IND-AS Compliance Made Easy for Listed Firms
As we are aware that Ministry of Corporate Affairs (MCA) has already notified Indian Accounting Standards (IND AS), which are to be implemented in 2 phases:
In Phase I, IND AS will be mandatorily applicable for the accounting periods beginning on or after April 1, 2016 on the following Companies:
- Companies whose equity and/or debt securities are listed or are in the process of listing on any stock exchange in India or outside India and having net worth of INR 500 crore or more.
- Companies having net worth of INR 500 crore or more other than those covered above.
- Holding, subsidiary, joint venture or associate companies of companies covered above.
In Phase II, IND AS will be mandatorily applicable for the accounting periods beginning on or after April 1, 2017 on the following Companies:
- Companies whose equity and/or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of less than INR 500 Crore.
- Unlisted companies other than those covered in Phase I whose net worth is more than INR 250 crore but less than INR 500 crore.
- Holding, subsidiary, joint venture or associate companies of companies covered above.
In accordance with the same, SEBI on November 30, 2015 came out with a circular prescribing certain stipulations and formats for disclosure of financial results on a quarterly and annual basis. In the said Circular, SEBI, inter alia, laid down the requirement for the listed entities opting for IND AS that while publishing quarterly/annual financial results such Companies shall ensure that the comparatives filed along with such quarterly/annual financial results should also be IND AS compliant which was acting as a major hurdle for the Companies as well as Auditors to comply with in a short span of time.
On the basis of representations received and to ease the process of implementation of IND AS, SEBI vide its circular dated July 05, 2016 has relaxed the period of submission of financial results in respect of Quarters ended June and September by 1 month for both Listed Companies covered under the ambit of Phase I & II as prescribed by MCA.
The main highlights of the aforesaid Circular addressing the concerns of listed entities are provided herein below:
| Particulars | Quarter ended June 30, 2016 | Quarter and Half-year ended September 30, 2016 | Quarter ended December 31, 2016 | Quarter and Year ended March 31, 2017 |
| Applicability of IND AS | Yes | Yes | Yes | Yes |
| Whether the Companies are required to publish financial results as per the format prescribed in Schedule III to the Companies Act, 2013 | Not mandatorily required | Not mandatorily required except that the Balance Sheet is needed to be prepared as per Schedule III to the Companies Act, 2013 (excluding notes and detailed sub-classifications) | Not mandatorily required | As per Schedule III to the Companies Act, 2013. |
| Are Comparative financial results also required to be prepared in accordance with IND AS | Comparative Financial Results for the corresponding Quarter ended June 30, 2015 are only needed to be prepared as per IND AS. | Comparative Financial Results for the following periods shall be as per IND AS:
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Comparative Financial Results for the following period shall be as per IND AS:
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Comparative Financial results for all periods are needed to be disclosed shall be in accordance with IND AS. |
| Are March 31, 2016 figures needed to be IND AS compliant | With regard to March 31, 2016 figures, it is not mandatory to submit IND AS compliant figures | With regard to March 31, 2016 figures, it is not mandatory to submit IND AS compliant figures | With regard to March 31, 2016 figures, it is not mandatory to submit IND AS compliant figures | With regard to March 31, 2016 figures, it is mandatory to submit IND AS compliant figures |
| Time frame for submission | Till September 14, 2016 | Till December 14, 2016 | Within 45/60 days from the end of the quarter, as the case may be | Within 60 days from the end of quarter |
| Whether the comparatives financials are subject to Limited Review/ Audit | No mandatory requirement to submit limited review/audit report in respect of the comparative financials. However, the companies are required to give a statement disclosing that management has exercised necessary due diligence and the financial results provide a true and fair view of its affairs. | Yes, the comparative results are subject to limited review or audit, as the case may be. | ||
| Applicability of IND AS to Segment Reporting | Yes, Segment Reporting is needed to be disclosed as per IND AS and the following information is mandatorily required to be disclosed separately:
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| Format for publication of results | Newspaper publication is to be given as per the revised format as prescribed in the Circular | |||
Other highlights of SEBI Circular:
- In the event of any technical difficulty in the interpretation of any specific item in the formats or implementation of this circular, the listed entities have been allowed to make suitable modifications in compliance with the relevant provisions of the IND-AS Rules and Schedule III to the Companies Act, 2013.
- The period for which the comparative information has been provided may be shorter or longer than the normal 12-month period if the entity historically has a year-end other than 31 March. In such a case, the listed entity needs to disclose a suitable note that the comparative amounts are not entirely comparable.
- If such listed entity has subsidiaries/Joint Ventures/Associates, the entity may exercise the option to submit quarterly/year-to-date consolidated financial results in the second quarter instead of first quarter of the financial year and this option shall not be changed during the remaining part of the financial year.
CP’s Viewpoint:
In our view point, SEBI’s clarification would surely act as a booster dose for the listed firms to come out of the teething troubles associated with the implementation of Ind-AS. Since, the results for Q1 are already under process and many a companies have already announced their Board Meetings to consider the results for Q1, the Circular has been promulgated at a very apt time. The Circular doesn’t merely talk about the extension of time for submission of Q1 & Q2 results, but also provides a relief from undergoing limited review or audit of the corresponding Ind AS compliant figures of the respective previous periods.