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GAAP ReporterApril 2017

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IntroductionDear Reader,

Grant Thornton in India presents ‘GAAP Reporter’, a quarterly bulletin that summarises significant accounting, auditing and related

updates. This publication has been compiled to meet the needs of dynamic Indian businesses and focusses on key developments in

India and across the globe.

To access the source of information and complete details, you can click the hyperlinked text.

We would be pleased to receive your feedback. Please write to us at npsg@in.gt.com with your comments, questions or suggestions.

This edition covers updates for the quarter ended 31 March 2017 and hot topic. Abbreviations used in the publication are explained at

the end of the publication.

Following is the index of updates covered in this bulletin:

India

Guidance note on audit of banks Auditing

Companies (Audit and Auditors) Amendment Rules, 2017 Auditing

Deferment of effective date of revised SAs Auditing

Companies (Indian Accounting Standards) (Amendment) Rules, 2017 Accounting

ITFG clarification bulletin 7 Accounting

Amendment in Schedule III of the 2013 Act Accounting

Formats for publishing financial results by listed general insurance companies including standalone health

insurance companies and reinsurersAccounting

Exposure draft of Ind AS compliant Schedule III to the 2013 Act for NBFCs Accounting

Exposure draft of amendments to Ind AS 40, Investment Property - transfers of investment property Accounting

Exposure draft of Appendix B of Ind AS 21, Foreign Currency Transactions and Advance consideration Accounting

Exposure draft of annual improvements to Ind AS 2014-2016 cycle Accounting

Exposure draft of amendments to Ind AS 12, Income taxes - recognition of deferred tax assets for

unrealised lossesAccounting

Exposure draft of IRDAI (Preparation of Financial Statements of Insurers) Regulations, 2017 Accounting

Companies (Meetings of Board and its Powers) Amendment Rules, 2017 Other

Integrated reporting by listed entities Other

Circular on schemes of arrangement by listed entities and relaxation under Rule 19(7) of Securities

Contracts (Regulation) Rules, 1957Other

SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2017 Other

SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations, 2017 Other

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SEBI (Mutual Funds) (Amendment) Regulations, 2017 Other

Circular on SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011 Other

Companies (Transfer of pending proceedings) Amendment Rules, 2017 Other

Companies (Incorporation) Amendment Rules, 2017 Other

Clarification on applicability of Section 391(2) of the 2013 Act Other

Investment in units of REITs and InvITs Other

Clarification on ICDS notified under Section 145(2) of the IT Act Other

Notification of provisions of the Insolvency and Bankruptcy Code, 2016 Other

The Finance Act, 2017 Other

Revised minimum rates of wages Other

The Payment of Wages (Amendment) Act, 2017 Other

Ease of compliance to maintain registers under various Labour Laws Rules, 2017 Other

International

Exposure draft of amendments to IFRS 8, Operating Segments, and IAS 34, Interim Financial Reporting Accounting

Exposure draft of annual improvements to IFRS 2015-2017 cycle Accounting

Discussion paper on disclosure initiative - principles of disclosure Accounting

America

ASU on consolidation - guidance for not-for-profit entities Accounting

ASU on intangibles - goodwill and other - simplifying the test for goodwill impairment Accounting

ASU on other income - gains and losses from the derecognition of non-financial assets - clarifying the

scope of asset derecognition guidance and accounting for partial sales of non-financial assetsAccounting

ASU on plan accounting - employee benefit plan master trust reporting Accounting

ASU on compensation - retirement benefits - improving the presentation of net periodic pension cost and

net periodic post-retirement benefit costAccounting

ASU on receivables - non-refundable fees and other costs - premium amortisation on purchased callable

debt securitiesAccounting

Proposed ASU on compensation - stock compensation - improvements to non-employee share-based

payment accountingAccounting

Hot Topic

Real Estate Investment Trusts and Infrastructure Investment Trusts

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Guidance note on audit of banks

AASB of the ICAI has issued Guidance note on audit of

banks (2017 edition) (‘guidance note’) on 27 February

2017. It discusses in depth the various important items of

the financial statements of banks, its peculiarities, manner

of disclosure in the financial statements, the RBI's

prudential directions thereon, audit procedures etc. The

guidance note contains illustrative formats of audit

reports, engagement letters and written representation

letter.

This guidance note, inter alia, has been updated for the

impact of the master directions and other relevant

circulars issued by the RBI during 2016, guidance on

demonetisation at appropriate places and relevant

pronouncements of the ICAI having bearing on bank

audits.

Click here for guidance note.

Companies (Audit and Auditors) Amendment Rules,

2017

MCA has issued Companies (Audit and Auditors)

Amendment Rules, 2017 (‘amendment rules’) on 30

March 2017 to amend the Companies (Audit and

Auditors) Rules, 2014 (‘Principal rules'). Consequent to

these amendment rules, auditors are required to report on

the following matter in the auditor's report for the year

ended 31 March 2017:

• Whether the company had provided requisite

disclosures in its financial statements as to holdings as

well as dealings in Specified Bank Notes ('SBNs')

during the period from 08 November 2016 to 30

December 2016 and if so, whether these are in

accordance with the books of accounts maintained by

the company.

This amendment is consequent to amendment in

Schedule III of the 2013 Act which requires the

companies to disclose the details of SBNs held and

transacted during the above stated period. This

amendment for disclosure requirements is explained in

more detail in India - Accounting updates section.

Click here for amendment rules.

The ICAI has also published an announcement in regard

to these amendment rules and requested its members to

take care in professional capacity of the disclosure and

reporting requirements while auditing the financial

statements for the year 2016-17.

Click here for announcement.

Deferment of effective date of revised SAs

The ICAI had issued new/ revised SAs. These

new/revised SAs were effective for audits of financial

statements for periods beginning on or after 01 April

2017. Following revised/new SAs were issued:

• Revised SA 700, Forming an Opinion and Reporting

on Financial Statements

• New SA 701, Communicating Key Audit Matters in the

Independent Auditor’s Report

• Revised SA 705, Modifications to the Opinion in the

Independent Auditor’s Report

• Revised SA 706, Emphasis of Matter Paragraphs and

Other Matter Paragraphs in the Independent Auditor’s

Report

• Revised SA 260, Communication with Those Charged

with Governance

• Revised SA 570, Going Concern

Click here for ICAI announcement.

AASB of the ICAI has now issued an announcement

stating that it has been decided that effective date/

applicability of the following SAs be deferred by one year

and hence will be applicable/ effective for audits of the

financial statements for periods beginning on or after 01

April 2018:

• Revised SA 700

• New SA 701

• Revised SA 705

• Revised SA 706

It is further clarified that existing SA 700, SA 705 and SA

706 will continue to apply.

Click here for ICAI announcement.

India - Auditing updates

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Companies (Indian Accounting Standards)

(Amendment) Rules, 2017

MCA has issued Companies (Indian Accounting

Standards) (Amendment) Rules, 2017 ('amendment

rules') to amend Ind AS 102, Share-based Payment and

Ind AS 7, Statement of Cash Flows.

These amendment rules, inter alia, provides the following:

Ind AS 102

New guidance has been provided for:

• Treatment of vesting and non-vesting conditions

in case of cash-settled share-based payment

transactions: Earlier, such guidance was available

only in respect of the equity-settled share-based

payment transactions;

• Classification of equity settled plans where

employers are required to withheld certain shares

to fulfil its obligation of payment of withholding

tax: The amendment states that certain tax laws may

require an entity to withhold an amount for an

employee’s tax obligation in respect of share-based

payment and transfer that amount, normally in cash, to

the tax authority. While this situation is akin to net

settlement plans, as per the amendment such plans

shall continue to be regarded as equity settled plan;

• Accounting for modification of a share-based

payment transaction that changes its

classification from cash-settled to equity-settled: If

a cash-settled share-based payment transaction is

cancelled or settled and entity identifies equity

instruments as a replacement for cancelled cash-

settled share-based payment, the entity will apply this

new guidance introduced. In such scenario, it provides

that:

- equity-settled share-based payment transaction will

be recognised in equity on the modification date to

the extent to which goods or services have been

received;

- liability for cash-settled share-based payment

transaction as at the modification date is

derecognised on that date;

- any difference between the carrying amount of the

liability derecognised and the amount of equity

recognised on the modification date is recognised

immediately in profit or loss;

An entity shall apply amendments introduced in these

amendment rules for annual periods beginning on or after

01 April 2017.

Ind AS 7

• An entity should provide disclosures that enable users

of the financial statements to evaluate changes in

liabilities arising from financing activities, including

both changes arising from cash flows and non-cash

changes. An entity should disclose following changes

in liabilities arising from financing activities:

- Changes from financing cash flows;

- Changes arising from obtaining or losing control of

subsidiaries or other businesses;

- The effect of changes in foreign exchange rates;

- Changes in fair values; and

- Other changes;

• Liabilities arising from financing activities are liabilities

for which cash flows were, or future cash flows will be,

classified in the statement of cash flows as cash flows

from financing activities;

• The above disclosure requirement is also applicable to

changes in financial assets if cash flows from those

financial assets were, or future cash flows will be,

included in cash flows from financing activities;

It further provides that when the entity first applies these

amendments, it is not required to provide comparative

information from preceding periods. An entity shall apply

amendments introduced in these amendment rules for

annual periods beginning on or after 01 April 2017.

Click here for amendment rules.

ITFG clarification bulletin 7

ITFG of Ind AS (IFRS) Implementation Committee has

issued the seventh set of clarifications on various issues

related to the applicability/implementation of Ind ASs

under the Ind AS Rules, which were raised by

preparers/users/other stakeholders.

