The highlighted importance of being digital has spurred the adoption of technology among Indian businesses. As customers moved to online channels, digitalization has become a vital part of the new normal, resulting in a paradigm shift in how financial records are stored and maintained. Accounting, one of the most significant parts of running a business has also been transformed into a truly technologically-enabled system. The widespread adoption of tech-led accounting software has moved business’s towards automation and artificial intelligence. The tasks that earlier used to take months can now be done in minutes, all through a single click of a button. This has proved to be the most significant transformation of the business finance and accounting sector.

While tech advancements have accelerated globally and in India, there’s a critical need to tweak Esop Costs. Some experts even opine that keeping Employee Stock Options (ESOPs) outside the purview of operating EBITDA is best. This is because factoring it while calculating operating EBITDA can skew numbers for a company’s overall financial report card, thereby impacting its performance, growth and profitability. This factor is already creating hurdles for new-age tech Indian companies getting listed on Dalal street.

Discontinuation of interest expense recognition based solely on the expectations of waiver or concession by the lender is a violation of the Indian Accounting Standards, the National Financial Reporting Authority (NFRA) said, cautioning against such practices by firms with regard to loans classified as NPAs.

To ensure that such violations do not occur when firms make financial statements, the NFRA has issued a circular dated October 20. The idea is to draw the attention of all companies, audit committees and statutory auditors. Also, company secretaries have been advised to take note and apprise the boards of directors of companies of the issue.

Ease of Doing Business for MSMEs: The Ministry of Corporate Affairs (MCA) is continuously working towards driving transparency and strengthening the integrity of financial reporting in the business. The notification pertaining to the new audit trail rule is a step in this direction. This mandate is expected to be implemented from April 1, 2022, for companies that are registered under the Companies Acts in India. As per the notification “Every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.”

The National Financial Reporting Authority on Tuesday recommended to the chartered accountants' apex body ICAI to carry out a regulatory impact assessment with respect to proposed revision to certain accounting standards. The Institute of Chartered Accountants of India (ICAI) had submitted to NFRA an approach paper for revision of existing accounting standards of companies that are not required to follow Indian Accounting Standards (Ind ASs).
Apart from conducting a regulatory impact assessment, NFRA noted that ICAI should reconsider the structure, form and contents of revised accounting standards for such companies.

The proposed texts of 18 revised Accounting Standards (ASs) out of a total of 32 revised ASs expected to be prescribed upon completion of the revision project was submitted by ICAI.

Chartered accountants’ apex body ICAI will come out with eight new forensic accounting and investigation standards, whereby forensic auditors will be required to issue a precise and unambiguous report, sources close to the development said.

Under the new accounting standards, auditors will be required to follow stiff norms while conducting forensic audit, they said.
The new forensic audit standards are likely to render several existing forensic audit reports untenable, especially where lenders have used ambiguous and inconclusive reports to classify borrower loan accounts as fraud.

These are part of eight new forensic accounting and investigation standard (FAIS) proposed by the institute’s Digital Accounting and Assurance Board. These proposals will be placed for final approval on Friday.

The Institute of Chartered Accountants of India (ICAI) had earlier issued 13 FAIS.

The sources said that governing council of ICAI is meeting on Friday to approve the new forensic audit and investigation standards. As a part of the new accounting standards, forensic auditor will be required to issue a precise and unambiguous report.

Further, such report is also required to be backed by reliable evidence and relevant documents collected by the auditor in line with the requirements of FAIS to support its conclusions.

The government, in continuation of its theme as regards ease of doing business, has increased the limits for classification as Small & Medium Sized (SMC) companies. The objective is to reduce the compliance burden and the time required to prepare the financial statements. As a result of this notification, a significant number of companies would be covered in the definition of the SMC companies.

These amendments follow the recent changes made by the government to the Micro, Small and Medium Enterprises Development Act, 2006 wherein the upper cap of turnover for the purpose of registration was enhanced for micro, small and medium enterprises.
The limits were not amended from many years and considering the overall growth in the economy it was imperative that the limits need to be increased. The benefit of this amendment would be available to a large number of companies.

The government has notified the accounting standards for small and medium companies that revise the turnover and borrowing limits as well as help in making disclosure requirements less onerous. Besides, the definition of Small and Medium Sized Companies (SMCs) under the standards has been revised.

The Companies (Accounting Standards) Rules, 2021 have been notified by the corporate affairs ministry under the Companies Act, 2013. The latest notification mirrors the accounting standards that were in force under the Companies Act, 1956, which is no more there, according to a senior official. Among the changes, the revised definition of MSMEs has been included, the official added.

The government has amended rules pertaining to various Indian Accounting Standards (Ind AS), including those related to interest rate benchmark reform. Ind AS are converged with the International Financial Reporting Standards (IFRS).

On Friday, the corporate affairs ministry notified the Companies (Indian Accounting Standards) Rules, 2021. The changes have been made after consultations with the National Financial Reporting Authority (NFRA).

Sandip Khetan, Partner and National Leader, Financial Accounting Advisory Services (FAAS) at EY India, said the ministry has issued the second phase amendments to interest rate benchmark reform and "has consequently made amendments to Ind AS 109, Ind AS 107, Ind AS 104 and Ind AS 116".

