to its members in general and specifically with respect to audits pertaining to private limited companies, and other class of public unlisted companies.
On 14 February, 2018 one of India’s largest banks, Punjab National Bank (PNB), informed the stock exchanges that it unearthed a fraud of $ 1.88 billion (around Rs. 11,400 crores) at its Brady Branch of Mumbai. ICAI set up a high-powered group to examine whether there were any control related issues in the matter and to suggest remedial measures and improvement in the banking system.
In the process of probing the role of auditors in fraud, the Institute of Chartered Accountants of India (ICAI) issued a show-cause notice to the auditors of PNB and Gitanjali Gems Ltd. Apart from this, it also summoned Deputy General Manager of PNB to give details of the modus operandi used in the fraud and to produce related documents.
After demonetization of Rs. 500 and Rs. 1,000 currency notes being Specified Bank Notes (SBNs), the Ministry of Corporate Affairs (MCA) introduced a requirement for every company to disclose the details of SBNs held and transacted during the period from 8 November 2016 to 30 December 2016 as part of notes to an account of financial statements for the year ended 30thMarch, 2017.
There were confusions regarding the similar disclosure should be required in FY 17-18 with a corresponding disclosure of FY 16-17. ICAI clarified that the disclosures related with SBNs were event-specific, and hence were applicable for only FY 2016-17. There is no requirement of making such disclosures either in the notes to accounts by the companies or in the auditor's report by the auditors for FY 2017-18 and subsequent years.
Going forward in the process of upgrading existing Accounting Standards (AS) on the request of the Ministry of Corporate Affairs (MCA), the Institute of Chartered Accountants of India (ICAI) has issued an exposure draft of AS 109, Financial Instruments. This Standard has been drafted on the basis of IFRS 9, Financial Instruments applicable for Small and Medium Enterprises (SMEs). It has provisions from the existing Guidance Note on Accounting for Derivative Contracts issued. The exposure draft is divided into three parts; Section A, Basic Financial Instruments; Section B, Other Financial Instruments and Section C, Liabilities and Equity.
ICAI issued exposure drafts of new Accounting Standard (AS) 23, Borrowing Costs and Accounting Standard (AS) 24, Related Party Disclosures. If finalized, proposed AS 23 and AS 24 shall replace existing AS 16 and AS 18 respectively. The change in numbering of the standard is as per present Indian Accounting Standard ie. Ind AS 23 deals with Borrowing Costs and Ind AS 24 deals with Related Party Disclosures.
The Institute of Chartered Accountants of India (ICAI) has issued exposure drafts of new Accounting Standards (AS), AS 1, Presentation of Financial Statements and AS 37, Provisions, Contingent Liabilities and Contingent Assets. Once notified, these two new Standards will replace existing AS 1, Disclosure of Accounting Policies and AS 29, Provisions, Contingent Liabilities and Contingent Assets. Exposure drafts of new AS 1 and AS 37 have been developed on the basis of Ind AS 1 and Ind AS 37, respectively by liberalising or deleting certain provisions of Ind AS 1 and Ind AS 37 to simplify compliance requirements of small entities.
Exposure Draft on revised lease standard Ind AS 116 has been issued by the Institute of Chartered Accountants of India (ICAI). Ind AS 116 will replace the existing lease standard Ind AS 17. Last year, the International Accounting Standards Board (IASB) revised the lease standard and issued new IFRS 16, Leases. Ind AS 116, Leases sets out the provisions for the recognition, measurement, presentation and disclosures of leases. It shall be applicable from April 1, 2019. If notified, this standard is expected to significantly impact the balance sheet of airlines industry and other industries taking assets on lease.
The Institute of Chartered Accountants of India (ICAI) issued an exposure draft of IND-AS 117 - Insurance Contracts on February 12, 2018 that would replace IND-AS 104. IND-AS 117 is based on IFRS 17. IFRS 17-Insurance Contracts is applicable globally with effect from January 1, 2021. The exposure draft states that it has been decided to implement the new standard in India with effect from April 1, 2020. In case of insurance company’s early application of the said standard will be permitted for consolidation purposes only. IRDA has set the dates for IND-AS implementation for Indian insurance companies.
ICAI issued a Guidance Note on preparation of financial statements by Ind AS compliant companies as per Division II of Schedule III to the Companies Act, 2013. Division II of Schedule III to the Companies Act, 2013 prescribes format of Balance Sheet, Statement of Changes in Equity (SOCIE), Statement of Profit and The loss for Ind AS compliant companies. It includes general instructions for preparation of standalone and consolidated financial statements also.
The International Accounting Standards Board (IASB) has made narrow-scope amendments to International Financial Reporting Standard (IFRS) 9, Financial Instruments and International Accounting Standard (IAS) 28, Investments in Associates and Joint Ventures. The amendment to IFRS 9 relates to classification of pre-payable financial assets and the amendment to IAS 28 relates to the accounting of long-term interests in an associate or joint venture to which the equity method is not applied.