This bulletin, inter alia, provides the following

clarifications:

Clarification 1

Clarifications on exemption given under Ind AS 101

regarding option provided in paragraph 46/46A of AS

11, The Effects of Changes in Foreign Exchange

Rates

If the following conditions are fulfilled:

• A first-time adopter entered into a foreign currency

loan agreement for construction of its PPE but has not

drawn the full loan amount up to 31 March 2016;

• It had availed the option given under paragraph

46/46A of AS 11 and hence added or deducted the

exchange gain/loss on such foreign currency loan from

the cost of PPE;

India - Accounting updates

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• On transition to Ind AS, it has opted for the exemption

given under Ind AS 101, First-time Adoption of Ind

AS, (i.e. to continue the same policy adopted for

accounting for exchange differences arising from

translation of long-term foreign currency monetary

items);

In such a scenario, it has been clarified that:

• the exemption under Ind AS 101 is available only on

exchange gain/loss on foreign currency loan which

was drawn up to 31 March 2016 (i.e. period ending

immediately before the beginning of first Ind AS

financial reporting period); and

• such exemption is not available on exchange gain/loss

on foreign currency loan which was drawn after 31

March 2016;

Clarification 2

Clarifications on exemption given under Ind AS 101

regarding option provided in paragraph 46/46A of

AS 11

If a company:

• has opted the option available under paragraph

46/46A of AS 11 and therefore, has added to or

deducted from the cost of PPE, the exchange

gain/loss on foreign currency borrowings; and

• on first-time adoption to Ind AS, has availed the

deemed cost exemption given under Ind AS 101 in

respect of PPE;

In such a scenario, it has been clarified that the company

cannot reverse the impact of paragraph 46A of AS 11

from its PPE, even if it wishes to retrospectively reverse

the effect of paragraph 46/46A from its PPE. Once the

company avails the deemed cost exemption in respect of

PPE, it cannot make any adjustments to the carrying

amount of PPE and it will carry forward the previous

GAAP carrying amount for all of its PPE.

Clarification 3

Preparation of annual financial statements where the

functional currency is different from the currency in

which its financial statements are statutorily required

to present

• If a company is statutorily required to present its

financial statements in INR, which is different from its

functional currency, then it has to prepare its financial

statements in its functional currency and apply the

principles of Ind AS 21, The Effects of Changes in

Foreign Exchange Rates, to translate them to

presentation currency (i.e. INR);

• Since the company is statutorily required to present its

financial statements in INR, the auditor will also be

required to give auditor's report on the financial

statements prepared in INR.

Clarification 4

Dividend declared on a financial instrument classified

as a liability after the reporting period

If a company declares dividend, after the end of the

reporting period, on a financial instrument classified as a

liability, the company is required to accrue the liability of

dividend at the end of the reporting period, even if it is

declared after the end of the reporting period.

Accounting for dividend on financial instrument which is

classified as financial liability is governed by classification

of such instrument under Ind AS 109, Financial

Instruments. If it is classified as subsequently measured

at amortised cost, dividend will be accrued as part of

interest expense recognised based on effective interest

method.

Click here for clarification bulletin.

Amendment in Schedule III of the 2013 Act

The MCA has issued notification amending Part I under

the heading ‘General instructions for preparation of

Balance Sheet’ of both Division I and Division II, in

Schedule III of the 2013 Act. This amendment requires

every company to disclose the details of SBNs held and

transacted during the period from 08 November 2016 to

30 December 2016, as provided in table below:

For the purpose of this amendment, the term ‘Specified

Bank Notes’ shall mean the bank notes of denominations

of the series existing as on 08 November 2016 of the

value of five hundred rupees and one thousand rupees of

which legal tender ceased on the given date.

Click here for amendment.

India - Accounting updates

SBNs Other

denomination

Total

Closing cash

in hand as on

08.11.2016

(+) Permitted

receipts

(-) Permitted

payments

(-) Amount

deposited in

Banks

Closing cash

in hand as on

30.12.2016

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Formats for publishing financial results by listed

general insurance companies including standalone

health insurance companies and reinsurers

IRDAI had issued circular dated 25 October 2016 for

listed life insurance companies (refer circular) providing

following formats for compliance with the disclosure

requirements of SEBI Listing Regulations:

• The quarterly financial results

• Reporting of segment wise revenue, results and

capital employed along with the quarterly results

• Limited review reports to be given by auditors

• In case of audited financial reports, the audit report to

be given by auditors

• Financial results published in the newspapers in terms

of Regulation 47(1)(b) of SEBI Listing Regulations

IRDAI has now issued a circular dated 30 January 2017

providing aforementioned formats for listed general

insurance companies including standalone health

insurance companies and reinsurers (including those

insurers whose securities are listed on the stock

exchanges) for compliance with the disclosure

requirements of SEBI Listing Regulations.

It further states that these requirements do not in any

manner, modify the disclosure requirements or the

manner of preparation of financial statements as required

under the Insurance Act, 1938, the IRDAI Act, 1999 and

the regulations framed thereunder.

Click here for circular.

Exposure draft of Ind AS compliant Schedule III to

the 2013 Act for NBFCs

ASB of the ICAI has issued an exposure draft of Ind AS

compliant Schedule III to 2013 Act for NBFCs (‘exposure

draft’). It, inter alia, includes the following:

• General instructions for preparation of Balance Sheet,

formats of Balance Sheet and Statement of Changes

in Equity in Part I

• General instructions and format for preparation of

Statement of Profit and Loss in Part II

• General instructions for preparation of the

consolidated financial statements and additional

information which shall be disclosed in the

consolidated financial statements in Part III

Further, the exposure draft also provides the following:

• NBFCs preparing the financial statements as per this

Schedule may change the order of presentation of line

items on the face of financial statements or order of

line items within the schedules in order of liquidity, if

appropriate, considering the operations performed by

the NBFCs;

• With respect to hedges and hedge accounting, NBFCs

may provide a description in accordance with the

requirements of Ind ASs, of how derivatives are used

for hedging, explain types of hedges recognised for

accounting purposes and their usage/application by

the entity.

Click here for exposure draft.

Exposure draft of amendments to Ind AS 40,

Investment Property - transfers of investment

property

ASB of the ICAI has issued exposure draft of

‘Amendments to Ind AS 40, Investment Property -

transfers of investment property’ (‘exposure draft’). The

exposure draft, inter alia, provides the following

amendments:

• Paragraph 57 is proposed to be amended clarifying

that list of circumstances that provides evidence of a

change in use set out in paragraph 57(a)–(d) of Ind

AS 40 is not exhaustive;

• It is emphasised that a change in use occurs when the

property meets, or ceases to meet the definition of

investment property and there is evidence of the

change in use. A change in management’s intentions

for the use of a property does not provide evidence of

a change in use;

• Disclose the amounts reclassified to, or from,

investment property. Entity shall disclose those

amounts reclassified as part of reconciliation of the

carrying amount of investment property at the

beginning and end of the period.

• Transitional provisions: Paragraph 84C of the

exposure draft states that these amendments

proposed will be applicable to changes in use that

occur on or after the beginning of the annual reporting

period in which the entity first applies the amendments

(the date of initial application). At the date of initial

application, an entity shall reassess the classification

of property held at that date and, if applicable,

reclassify property applying paragraphs 7-14 to reflect

the conditions that exist at that date. Notwithstanding

the requirements of Paragraph 84C, an entity is

permitted to apply the amendments to paragraphs 57–

58 retrospectively in accordance with Ind AS 8 if, and

only if, that is possible without the use of hindsight. If

in accordance with paragraph 84C, an entity

reclassifies property at the date of initial application,

the entity shall account for such reclassification

without any change in the carrying amount of the

property transferred.

India - Accounting updates

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The amendments proposed in this exposure draft shall

apply for annual periods beginning on or after 01 April

2018.

The last date for submission of comments is 28 April

2017.

Click here for exposure draft.

Exposure draft of Appendix B of Ind AS 21, Foreign

Currency Transactions and Advance consideration

ASB of the ICAI has issued exposure draft of ‘Appendix B

of Ind AS 21, Foreign Currency Transactions and

Advance Consideration’ (‘exposure draft’).

This Appendix applies to a foreign currency transaction

(or part of it) when an entity recognises a non-monetary

asset or non-monetary liability arising from the payment

or receipt of advance consideration before the entity

recognises the related asset, expense or income (or part

of it).

This Appendix does not apply when an entity measures

the related asset, expense or income on initial

recognition:

• at fair value; or

• at the fair value of the consideration paid or received

at a date other than the date of initial recognition of the

non-monetary asset or non-monetary liability arising

from advance consideration.

An entity is not required to apply this Appendix to:

• Income taxes; or

• Insurance contracts (including reinsurance contracts)

that it issues or reinsurance contracts that it holds.

Appendix B addresses how to determine the date of the

transaction for the purpose of determining the exchange

rate to use on initial recognition of the related asset,

expense or income (or part of it) on the derecognition of a

non-monetary asset or non-monetary liability arising from

the payment or receipt of advance consideration in a

foreign currency.

Exposure draft proposes that the date of the transaction

for the purpose of determining the exchange rate to use

on initial recognition of the related asset, expense or

income (or part of it) is the date on which an entity initially

recognises the non-monetary asset or non-monetary

liability arising from the payment or receipt of advance

consideration.

Further, if there are multiple payments or receipts in

advance, the entity shall determine a date of the

transaction for each payment or receipt of advance

consideration

The proposed Appendix shall apply for annual reporting

periods beginning on or after 01 April 2018.

The last date for submission of comments is 28 April

2017.

Click here for exposure draft.

