GAAP Reporter | December 2014

Accounting updates

MCA announces the Ind AS roadmap

The Ministry of Corporate Affairs (‘MCA’) has issued a press release announcing the Ind AS roadmap for companies other than insurance, banking, and non-banking finance companies.

The MCA press release provides for mandatory application of Ind AS as follows:

Phase 1, financial year 2016-17 onwards

For accounting periods beginning on or after 1 April 2016, with comparatives for the periods ending 31 March 2016, for the companies specified below:
a. Companies with a net worth of Rs. 500 crore or more.
b. Holdings, subsidiaries, joint ventures or associate companies of the companies covered above.

Phase 2, financial year 2017-18 onwards

For accounting periods beginning on or after 1 April 2017, with comparatives for the periods ending 31 March 2017, for the companies specified below not already covered above:

• 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.
• Companies with net worth of Rs. 250 crore or more.
• Holdings, subsidiaries, joint ventures or associate companies of companies covered above.

Companies listed on SME exchanges in India

Companies, whose securities are listed or in the process of listing on SME exchanges, shall not be required to adopt Ind AS. Such companies shall continue to comply with the existing accounting standards unless they choose otherwise.

Voluntary adoption

Companies not covered above shall continue to apply the existing accounting standards prescribed in the Annexure to the Companies (Accounting Standards) Rules, 2006. However, they have the option to adopt Ind AS voluntarily for financial statements for accounting periods beginning on or after 1 April 2015, with the comparatives for the periods ending 31 March 2015. Once a company opts to report under Ind AS, it will be required to do this for all subsequent financial statements.

A notification on the above lines shall be issued shortly.

Requirement for consolidated financial statements

The MCA has amended the Companies (Accounts) Rules, 2014 to provide that the requirement to prepare consolidated financial statements in accordance with Schedule III to the Companies Act 2013 shall not apply to an intermediate wholly-owned subsidiary, other than a wholly-owned subsidiary whose immediate parent is a company incorporated outside India. Further, companies which do not have any subsidiaries but only associate(s) and/or joint venture(s) are exempt from preparing consolidated financial statements for the financial year 2014-15.

Clarification on disclosures in consolidated financial statement

Schedule III to the Companies Act 2013 provides that a company while preparing the consolidated financial statements shall follow the same requirements applicable for preparing the standalone financial statements and make disclosures as per the applicable accounting standards.

The MCA has clarified that Schedule III read with the applicable accounting standards does not envisage that a company while preparing its consolidated financial statements merely repeats the disclosures made under stand-alone accounts being consolidated. In the consolidated financial statements, the company must provide all the disclosures relevant for consolidated financial statements only.