The forensic accounting and investigation standards have “adequate flexibility to address unique situations” and will ensure uniformity in forensic audits carried out by financial institutions, according to chartered accountants’ apex body ICAI.

Institute of Chartered Accountants of India (ICAI) has issued 13 Forensic Accounting and Investigation Standards (FAIS). There are also three overarching documents. These have been issued by the institute’s Digital Accounting and Assurance Board.
ICAI President Nihar N Jambusaria told PTI that another eight standards are in the pipeline.

Forensic audits play a key role in assessing the financial health of institutions, especially banks and their loan portfolios.

When asked whether the standards will help in ensuring uniformity in forensic audits conducted by banks and other financial institutions, Jambusaria replied in the affirmative.

The Reserve Bank on Friday came out with regulatory guidelines for implementation of Indian Accounting Standards (Ind AS) by non-banking financial companies (NBFCs) and asset reconstruction companies (ARCs) while preparing their financial results.

The guidelines, which are aimed at promoting high quality and consistent implementation of Ind AS as well as facilitate comparison and better supervision, will be applicable to NBFCs and ARCs for preparations of their financial results from FY20 onwards, RBI said in a notification.


The guidelines mandate NBFCs/ARCs to put in place board-approved policies that clearly articulate and document their business models and portfolios.

NBFCs/ARCs shall frame their policy for sales out of amortised cost business model portfolios and disclose the same in their notes to financial statements.

"The RBI expects the board of directors to approve sound methodologies for computation of expected credit losses (ECL) that address policies, procedures and controls for assessing and measuring credit risk on all lending exposures, commensurate with the size, complexity and risk profile specific to the NBFC/ARC," the guidelines said.

The audit committee of the board (ACB) will have to approve the classification of accounts that are due beyond 90 days but not treated as impaired, with the rationale for the same clearly documented.

Call this manna from heaven for the banking sector that is faced with the bad loans mess and weak balance sheets, especially in the public sector. Coming to the rescue of banks, the Reserve Bank of India (RBI) on Thursday decided to defer implementation of Indian Accounting Standards, popularly known as Ind AS, by one year, in respect of scheduled commercial banks. Ind AS is a set of accounting norms developed by Indian authorities, which converge with the International Financial Reporting Standards (IFRS).

Companies will have to adopt more detailed revenue recognition ways from April 1 as the government has notified a new accounting standard. The Corporate Affairs Ministry has notified Indian Accounting Standard (Ind AS) 115 which would be effective from the new financial year, starting Sunday. According to experts, Ind AS 115 will help in a more transparent accounting of revenues and have an impact on companies operating in diverse sectors, including technology, real estate and telecom.

The Insurance Regulator and Development Authority of India (IRDAI) has deferred the implementation of Indian Accounting Standards (Ind AS) by insurance companies till 2020-21.Rule 4 of the Companies (Indian Accounting Standards) (Amendment) Rules 2016 states that “the Banking Companies and Insurance Companies shall apply the Ind AS as notified by the Reserve Bank of India (RBI) and Insurance Regulatory Development Authority (IRDA), respectively.This empowers IRDAI to have a regulatory override and notify an exclusive date for implementation of new accounting standards by insurers.It may be noted that many other global corporates such as Dr Reddy’s have already implemented Ind AS along with International Financial Reporting Standards (IFRS).

The adoption of the new Indian Accounting Standards (IndAS) might compel banks to cut down on the quantum of loans they dole out to companies. IndAS will result in a change in the debt-to-equity ratios of companies as capital structures and financial instruments get reclassified, increasing debts and compelling banks to reassess the way they lend to companies, particularly in sectors such as power, infrastructure and real estate. “Banks and financial institutions will have to consider how IndAS has potentially changed the balance sheets of companies.

The Ministry of Corporate Affairs mandated the implementation of Indian Accounting Standards (Ind-AS) to align with International Financial Reporting Standards (IFRS) from the first quarter of financial year 2016-17. In a study of 600-plus companies, accounting firm Grant Thornton found that the adoption of Ind-AS reduced the June 2015 net profit by 1.4 per cent for the universe.

In an interview to Business Standard, Siddharth Talwar and Keyur Dave, partners, Grant Thornton India LLP, say that while adoption of Indian Accounting Standards (Ind-AS) may increase the uncertainty of earnings predictability in the short term, it is going to be a tectonic shift in financial reporting and will improve the credence of India among global investors. Excerpts:

As India Inc adapted the new accounting standards, Ind AS, there was a jump in net income of pharma companies and increased losses of infrastructure companies in their first quarter results, according to a research report by PwC.
Most of the listed companies saw an impact on how they account for taxes and deal with their financial instruments, mainly foreign borrowings, due to the new accounting methodology.

Most listed companies that are part of the BSE 500 index managed to file results for the quarter ended June under the new Indian Accounting Standard or Ind-AS, the extended deadline for which ended on Thursday. However, some outside the top 500 failed to file their numbers within the stipulated deadline citing “practical difficulties”.

Capital goods and infrastructure are among the sectors that are likely to be most impacted by the switch to the new Indian Accounting Standards (Ind AS), which is expected to induce volatility in corporate financial statements, says a Crisil report. The rating agency, which surveyed 80 firms rated by it, found that the difference in reported profit in comparison to Indian GAAP (Generally Accepted Accounting Principles) was in excess of 5 per cent for one-third of the firms.