Exposure draft of annual improvements to Ind AS

2014 - 2016 cycle

ASB of the ICAI has issued exposure draft of ‘Annual

improvements to Ind AS - Amendments in Ind AS 112

and 28 (‘exposure draft’). These amendments address

following topics:

• Ind AS 112, Disclosure of interests in other entities -

Clarification of the scope of the Standard

Paragraph B17 of Ind AS 112 states that an entity is

not required to disclose summarised financial

information as required by paragraphs B10-B16 for

interests classified as held for sale. New paragraph

5A is added to clarify that the requirements of Ind AS

112 will apply to interests in entities which are

classified as held for sale, held for distribution to

owners in their capacity as owners, or discontinued

operations, except the requirements stated in

paragraph B17;

• Ind AS 28, Investments in associates and joint

ventures - Measuring an associate or joint venture at

fair value

- Paragraph 18 of Ind AS 28 states that when an

investment in an associate or a joint venture is held

by, or is held indirectly through, an entity that is a

venture capital organisation, or a mutual fund, unit

trust and similar entities including investment-

linked insurance funds, the entity may elect to

measure that investment at fair value through profit

or loss. Paragraph 18 is proposed to be amended

to clarify that an entity may elect, at initial

recognition, to measure that investment in an

associate or joint venture at fair value through profit

or loss separately for each associate or joint

venture;

- Paragraph 36A states that an entity that is not an

investment entity may retain the fair value

measurement applied by its associates and joint

ventures when applying the equity method. This

paragraph is also proposed to be amended to clarify

that this option is available, at initial recognition, for

each investment entity associate or joint venture;

- Earlier application of these proposed amendments is

permitted. Entity shall disclose this fact.

An entity shall apply these amendments retrospectively in

accordance with Ind AS 8, Accounting Policies,

Changes in Accounting Estimates and Errors, for

annual periods beginning on or after 1 April 2018.

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The last date for submission of comments is 28 April

2017.

Click here for exposure draft.

Exposure draft of amendments to Ind AS 12, Income

taxes - recognition of deferred tax assets for

unrealised losses

The ASB of the ICAI has issued an exposure draft of

amendments to Ind AS 12, Income taxes - Recognition

of deferred tax assets for unrealised losses (‘exposure

draft’). It, inter alia, proposes the following amendments:

• An example has been added following paragraph 26,

illustrating identification of a deductible temporary

difference;

• Paragraph 27A has been added which provides

guidance on utilisation of deductible temporary

differences in cases where tax law restricts the

sources of taxable profits against which it may make

deductions on the reversal of that deductible

temporary difference and where tax law imposes no

such restrictions.

An entity shall apply the amendments proposed in this

exposure draft retrospectively in accordance with Ind AS

8, Accounting policies, changes in accounting

estimates and errors. However, on initial application of

the amendments, the change in the opening equity of the

earliest comparative period may be recognised in opening

retained earnings (or in another component of equity, as

appropriate), without allocating the change between

opening retained earnings and other components of

equity. If an entity applies this relief, it will disclose the

fact.

Click here for exposure draft.

Exposure draft of IRDAI (Preparation of Financial

Statements of Insurers) Regulations, 2017

The IRDAI had constituted an implementation group on

Ind AS in insurance sector in India (‘group’) for

addressing the implementation issues in the preparation

of Ind AS compliant financial statements. This group

submitted its report on 30 December 2016 (refer report).

Based upon the report of the group, the IRDAI has issued

an exposure draft of IRDAI (Preparation of Financial

Statements of Insurers) Regulations, 2017 (‘draft

regulations’) which proposes to replace the existing

Insurance Regulatory and Development Authority

(Preparation of Financial Statements and Auditor’s Report

of Insurance Companies) Regulations, 2002. The draft

regulations, inter-alia, propose the following:

• Schedule A (for life insurance business) and Schedule

B (for general insurance business, including health

and reinsurance), comprising of:

- Part I: General instructions for preparation of

financial statements;

- Part II: Accounting principles for preparation of

financial statements;

- Part III: Balance sheet including Statement of

Changes in Equity;

- Part IV: Statement of Profit and Loss, Revenue

(Policyholders’), Profit and Loss (Shareholders’)

Accounts

- Part V: Other disclosures

• Segments to be reported by the insurers

• Requirements for life companies to revalue investment

property at a minimum every three years

• Figures in the financial statements to be rounded off to

the nearest rupees in lakhs

• All other disclosures to be made in compliance to Ind

ASs and regulatory stipulations

The IRDAI (Preparation of Financial Statements of

Insurers) Regulations, 2017 have been proposed to be

effective from accounting periods commencing on or after

01 April 2018.

Click here for press release.

Click here for draft regulations.

India - Accounting updates

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Companies (Meetings of Board and its Powers)

Amendment Rules, 2017

The MCA has issued Companies (Meetings of Board and

its Powers) Amendment Rules, 2017 (‘amendment rules’)

to amend the Companies (Meeting of Board and its

Powers) Rules, 2014 (‘principal rules’). Rule 15, Contract

or arrangement with a related party, of the principal

rules state that a company shall enter into any contract or

arrangement with a related party subject to certain

conditions. Further, sub-rule 3(a) of Rule 15 prescribes

the limits exceeding which no transactions stated in

clauses (a) to (e) of Section 188(1) of the 2013 Act can be

entered except with prior approval of the company by a

resolution. These amendment rules have amended such

limits of transactions which are states as follows:

• Sale, purchase or supply of any goods or materials,

directly or through appointment of agent, amounting to

ten percent or more (earlier ‘exceeding ten per

cent’) of the turnover of the company or rupees one

hundred crore, whichever is lower, as mentioned in

clause (a) and clause (e) respectively of sub-section

(1) of Section 188;

• Selling or otherwise disposing of or buying property of

any kind, directly or through appointment of agent,

amounting to ten percent or more (earlier ‘exceeding

ten per cent’) of net worth of the company or rupees

one hundred crore, whichever is lower, as mentioned

in clause (b) and clause (e) respectively of sub-section

(1) of Section 188;

• Leasing of property of any kind amounting to ten

percent or more (earlier ‘exceeding ten per cent’) of

the net worth of the company or ten per cent or more

of turnover (earlier ‘ten per cent of turnover’) of the

company or rupees one hundred crore, whichever is

lower, as mentioned in clause (c) of sub-section (1) of

Section 188;

• Availing or rendering of any services, directly or

through appointment of agent, amounting to ten

percent or more (earlier ‘exceeding ten per cent’) of

the turnover of the company or rupees fifty crore,

whichever is lower, as mentioned in clause (d) and

clause (e) respectively of sub-section (1) of Section

188.

Click here for amendment rules.

Integrated reporting by listed entities

Regulation 34(2)(f) of the SEBI Listing Regulations (refer

regulations) requires submission of Business

Responsibility Report (‘BRR’) describing the initiatives

taken by top 500 listed entities, based on market

capitalisation, from an environmental, social and

governance perspective. With the objective of improving

disclosure standards, SEBI issued circular on 06

February 2017 advising top 500 listed companies which

are required to prepare BRR to adopt Integrated

Reporting (‘IR’) on a voluntary basis from the FY 2017-18.

Framework for IR has been prescribed by Integrated

Reporting Council.

Such listed companies are advised to adhere to the

following:

• The information related to IR may be provided in the

annual report separately or by incorporating in

Management Discussion and Analysis or by preparing

a separate report (annual report prepared as per IR

framework);

• In case the company has already provided the relevant

information in any other report prepared in accordance

with national/international requirement/framework, it

may provide appropriate reference to the same in its

integrated report so as to avoid duplication of

information;

• As a green initiative, the companies may host the

integrated report on their website and provide

appropriate reference to the same in their Annual

Report.

Click here for circular.

Circular on schemes of arrangement by listed entities

and relaxation under Rule 19(7) of Securities

Contracts (Regulation) Rules, 1957

SEBI Listing Regulations place obligations with respect to

scheme of arrangement on (a) listed entities in Regulation

11, Scheme of Arrangement, 37, Draft Scheme of

Arrangement & Scheme of Arrangement and on (b)

stock exchanges in Regulation 94, Draft Scheme of

Arrangement & Scheme of Arrangement. SEBI had

issued a circular dated 30 November 2015 (‘old circular’)

laying down the detailed requirements to be complied

with by listed entities while undertaking schemes of

arrangements. SEBI has decided to revise the regulatory

framework for such schemes of arrangements and issued

a circular with revised requirements on 10 March 2017.

The revised circular, inter alia, provides the following:

• Annexure I

New Requirements to be fulfilled by listed entity

a) Conditions for schemes of arrangement between

listed and unlisted entities are provided, which, inter

alia, includes the following:

India - Other updates

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- Listed entity shall include the applicable

information pertaining to the unlisted entity

involved in the scheme in the format specified for

abridged prospectus as provide in Part D of

Schedule VIII of the ICDR Regulations, in the

explanatory statement or notice or proposal

accompanying resolution to be passed sent to the

shareholders while seeking approval of the

scheme;

- Percentage of shareholding of pre-scheme public

shareholders of the listed entity and the Qualified

Institutional Buyers of the unlisted entity, in the

post scheme shareholding pattern of the ‘merged’

company shall not be less than 25%;

- Unlisted entities can be merged with a listed entity

only if the listed entity is listed on a stock

exchange having nationwide trading terminals;

b) Detailed compliance report as per format specified in

Annexure IV duly certified by the Company Secretary,

Chief Financial Officer and the Managing Director,

confirming compliance with various regulatory

requirements specified for schemes of arrangement

and all accounting standards is also required to be

submitted by listed entity to the Stock exchanges;

c) Scheme of arrangement submitted with NCLT for

sanction provides for voting by public shareholders

only through e-voting. Earlier postal ballot method

was also allowed for such voting on the scheme;

d) Subsequent to filing the draft scheme with SEBI, no

changes to the draft scheme except those mandated

by the regulator/ authorities/ tribunal shall be made

without specific written consent of SEBI;

e) Scheme of arrangement shall be acted upon only if

the votes cast by the public shareholders in favour of

the proposal are more than the number of votes cast

by public shareholders against it under specified

cases. In these cases, following cases are added:

- where the scheme involving merger of an unlisted

entity results in reduction in the voting share of

pre-scheme public shareholders of listed entity in

the transferee/ resulting company by more than

5% of the total capital of the merged entity;

- where the scheme involves transfer of whole or

substantially the whole of the undertaking of the

listed entity and the consideration for such transfer

is not in the form of listed equity shares.

