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Centre amends certain Indian Accounting Standards amid COVID-19 pandemic

Corporate Affairs Ministry has amended the Ind-AS 103, 116, and some other standards. As Ind-AS 103 pertains to the business combinations, Ind-AS 116 is related to principles for presentation, recognition, and disclosure of leases.

Jul 27, 2020 14:05 IST
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The central government has amended certain Indian Accounting Standards (Ind-AS), including the standard that is related to leases amid the ongoing pandemic.

Corporate Affairs Ministry has amended the Ind-AS 103, 116, and some other standards. As Ind-AS 103 pertains to the business combinations, Ind-AS 116 is related to principles for presentation, recognition, and disclosure of leases.

A notification to amend the Companies (Indian Accounting Standards) Rules, 2015 was issued on July 24, 2020. The amended rules were finalized by the ministry in consultation with the National Financial Reporting Authority (NFRA).

Objective:

Due to the COVID-19 pandemic, many lessors have extended the rent concessions to the lessees. However, applying Ind-AS 116 requirements for the changes to lease the payments can pose practical difficulties in the current situation.

To solve the problem, the ministry has amended the rules, giving entities relief from lease modification accounting due to the COVID related concessions.

Indian Companies welcome the decision:

Sandip Khetan, Leading Consultancy EY India’s Partner and National Leader (Financial Accounting Advisory Services) mentioned that the amendment was awaited by the Indian companies who have been gearing up for their quarterly results.

He informed that lease modification requires re-computation of lease liability with the use of a discount rate on the date of modification. This could have posed a significant challenge to those companies whose volume of leases is very high.

But the amendment to Ind-AS 116 will provide relief to such lessees accounting for rent concessions from the lessors specifically arising from the pandemic.

Sandip Khetan further added that determining if an acquired set of assets and activities is a business or not, it could result in significantly different accounting outcomes.

Among others, the Corporate ministry has also amended the rules regarding Ind-AS 103. The rules aim at helping the entities to determine whether a transaction needs to be accounted for as an asset acquisition or as a business combination.

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