• Annexure II: Format for auditor’s certificate;

• Annexure III: Format for reports on complaints;

• Annexure IV: Format of the compliance report to be

submitted along with the draft scheme

• Provisions of this circular shall not apply to schemes

which solely provide for merger of a wholly owned

subsidiary with the parent company; however, such

draft schemes shall be filed with the stock exchanges

for the purpose of disclosures. Relevant amendment to

SEBI Listing Regulations in this regard has been

notified on 15 February 2017. Click here for

amendment.

• Issuance of shares under schemes in case of

allotment of shares only to a select group of

shareholders or shareholders of unlisted companies

pursuant to such schemes, shall follow the pricing

provisions of Chapter VII of SEBI ICDR Regulations.

Relevant amendment to ICDR Regulations in this

regard has been notified on 15 February 2017. Click

here for amendment.

The schemes filed after the date of this circular will be

governed under this circular. The schemes already

submitted to the stock exchanges in terms of old circular

will be governed by the requirements specified in that

circular.

Click here for revised circular.

SEBI has further issued circular on 23 March 2017 to

clarify that the ‘relevant date’ for the purpose of

computing pricing as per the provisions of Chapter VII of

SEBI ICDR Regulations shall be the date of board

meeting in which the scheme is approved.

Click here for circular.

SEBI (Listing Obligations and Disclosure

Requirements) (Amendment) Regulations, 2017

Regulation 37 of SEBI Listing Regulations, inter alia,

provides that the listed entity desirous of undertaking a

scheme of arrangement or involved in a scheme of

arrangement will file the draft scheme of arrangement

proposed to be filed before any Court or Tribunal under

relevant sections of the Companies Act, whichever is

applicable, with the stock exchange(s) for obtaining

observation letter or no-objection letter, before filing such

scheme with any Court or Tribunal.

SEBI has now issued SEBI (Listing Obligations and

Disclosure Requirements) (Amendment) Regulations,

2017 (‘amendment regulations’) which provides that

provisions of Regulation 37 will not apply to draft

schemes which solely provide for merger of a wholly

owned subsidiary with its holding company. It further

provides that such draft schemes will be filed with the

stock exchange(s) for the purpose of disclosures.

These amendment regulations have come into force from

15 February 2017.

Click here for amendment regulations.

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SEBI (Issue of Capital and Disclosure Requirements)

(Amendment) Regulations, 2017

SEBI has issued SEBI (Issue of Capital and Disclosure

Requirements) (Amendment) Regulations, 2017

(‘amendment regulations’) to amend SEBI ICDR

Regulations (refer regulations). It, inter alia, provides the

following:

• Pricing provisions of Chapter VII ‘Preferential Issue’

of SEBI ICDR Regulations will apply to the issuance of

shares under schemes approved by a High Court

under Sections 391 to 394 of the Companies Act, 1956

or a Tribunal under Sections 230 to 234 of the 2013

Act, whichever is applicable, in case allotment of

shares is only to a select group of shareholders or

shareholders of unlisted companies pursuant to

schemes stated above.

Earlier, provisions of Chapter VII ‘Preferential Issue’

were not applicable where the preferential issue of

equity shares is made pursuant to schemes stated

above.

• Following regulations have been added:

- Regulation 111A, Liability for contravention of Act,

rules or the regulations;

- Regulation 111B, Failure to pay fine.

These amendment regulations have come into force from

15 February 2017.

Click here for amendment regulations.

SEBI (Mutual Funds) (Amendment) Regulations, 2017

SEBI has issued SEBI (Mutual Funds) (Amendment)

Regulations, 2017 (‘amendment regulations’) to further

amend SEBI (Mutual Funds) Regulations, 1996 (refer

regulations). In seventh schedule ‘Restrictions on

Investments’ of the regulations, a new clause has been

inserted. It provides that a mutual fund may invest in the

units of REITs and InvITs subject to the following:

• No mutual fund under all its schemes shall own more

than 10% of units issued by a single issuer of REIT

and InvIT; and

• A mutual fund scheme shall not invest:

- more than 10% of its NAV in the units of REIT and

InvIT; and

- more than 5% of its NAV in the units of REIT and

InvIT issued by a single issuer.

Provided that the limits mentioned in sub-clauses (i) and

(ii) above shall not be applicable for investments in case

of index fund or sector or industry specific scheme

pertaining to REIT and InvIT.

These amendment regulations have come into force from

15 February 2017.

Click here for amendment regulations.

Further, SEBI has issued a circular on mutual funds on 28

February 2017 which states that:

• investments restrictions stated in amendment

regulations will be applicable to all fresh investments

by all schemes, including an existing scheme;

• for investment in units of REITs/InvITs by an existing

mutual fund scheme, unitholders of the scheme shall

be given a time period of at least 15 days for the

purpose of exercising the exit option as per the

provisions of Regulation 18 (15A) of SEBI (Mutual

Funds) Regulations, 1996.

This circular is effective with immediate effect.

Click here for circular.

Circular on SEBI (Substantial Acquisition of Shares &

Takeovers) Regulations, 2011

SEBI had issued a circular issuing the format for

submitting the draft letter of offer (DLOF) with SEBI in

terms of SEBI (Substantial Acquisition of Shares &

Takeovers) Regulations, 2011 and certain instructions to

be followed by merchant bankers while filing the DLOF.

SEBI has issued a circular on 15 March 2017 to revise

the time period for which information is required to be

filed with SEBI, in line with the provisions relating to

maintenance of records under the 2013 Act. The format

and instructions prescribed vide aforementioned circular

will stand modified as given in Annexure of this circular.

This circular provides amendments in some general

instructions and format of the standard letter of offer.

This circular will be applicable to all the offers where the

draft letter of offer is filed with SEBI after the date of this

circular.

Click here for circular.

Companies (Transfer of pending proceedings)

Amendment Rules, 2017

The MCA had issued Companies (Transfer of Pending

Proceedings) Rules 2016 (‘principal rules’). The principal

rules, inter alia, laid down provisions regarding transfer of

pending petitions of winding-up on the ground of inability

to pay debts, pending before High Court to the Bench of

the Tribunal.

It states that all such transferred petitions shall be treated

as applications under Section 7, Initiation of Corporate

insolvency resolution process by financial creditor,

Section 8, Insolvency resolution by operational

creditor and Section 9, Application for initiation of

corporate insolvency resolution process by

operational creditor of the Insolvency and Bankruptcy

Code, 2016 (Code).

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It further provides that the petitioner shall need to submit

all information required to be submitted under Sections 7,

8 and 9 of the Code including details of the proposed

insolvency professional to the Tribunal within sixty days

from the date of notification.

MCA has now issued Companies (Transfer of pending

proceedings) Amendment Rules, 2017 (‘amendment

rules’) to amend the principal rules. It provides that sixty

days will be substituted with six months.

These amendment rules have come into force from 28

February 2017.

Click here for amendment rules.

Companies (Incorporation) Amendment Rules, 2017

MCA has issued Companies (Incorporation) Amendment

Rules, 2017 (‘amendment rules’). These amendment

rules, inter alia, provide the following:

• The certificate of incorporation shall be issued by the

registrar in the Form No. INC 11 and the certificate of

incorporation shall mention permanent account

number of the company where if it is issued by the

Income-tax Department;

• Form No. INC 11, Certificate of Incorporation, is

substituted by new Form No. INC 11, Certificate of

Incorporation.

These amendment rules have come into force from 30

January 2017.

Click here for amendment rules.

Clarification on applicability of Section 391(2) of the

2013 Act

Section 391 (2) of the 2013 Act states that the provisions

of Chapter XX, Winding Up, shall apply mutatis

mutandis for closure of the place of business of a foreign

company in India as if it were a company registered in

India. These provisions came into force on 15 December

2016.

MCA has now clarified that the provisions of sub-sections

(1) and (2) of Section 391 of the 2013 Act need to be read

harmoniously. The provisions of Section 391(2) will apply

only in case of a foreign company which has issued

prospectus or Indian Depository Receipts pursuant to the

provisions of Chapter XXII, Companies Incorporated

Outside India of the 2013 Act.

Click here for circular.

Investment in units of REITs and InvITs

The IRDAI has issued circular to amend the Master

Circular - Investment, 2016. The circular states that the

insurers can invest in units of REITs and InvITs and

provides the following:

• Conditions which are required to be ensured, inter alia,

are:

- An insurer can invest not more than 3% of

respective fund size of the insurer(or) not more

than 5% of the units issued by a single REIT / InvIT,

whichever is lower;

- No investment shall be made in REIT /InvIT where

the Sponsor is under the promoter group of the

insurer.

• Investment in units of REITs/InvITs shall be valued at

market value (last quoted price should not be later

than 30 days). Where market quote is not available for

the last 30 days, the units shall be valued as per the

latest net asset value (not more than 6 months old) of

the units published by the trust;

• The concurrent auditor in his quarterly report to the

audit committee/board of the insurer shall confirm

compliance to the norms and disclosure requirements

provided in this circular.

The amendments stated in this circular have come into

force from 14 March 2017.

Click here for circular.

Clarification on ICDS notified under Section 145(2) of

the IT Act

The Central Government had notified amended ICDS on

29 September 2016 which are effective from assessment

year 2017-18. Certain provisions brought to the notice of

the CBDT that may require clarification for proper

implementation of ICDS. CBDT has issued a circular

providing some clarifications which, inter alia, are as

follows:

• Provisions of ICDS are applicable for computation of

income under the regular provisions of the IT Act. The

provisions of ICDS shall not apply for computation of

MAT. Provisions of ICDS shall apply for computation

of Alternate Minimum Tax;

• ICDS VI, Effects of Changes in Foreign Exchange

Rates, provides guidance on accounting for derivative

contracts such as forward contracts and other similar

contracts. For derivatives not covered in the scope of

ICDS VI, provisions of ICDS I, Accounting Policies,

would apply;

• At present no specific ICDS has been notified for real

estate developers, Build-Operate -Transfer projects

and leases. Therefore, relevant provisions of the IT Act

and ICDS shall apply to these transactions as may be

applicable.

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14

• ICDS I provides that MTM loss or an expected loss

shall not be recognised unless the recognition is in

accordance with the provisions of any other ICDS. It

has been clarified that principles applicable to MTM

loss shall be applicable for recognition of MTM gain or

expected gain;

• It has been clarified that ICDS shall apply for

computation of taxable income of all companies

irrespective of the fact whether they are following

Indian GAAP or newly introduced Ind AS;

• ICDS I provides that an accounting policy shall not be

changed without ‘reasonable cause’. In this regard, the

clarification provides that ‘reasonable cause’ is an

existing concept under the IT Act and has evolved

over a period of time, conferring desired flexibility to

the taxpayer in deserving cases and the same is to be

followed;

• It has been clarified that balance in foreign currency

translation reserve account as on 01 April 2016

pertaining to exchange difference on monetary items

for non-integral operations, shall be recognised in the

FY 2016-17 to the extent not recognised in the income

computation in the past.

Click here for circular.

Notification of provisions of the Insolvency and

Bankruptcy Code, 2016

The Central Government has appointed 01 April 2017 as

the date on which the provisions of the following sections

of the Insolvency and Bankruptcy Code, 2016 (‘code’)

have come into force:

• Section 59 - Voluntary liquidation of corporate

persons;

• Sections 209 to 215 (both inclusive) and Section

216(1) - Information utilities;

• Section 234 - Agreement with foreign countries; and

• Section 235 - Letter of request to a country outside

India in certain cases.

Click here for code.

Click here for notification.

The Finance Act, 2017

The Finance Act, 2017 (‘Act’) has received the assent of

the President of India on 31 March 2017. It, inter alia,

provides the following amendments:

• Amendment with respect to Section 115JB: New

sub-sections are inserted in Section 115JB, Special

provision for payment of tax by certain companies,

for companies whose financial statements are drawn

up in compliance with the Ind AS specified in Ind AS

Rules, 2015. It states the following:

- Book profit will be computed in accordance with

explanation I to Section 115JB(2);

- It shall be further increased by all amounts credited

to OCI in the statement of profit and loss under the

head “Items that will not be re-classified to profit or

loss;

- Decreased by all amounts debited to OCI in the

statement of profit and loss under the head “Items

that will not be re-classified to profit or loss;

- Increased by amounts or aggregate of the amounts

debited to the statement of profit and loss on

distribution of non-cash assets to shareholders in a

demerger in accordance with Appendix A of the Ind

AS 10;

- Decreased by all amounts or aggregate of the

amounts credited to the statement of profit and loss

on distribution of non-cash assets to shareholders

in a demerger in accordance with Appendix A of the

Ind AS 10;

It further provides that nothing contained in clause (a) or

clause (b) shall apply to the amount credited or debited to

OCI under the head “Items that will not be re-classified to

profit or loss” in respect of revaluation surplus for assets

in accordance with the Ind AS 16, Property, Plant and

Equipment and Ind AS 38, Intangible Assets; or gains

or losses from investments in equity instruments

designated at fair value through OCI in accordance with

the Ind AS 109

• For companies referred above, the book profit of the

year of convergence and each of following four

previous years, shall be further increased or

decreased, as the case may be, by one-fifth of the

transition amount. Definition of ‘transition amount’ is

inserted.

‘Transition amount’ means the amount or aggregate of

the amounts adjusted in the other equity (excluding

capital reserve and securities premium reserve) on the

convergence date but not including the following:

- amount or aggregate of the amounts adjusted in the

OCI on the convergence date which shall be

subsequently re-classified to the profit or loss;

- revaluation surplus for assets in accordance with

the Ind AS 16 and Ind AS 38 adjusted on the

convergence date;

- gains or losses from investments in equity

instruments designated at fair value through OCI in

accordance with the Ind AS 109 adjusted on the

convergence date;

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15

- adjustments relating to items of property, plant and

equipment and intangible assets recorded at fair

value as deemed cost in accordance with

paragraphs D5 and D7 of the Ind AS 101 on the

convergence date;

- adjustments relating to investments in subsidiaries,

joint ventures and associates recorded at fair value

as deemed cost in accordance with paragraph D15

of the Ind AS 101 on the convergence date;

- adjustments relating to cumulative translation

differences of a foreign operation in accordance

with paragraph D13 of the Ind AS 101 on the

convergence date;

• Amendment with respect to Section 271J: Section

271J, Penalty for furnishing incorrect information

in reports or certificates, is inserted in the IT Act

which states that where the Assessing Officer or the

Commissioner (Appeals), in the course of any

proceedings under the IT Act, finds that an accountant

or a merchant banker or a registered valuer has

furnished incorrect information in any report or

certificate furnished under any provision of the IT Act

or the rules made thereunder, the Assessing Officer or

the Commissioner (Appeals) may direct that such

accountant or merchant banker or registered valuer,

as the case may be, shall pay, by way of penalty, a

sum of INR ten thousand for each such report or

certificate.

Click here for Act.

Revised minimum rates of wages

The Ministry of Labour and Employment has issued

notification on revised minimum rates of wages per day

payable to various categories of employees prescribed in

the schedule of such notification.

These revised minimum rates of wages are effective from

19 January 2017.

Click here for notification.

The Payment of Wages (Amendment) Act, 2017

The President of India had passed ‘The Payment of

Wages (Amendment) Ordinance, 2016’ (‘ordinance’) on

28 December 2016. The Payment of Wages

(Amendment) Act, 2017 (‘amendment act’) has now

received the assent of the President of India. The

ordinance issued stands repealed with issue of this

amendment act.

The amendment act has substituted Section 6, Wages to

be paid in current coin or currency notes, of the

Payment of Wages Act, 1936 with new Section 6, Wages

to be paid in current coin or currency notes or by

cheque or crediting in bank account. It states that:

• all wages shall be paid in current coin or currency

notes or by cheque or by crediting the wages in the

bank account of the employee;

• the appropriate Government may, by notification in the

Official Gazette, specify the industrial or other

establishment, the employer of which shall pay to

every person employed in such industrial or other

establishment, the wages only by cheque or by

crediting the wages in his bank account.

The amendment act shall be deemed to have come into

force from 28 December 2016.

Click here for amendment act.

Ease of compliance to maintain registers under

various Labour Laws Rules, 2017

The Central Government has issued 'Ease of compliance

to maintain registers under various Labour Laws Rules,

2017’ (‘rules’). These rules are issued for the ease of, and

for the expedient compliance of the requirement of

various labour related laws referred to in these rules and

for the purpose of maintaining combined registers for all

such laws.

Combined registers provided under these rules will

facilitate ease of compliance, maintenance and

inspection, and will also make the information provided

thereunder easily accessible to the public through

electronic means, thereby increasing transparency.

Combined registers in the Forms specified in the

Schedule to these rules shall be maintained either

electronically or otherwise.

Consequential amendments are also made in various

labour related laws referred to in these rules.

These rules have come into force from 21 February 2017.

Click here for rules.

India - Other updates

16

Exposure draft of amendments to IFRS 8, Operating

Segments, and IAS 34, Interim Financial Reporting

The IASB has issued exposure draft of Amendments to

IFRS 8, Operating Segments and IAS 34, Interim

Financial Reporting. It proposes, inter alia, following

amendments:

• IFRS 8, Operating Segments

- It proposes to emphasise that the chief operating

decision maker is a function that makes the

operating decisions and decisions about allocating

resources to, and assessing the performance of,

the operating segments of an entity;

- Require companies to disclose the title and

description of the role of the individual or group

which is identified as the chief operating decision

maker;

- Paragraphs 19A and 22(d) are proposed to be

amended which would require entities to explain in

the financial statements how and why the

reportable segments identified in the financial

statements differ from those segments identified in

the annual reporting package (such as Annual

reports, investor presentations, etc.);

- Require to disclose in the notes any judgment

made by management in applying the aggregation

criteria in paragraphs 12 and paragraph 12A;

- Paragraph 20A is introduced stating that the entity

may disclose additional information about the

reportable segments if helps the entity to meet the

core principle of the standard. This additional

information may include information not reviewed

by, or regularly provided to, the chief operating

decision maker;

- It is proposed that all material reconciling items

shall be separately identified and described in

sufficient details to enable users of the financial

statement to understand the nature.

• IAS 34, Interim Financial Reporting

- When entity changes the composition of its

reportable segments in accordance with IFRS 8,

the entity shall, in the first interim financial report

after that change, restate and disclose the segment

information required by paragraph 16A(g) of IAS 34

for each previously reported interim period both of

the current FY and of prior FYs, unless the

information is not available and the cost to develop

it would be excessive;

- The determination of whether the information is not

available and the cost to develop it would be

excessive shall be made for each individual item of

disclosure. The entity shall disclose whether it has

restated the segment information for earlier periods.

The last date for submission of comments is 31 July

2017.

Click here for press release.

Click here for exposure draft.

Exposure draft of annual improvements to IFRS

2015-2017 cycle

The IASB has issued an exposure draft of annual

improvements to IFRS 2015-17 cycle (‘exposure draft’). It

proposes amendments to the following standards:

• IAS 12, Income Taxes: Paragraph 52B (now

proposed as paragraph 58A) states that in the

circumstances described in paragraph 52A of IAS 12

(i.e. when there are different tax rates for distributed

and undistributed profits), the income tax

consequences of dividends are recognised in profit or

loss for the period. This exposure draft proposed to

clarify that the requirements in paragraph 52B (now

proposed as paragraph 58A) apply to all income tax

consequences of dividends. IASB require to apply

these amendments retrospectively in accordance with

IAS 8, Accounting Policies, Changes in

Accounting Estimates and Errors, from the annual

periods beginning the date then these amendments

will become effective;

• IAS 23, Borrowing Costs: Exposure draft proposes to

amend Paragraph 14 to clarify that when a qualifying

asset is ready for its intended use or sale, an entity

treats any outstanding borrowing made specifically to

obtain that qualifying asset as part of the funds that it

has borrowed generally. IASB proposes to require

prospective application of the proposed amendments,

i.e. these proposed amendments would apply only to

borrowing costs incurred on or after the date of first

applying the amendments;

International - Accounting updates

17

• IAS 28, Investments in Associates and Joint

Ventures: It proposes to clarifies that an entity is

required to apply IFRS 9, Financial

Instruments, including its impairment requirements, to

long-term interests in an associate or joint venture

that, in substance, form part of the net investment in

the associate or joint venture but to which the equity

method is not applied. An entity is proposed to apply

these amendments retrospectively in accordance with

IAS 8 for annual periods beginning on or after 01

January 2018 except as specified in paragraph 45F.

Paragraph 45F states that an entity shall restate

comparative information to reflect the proposed

amendments if the entity restates comparative

information in accordance with IFRS 9. If an entity

does not restate comparative information in

accordance with IFRS 9, the entity may choose to

restate comparative information to reflect the

application of IAS 39, Financial Instruments:

Recognition and Measurement. Similarly, if an

insurer applies the temporary exemption from IFRS 9

in accordance with IFRS 4, Insurance Contracts, the

insurer may choose to restate comparative information

to reflect the application of IAS 39.

The last date for submission of comments is 12 April

2017.

Click here for press release.

Click here for exposure draft.

Discussion paper on disclosure initiative - principles

of disclosure

IASB has issued a discussion paper that suggests

principles to make disclosures in financial statements

more effective. Some specific suggestions in the

discussion paper include:

• Seven principles of effective communication, which

could be included in a general disclosure standard or

described in non-mandatory guidance;

• Possible approaches to improve disclosure objectives

and requirements in IFRS; and

• Principles of fair presentation and disclosure of

performance measures and non-IFRS information in

financial statements, to ensure that such information is

not misleading.

The principles of disclosure project complements a

number of other projects already taken by the Board,

including amendments to IAS 1, Presentation of

Financial Information, and IAS 7, Statement of Cash

Flows, and the development of guidance to help

companies make materiality judgements when preparing

their financial statements.

The last date for submission of comments is 02 October

2017.

Click here for press release.

Click here for discussion paper.

International - Accounting updates

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ASU on consolidation - guidance for not-for-profit

entities

FASB has issued ASU 2017-02, Clarifying when a not-

for-profit (NFP) entity that is a general partner or a

limited partner should consolidate a for-profit limited

partnership or similar entity. It has amended the

consolidation guidance in subtopic 958-810, Not-for-

Profit Entities - Consolidation to clarify when a NFP

entity, that is a general partner or a limited partner, should

consolidate a for-profit limited partnership or similar legal

entity once the amendments in ASU 2015-02,

Consolidation (Topic 810): Amendments to the

Consolidation Analysis, become effective.

The amendments in this ASU retain the existing guidance

on how NFP entity general partners apply the

consolidation guidance that was in subtopic 810-20 by

including it within subtopic 958-810. Therefore, NFP

entities that are general partners are still presumed to

control for-profit limited partnership, regardless of the

extent of their ownership interest, unless that presumption

is overcome by either substantive kick-out rights or

substantive participating rights.

The amendments in this ASU also add guidance to

subtopic 958-810 on when NFP limited partners should

consolidate a for-profit limited partnership.

This ASU is effective for fiscal years beginning after 15

December 2016, and interim periods within fiscal years

beginning after 15 December 2017. Early adoption is

permitted.

NFPs that have already adopted the amendments in ASU

2015-02 are required to apply the amendments in this

ASU retrospectively to all relevant prior periods beginning

with the fiscal year in which the amendments in ASU

2015-02 were initially adopted.

NFPs that have not yet adopted the amendments in ASU

2015-02 are required to adopt the amendments in this

ASU at the same time they adopt the amendments in

ASU 2015-02 and should apply the same transition

method elected for the application of ASU 2015-02.

Click here for ASU.

ASU on intangibles - goodwill and other - simplifying

the test for goodwill impairment

FASB has issued ASU 2017-04, Simplifying the test for

goodwill impairment, to simplify how an entity is

required to test goodwill for impairment by eliminating

step 2 from the goodwill impairment test.

Step 2 in the goodwill impairment test involves computing

the implied fair value of goodwill, by determining the fair

value, at the impairment testing date, of its assets and

liabilities (including unrecognised assets and liabilities)

following the procedure that would be required in

determining the fair value of assets acquired and liabilities

assumed in a business combination.

To simplify the subsequent measurement of goodwill, this

ASU has eliminated step 2 from the goodwill impairment

test. The amendments in this ASU require entities to

perform its annual or interim goodwill impairment test by

comparing the fair value of a reporting unit with its

carrying amount. An impairment charge should be

recognised for the amount by which the carrying amount

of the reporting unit exceeds its fair value. The

impairment charge should not exceed the total amount of

goodwill allocated to that reporting unit. Additionally, an

entity should consider income tax effects from any tax

deductible goodwill on the carrying amount of the

reporting unit when measuring the goodwill impairment

loss, if applicable.

An entity should apply the amendments in this ASU on a

prospective basis. An entity is required to disclose the

nature of and reason for the change in accounting

principle upon transition. That disclosure should be

provided in the first annual period and in the interim

period within the first annual period when the entity

initially adopts the amendments in this ASU.

A public business entity that is a SEC filer should adopt

the amendments in this ASU for its annual or any interim

goodwill impairment tests in fiscal years beginning after

15 December 2019.

A public business entity that is not an SEC filer should

adopt the amendments in this ASU for its annual or any

interim goodwill impairment tests in fiscal years beginning

after 15 December 2020.

All other entities, including not-for-profit entities that are

adopting the amendments in this ASU should do so for

their annual or any interim goodwill impairment tests in

fiscal years beginning after 15 December 2021.

Early adoption is permitted for interim or annual goodwill

impairment tests performed on testing dates after 01

January 2017.

Click here for ASU.

ASU on other income - gains and losses from the

derecognition of non-financial assets - clarifying the

scope of asset derecognition guidance and

accounting for partial sales of non-financial assets

FASB has issued ASU 2017-05, Clarifying the scope of

asset de-recognition guidance and accounting for

partial sales of non-financial assets, included in

Subtopic 610-20, Other income - Gains and losses

from the de-recognition of non-financial assets.

Subtopic 610-20 was issued in May 2014 as part of ASU

2014-09, Revenue from Contracts with Customers

(Topic 606) and provided guidance for recognising gains

and losses from the transfer of non-financial assets in

contracts with non-customers.

America - Accounting updates

19

The scope of Subtopic 610-20 included de-recognition of

an ‘in substance non-financial asset’, but it did not define

the term ‘in substance non-financial asset’. This ASU

defines the term ‘in substance non-financial asset’, in

part, as a financial asset promised to a counterparty in a

contract if substantially all of the fair value of the assets

(recognised and unrecognised) that are promised to the

counterparty in the contract is concentrated in non-

financial assets. If substantially all of the fair value of the

assets that are promised to the counterparty in a contract

is concentrated in non-financial assets, then all of the

financial assets promised to the counterparty are in

substance non-financial assets within the scope of

Subtopic 610-20.

This ASU also clarify that non-financial assets within the

scope of Subtopic 610-20 may include non-financial

assets transferred within a legal entity to a counterparty.

The amendments in this ASU exclude all businesses and

non-profit activities from the scope of Subtopic 610-20.

Therefore, de-recognition of all businesses and non-profit

activities (except those related to conveyances of oil and

gas mineral rights or contracts with customers) should be

accounted for in accordance with Subtopic 810-10,

Consolidation-Overall.

This ASU also provides additional guidance for partial

sales of non-financial assets. This ASU requires an entity

to de-recognise a distinct non-financial asset or distinct in

substance non-financial asset in a partial sale transaction

when it:

• does not have (or ceases to have) a controlling

financial interest in the legal entity that holds the asset

in accordance with Topic 810; and

• transfers control of the asset in accordance with Topic

606.

Once an entity transfers control of a distinct non-financial

asset or distinct in substance non-financial asset, it is

required to measure any non-controlling interest it

receives (or retains) at fair value.

The amendments in this ASU are effective at the same

time as the amendments in ASU 2014-09. Therefore, for

public entities, the amendments are effective for annual

reporting periods beginning after 15 December 2017,

including interim reporting periods within that reporting

period. Public entities may apply the guidance earlier but

only as of annual reporting periods beginning after 15

December 2016, including interim reporting periods within

that reporting period.

For all other entities, the amendments in this ASU are

effective for annual reporting periods beginning after 15

December 2018, and interim reporting periods within

annual reporting periods beginning after 15 December

2019. All other entities may apply the guidance earlier as

of annual reporting periods beginning after 15 December

2016, including interim reporting periods within that

reporting period. All other entities also may apply the

guidance earlier as of annual reporting periods beginning

after 15 December 2016, and interim reporting periods

within annual reporting periods beginning one year after

the annual reporting period in which the entity first applies

the guidance.

An entity is required to apply the amendments in this ASU

at the same time that it applies the amendments in ASU

2014-09.

An entity may elect to apply the amendments in this ASU

either:

• Retrospectively to each period presented in the

financial statements (retrospective approach);

• Retrospectively with a cumulative-effect adjustment to

retained earnings as of the beginning of the fiscal year

of adoption (modified retrospective approach).

An entity may elect to apply all of the amendments in this

ASU and ASU 2014-09 using the same transition method.

Alternatively, an entity may elect to apply a different

transition method to transactions with customers (for

example, transactions within the scope of Topic 606) than

to transactions with non-customers (for example,

transactions within the scope of Subtopic 610-20).

Click here for ASU.

ASU on plan accounting - employee benefit plan

master trust reporting

FASB has issued ASU 2017-06, Employee Benefit Plan

Master Trust Reporting, which primarily relates to the

reporting by an employee benefit plan (‘plan’) for its

interest in a master trust.

A master trust is a trust for which a regulated financial

institution (bank, trust company, or similar financial

institution that is regulated, supervised, and subject to

periodic examination by a state or federal agency) serves

as a trustee or custodian and in which assets of more

than one plan sponsored by a single employer or by a

group of employers under common control are held.

The current guidance on disclosures about an employee

benefit plan’s interest in a master trust in Topic 960, Plan

Accounting - Defined Benefit Pension Plans, and

Topic 962, Plan Accounting - Defined Contribution

Pension Plans were considered limited and incomplete.

The amendments in this ASU clarify presentation

requirements for a plan’s interest in a master trust and

require more detailed disclosures of the plan’s interest in

the master trust.

America - Accounting updates

20

The main provisions of this ASU, inter alia, are as follows:

• For each master trust in which a plan holds an interest,

the amendments in this ASU requires the plan’s

interest in that master trust and any change in that

interest to be presented in separate line items in the

statement of net assets available for benefits and in

the statement of changes in net assets available for

benefits respectively;

• This ASU removes the requirement to disclose the

percentage interest in the master trust for plans with

divided interests and requires that all plans disclose

the dollar amount of their interest in each of those

general types of investments, which supplements the

existing requirement to disclose the master trust’s

balances in each general type of investments;

• It requires all plans to disclose their master trust’s

other asset and liability balances, and the dollar

amount of the plan’s interest in each of those

balances;

• This ASU does not require the health and welfare

benefit plans to include investment disclosures relating

to the 401(h) account assets, in their financial

statements. It requires the health and welfare benefit

plan to disclose the name of the defined benefit

pension plan in which those investment disclosures

are provided, so that participants can easily access

those statements for information about the 401(h)

account assets, if needed.

The amendments in this ASU are effective for fiscal

years beginning after 15 December 2018. Early

adoption is permitted. An entity should apply the

amendments in this ASU retrospectively to each

period for which financial statements are presented.

Click here for ASU.

ASU on compensation - retirement benefits -

improving the presentation of net periodic pension

cost and net periodic post-retirement benefit cost

FASB has issued ASU 2017-07, Compensation -

Retirement benefits - improving the presentation of

net periodic pension cost and net periodic post-

retirement benefit cost, to improve the presentation of

net periodic pension cost and net periodic post-retirement

benefit cost.

The amendments in this ASU require that an employer

report the service cost component in the same line item

or items as other compensation costs arising from

services rendered by the pertinent employees during the

period. The other components of net benefit cost as

defined in paragraphs 715-30-35-4 and 715-60-35-9 are

required to be presented in the income statement

separately from the service cost component and outside a

subtotal of income from operations, if one is presented. If

a separate line item or items are used to present the

other components of net benefit cost, that line item or

items must be appropriately described. If a separate line

item or items are not used, the line item or items used in

the income statement to present the other components of

net benefit cost must be disclosed.

The amendments in this ASU also allow only the service

cost component to be eligible for capitalisation when

applicable (for example, as a cost of internally

manufactured inventory or a self-constructed asset).

The amendments in this ASU apply to all employers,

including not-for-profit entities that offer to their

employees defined benefit pension plans, other post-

retirement benefit plans, or other types of benefits

accounted for under Topic 715, Compensation -

Retirement Benefits.

The amendments in this ASU are effective for public

business entities for annual periods beginning after 15

December 2017, including interim periods within those

annual periods. For other entities, the amendments in this

ASU are effective for annual periods beginning after 15

December 2018, and interim periods within annual

periods beginning after 15 December 2019. Early

adoption is permitted as of the beginning of an annual

period for which financial statements (interim or annual)

have not been issued or made available for issuance.

Disclosures of the nature of and reason for the change in

accounting principle are required in the first interim and

annual periods of adoption.

The amendments in this ASU should be applied

retrospectively for the presentation of the service cost

component and the other components of net periodic

pension cost and net periodic post-retirement benefit cost

in the income statement and prospectively, on and after

the effective date, for the capitalisation of the service cost

component of net periodic pension cost and net periodic

post-retirement benefit in assets.

Click here for ASU.

ASU on receivables - non-refundable fees and other

costs - premium amortisation on purchased callable

debt securities

FASB has issued ASU 2017-08, Receivables - non-

refundable fees and other costs (Subtopic 310-20) to

amend the amortisation period for certain purchased

callable debt securities held at a premium. FASB is

shortening the amortisation period for the premium to the

earliest call date.

America - Accounting updates

21

Under current GAAP, premiums and discounts on callable

debt securities generally are amortised to the maturity

date. An entity must have a large number of similar loans

to consider estimates of future principal prepayments

when applying the interest method. However, an entity

that holds an individual callable debt security at a

premium may not amortise that premium to the earliest

call date. If that callable debt security is subsequently

called, the entity records a loss equal to the unamortised

premium. The amendments in this ASU more closely

align the amortisation period of premiums and discounts

to expectations incorporated in market pricing on the

underlying securities. In most cases, market participants

price securities to the call date that produces the worst

yield when the coupon is above current market rates (that

is, the security is trading at a premium) and price

securities to maturity when the coupon is below market

rates (that is, the security is trading at a discount) in

anticipation that the borrower will act in its economic best

interest. As a result, the amendments more closely align

interest income recorded on bonds held at a premium or

a discount with the economics of the underlying

instrument.

The amendments in this ASU affect all entities that hold

investments in callable debt securities that have an

amortised cost basis in excess of the amount that is

repayable by the issuer at the earliest call date (that is, at

a premium).

For public business entities, the amendments in this ASU

are effective for fiscal years, and interim periods within

those fiscal years, beginning after 15 December 2018.

For all other entities, the amendments are effective for

fiscal years beginning after 15 December 2019 and

interim periods within fiscal years beginning after 15

December 2020. Early adoption is permitted, including

adoption in an interim period. If an entity early adopts the

amendments in an interim period, any adjustments should

be reflected as of the beginning of the fiscal year that

includes that interim period.

An entity should apply the amendments in this Update on

a modified retrospective basis through a cumulative-effect

adjustment directly to retained earnings as of the

beginning of the period of adoption.

Click here for ASU.

Proposed ASU on compensation - stock

compensation - improvements to non-employee

share-based payment accounting

FASB has issued a proposed ASU intended to maintain

or improve the usefulness of the information provided to

the users of the financial statements while reducing cost

and complexity in the financial reporting. It involve several

aspects of the accounting for non-employee share based

payment transactions resulting from expanding the scope

of Topic 718, Compensation - Stock Compensation, to

include share-based payment transactions for acquiring

goods and services from non-employees. The

amendments in this proposed ASU would expand the

scope of Topic 718 to include share-based payment

transactions for acquiring goods and services from non-

employees. An entity would apply the requirements of

Topic 718 to non-employee awards except for specific

guidance on inputs to an option pricing model and the

attribution of cost.

An entity would apply the amendments in this proposed

ASU through a cumulative-effect adjustment to retained

earnings as of the beginning of the annual period of

adoption. However, a non-public entity that substitutes

calculated value for expected volatility when measuring

share-based payment awards would apply the proposed

amendments prospectively to all awards that are

measured at fair value after the effective date. The

proposed amendments would be applied to only

outstanding awards.

Disclosures required at transition would include the

nature of and reason for the change in accounting

principle and, if applicable, quantitative information about

the cumulative effect of the change on retained earnings

or other components of equity.

The last date for submission of comments is 05 June

2017.

Click here for ASU.

America - Accounting updates

22

Real Estate Investment Trusts and Infrastructure

Investment Trusts

Background

Real estate and infrastructure are two of the most crucial

and influential sectors of the Indian economy. In this topic,

we cast our lens on the most-talked about regulated

mechanism which helps investors channelise their

investment into real estate and infrastructure sector

through REITs and InvITs respectively.

If real estate and infrastructure projects are physical

assets, REITs and InvITs help break these assets into

several small parts in the form of securitised investment.

It provides a more accessible platform for the individual

investors to reap the benefits of owning an interest in

securitised real estate and infrastructure market. In other

words, investment in units of Business Trusts ('BTs')

enable small-budget investors to put money in the real

estate and infrastructure projects with the benefit of

ongoing returns and without having to deal with the

shortcomings/difficulties of investing directly in such

physical assets.

Evolution in India

Such BTs have been in existence in developed

economies for several years and provide a stable

investment alternative for retail investors. This concept of

alternate investment structure in the real estate and for

the infrastructure sector has been into deliberations for

quite some time now. The formation of the REITs and

InvITs in India was first approved in the year 2014. On 26

September 2014, SEBI notified the SEBI (Real Estates

Investment Trusts) Regulations, 2014 (‘REITs

regulations’) and SEBI (Infrastructure Investment Trusts)

Regulations, 2014 (‘InvITs regulations’), thereby paving

the way for introduction of an internationally acclaimed

investment structure in India. Further, Government of

India also made necessary amendments to the Indian

taxation regime to provide incentives for the formation of

REITs and InvITs in India. REITs in India are mainly of

hybrid type. Hybrid REITs invest in both properties and

mortgages.

Most developers and investors didn’t go ahead with their

BT's plans, perhaps due to the onerous tax implications.

To address this issue, certain tax benefits have been

rolled-out in the finance budgets of the years 2015 and

2016 with the aim to improve the investment climate in

the country. With the aim to ease the path for REITs and

InvITs in India, pass-through status has been provided for

rental income and capital gains tax has been rationalised

for the sponsors exiting at the time of listing of the units of

REITs, subject to payment of securities transaction tax,

which is more extensively discussed later in this topic.

Hot Topic

While mutual funds invest in equities and other stocks, BTs invest directly in real estate and infrastructure assets

How are BTs different from mutual funds?

Business Trusts

REITs and InvITs

Though the government has been in

the process of making it easier to

invest in real estate and infrastructure

projects in India, the fact remains that

these sectors are yet to witness any

benefits from any REITs and InvITs

REITs and InvITs are

mandatorily required to be

listed on recognised stock

exchanges in India

REITs distribute a major part of their

earnings to their investors

23

Business model - A broad overview

Regulatory requirements:

REITs regulations and InvITs regulations state that no person shall act as REIT and InvIT respectively unless it is

registered with the SEBI. BT shall be a trust set up under the Indian Trust Act, 1882. As per these regulations, sponsor,

manager and trustee will be designated under the regulations and all such person will be separate entities.

Hot Topic

REIT/InvIT

- holds controlling interest in

HoldCo and SPV

- invests in properties

through HoldCo, SPV or

directly

Holding company (HoldCo)

- in which REIT/InvIT holds

controlling interest

- not engaged in any other

activity other than holding of

underlying SPV

Special purpose vehicle

(SPV):

- in which either REIT/ InvIT

or HoldCo holds controlling

interest

- does not investment in any

other SPV

Real estate and

infrastructure projects

Sponsor and sponsor group set-up the BT and appoint trustee

Trustee holds the assets of BT for benefits of the unit holders and enter into investment

management agreement with manager

Investment managermakes investment

decisions with respect to underlying assets of the

BT

Issue of units of BT

REIT: It shall make an initial offer of its units by way of

public issue only. Any subsequent issue of units by the

REIT may be by way of follow-on offer, preferential

allotment, qualified institutional placement, rights issue,

bonus issue, offer for sale or any other mechanism and in

the manner as may be specified by the SEBI.

InvIT: These entities may raise fund by way of private

placement or public issue through initial public offer.

Unit holders shall have the rights to receive income or

distributions as provided for in the offer document or trust

deed.

SEBI has allowed BT to invest in two level SPV structure

through holding company (HoldCo), subject to sufficient

shareholding in the HoldCo and the underlying SPV and

other safeguards. These provisions have enabled

companies to be able to move with the option of

constituting BT with making much changes in their

existing group structure.

Disclosure of financial information in offer document

for BTs

REITs regulations and InvITs regulations prescribe

disclosures to be made in an offer document. SEBI has

also issued circulars to provide detailed requirements for

disclosure of financial information in offer document for

REITs and InvITs.

These circulars, inter alia, provide that:

• Financial information to be disclosed in offer document

shall comply with the following:

- Period of financial information: Offer document

shall contain financial information for a period of

last three completed financial years immediately

preceding the date of offer document. Further, if

closing date of the last completed financial year

falls more than six months before the date of offer

document, then the BT shall also disclose interim

financial information;

24

- Nature of financial information: If BT has been in

existence for the last three completed financial

years, then the historical financial statements of the

BT, on both standalone as well as consolidated

basis) for last three years, and interim period, if

any, shall be disclosed. If BT has been in existence

for a period lesser than the last three completed

financial years and the historical financial

statements of BT are not available for the reporting

period of three years and interim period, then the

combined financial statements need to be disclosed

for the periods when such historical financial

statements are not available;

- Content and basis of preparation: Financial

information shall be prepared in accordance with

Ind AS Rules. Financial information presented by

the BT can be in the form of condensed financial

statement;

- Additional financial disclosures: In addition to

the financial statements, BT shall also disclose

property wise operating income/project wise

operating cash flows, earning per share, contingent

liabilities, commitments etc. as a part of the audited

financial information and shall also be subjected to

audit;

- Audit of financial information: Financial

information shall be audited. In providing report, the

auditor shall be guided by the requirements of the

'Guidance Note on Reports in Company

Prospectuses' issued by the ICAI, to the extent

applicable;

• Projections of BT's revenue/income and operating

cash flows over the next three years including related

assumptions;

• Management discussion and analysis of BT's

operations;

• Framework for calculation of Net Distributable Cash

Flows ('NDCFs').

Disclosure requirements to stock exchanges on

continuous basis

• BT is required to submit half yearly and annual

financial information to the stock exchanges;

• Financial information shall be disclosed on both

standalone and consolidated basis;

• Financial information shall be prepared in accordance

with Ind AS notified under Ind AS Rules;

• In addition to above stated financial information, BT

shall also disclose their statement of NDCFs as well

as of all the underlying HoldCos and SPVs.

Audit of Financial Information

• Annual financial information shall be audited, whereas

the half yearly financial information may be either

audited or unaudited;

• As part of the audit report, in addition to the opinion on

the financial statements of the BT, auditor shall give

his opinion as to whether:

- the statement of net assets value gives a true and

fair view of the net assets as at the balance sheet

date;

- the statement of total returns at fair value gives a

true and fair view of the total returns;

- the statement of NDCFs gives a true and fair view

of NDCFs for the years/periods ended at the

balance sheet dates.

Taxation regime - A bird’s eye view

• Shares of SPV are exchanged with the units of the

BT:

Sponsors: Capital gains shall not be taxable at the

time of transfer of such shares.

• Interest income: Flow of interest from SPV to the BT.

SPV: Not applicable

BT: Exempt, considered as pass through

Unit holders: Taxable as interest income and tax

withholding tax to be deducted by BT.

• Income from real estate assets and investment

property:

SPV: If such assets are held by SPV, taxable as

business income or rental income

BT: If such assets are directly hold by BT, exempt (in

case of REITs) and Taxable (in case of InvITs)

Unit holders: Taxable for unitholders of REITs and

withholding tax to be deducted by REIT on distribution.

In case of InvITs, such income will be exempt.

Hot Topic

Audit Requirement

Minimum once in a year

Audit report on annual financial

information to be submitted within 60

days

Half yearly audited/reviewed financial

information within 45 days

25

• Dividend:

SPV: When SPV will distribute dividend to BT (DDT

not required to be paid subject to certain conditions)

BT: Exempt

Unit holders: Exempt

• Capital gains earned on sale of assets, share of

SPVs or units of BT:

SPV: On sale of real estates and investment property

held by them, capital gain shall be computed as per

provisions of the IT Act.

BT: On sale of real estates and shares in SPVs held

by them, capital gain shall be computed as per

provisions of the IT Act.

Unit holders: On sale of units of BT, following are the

tax implications:

For unit holders and Sponsors: Long term capital gain

is exempt; short term capital gain is taxable at 15%

• Any other income

SPV: Taxable

BT: Taxable

Unit holders: Exempt

Hot Topic

The final word

India is an untapped market for these asset classes and these are the sectors that will

continue to evolve. Largely, the Indian REIT/InvIT regime is at par with the international

format and seems to have what is needed to provide the right impetus to the Indian real

estate and infrastructure sector. But tax efficiency, at this point, is quite critical to the

success of these investment vehicles. Though the recent budgetary amendments could give

the much-needed push to the REITs and InvITs by making this alternative investment

opportunity more lucrative to the common man, but the regulators must ensure that the

REIT/InvIT regime is appraised periodically to keep pace with the changing dynamics of the

economy.

Withholding tax

BT to deduct tax on interest income and income from real estate /investment property,

payable to the unit holders on payment or credit (whichever is earlier), as per the rates

specified.

26

Abbreviations used in this publication2013 Act Companies Act, 2013 (as amended)

AASB Auditing and Assurance Standards Board

AS Accounting Standard

AS RulesCompanies (Accounting Standards) Rules 2006 (as

amended)

ASB Accounting Standards Board

ASU Accounting Standards Update

CBDT Central Board of Direct Taxes

FASB Financial Accounting Standards Board

FY Financial year

GAAP Generally Accepted Accounting Principles

IAS International Accounting Standard

IASB International Accounting Standards Board

ICAI Institute of Chartered Accountants of India

ICDR

Regulations

SEBI (Issue of Capital and Disclosure Requirements)

Regulations, 2009 (as amended)

ICDS Income Computation and Disclosure Standards

IFRS International Financial Reporting Standard

Ind AS Indian Accounting Standard

Ind AS

Rules

Companies (Indian Accounting Standards) Rules,

2015 (as amended)

InvIT Infrastructure Investment Trust

IRDAIInsurance Regulatory and Development Authority of

India

IT Act Income-tax Act, 1961

ITFG Ind AS Transition Facilitation Group

MAT Minimum Alternate Tax

MCA Ministry of Corporate Affairs

MTM Mark to Market

NAV Net Asset Value

NBFC Non-Banking Financial Company

NCLT National Company Law Tribunal

OCI Other Comprehensive Income

PPE Property, Plant and Equipment

RBI Reserve Bank of India

REIT Real Estate Investment Trust

SA Standard on Auditing

SEBI Securities and Exchange Board of India

SEBI Listing

Regulations

SEBI (Listing Obligations and Disclosure

Requirements) Regulations, 2015 (as amended)

SEC U.S. Securities and Exchange Commission

27

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