Companies (Indian Accounting Standards) Second Amendment Rules, 2019
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....er Income Tax Treatments, to Ind AS 12 added paragraph E8. An entity shall apply that amendment when it applies Appendix C to Ind AS 12."; (ii) In Appendix E, the following paragraphs shall be inserted, namely:- "E1 * E2 * E3 * E4 * E5 * E6 * E7 * Uncertainty over income tax treatments E8 A first-time adopter whose date of transition to Ind ASs is before the date of notification of this Appendix may elect not to reflect the application of the Appendix C, Uncertainty over Income Tax Treatments, to Ind AS 12, Income Taxes, in comparative information in its first Ind AS financial statements. An entity that makes that election shall recognise the cumulative effect of applying Appendix C to Ind AS 12 as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of its first Ind AS reporting period."; (iii) In Appendix 1, (a) for paragraph 9, the following paragraph shall be substituted, namely:- "9. Paragraphs E1-E2 of Appendix E of IFRS 1 provides 'Short-term exemptions from IFRSs', however Ind AS 101 does not provide the aforesaid short-term exemptions. In order to maintain consistency with paragrap....
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.... of IFRS 3, these paragraph numbers are retained in Ind AS 103.". III. in "Indian Accounting Standard (Ind AS) 109", - (i) after paragraph 7.1.5, the following paragraphs shall be inserted, namely:- "7.1.6 * 7.1.7 Prepayment Features with Negative Compensation (Amendments to Ind AS 109), added paragraphs 7.2.1-7.2.34 and B4.1.12A and amended paragraphs B4.1.11(b) and B4.1.12(b). An entity shall apply these amendments for annual periods beginning on or after 1 April, 2019. 7.2 Transition1 7.2.1 An entity shall apply this Standard retrospectively, in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors, except as specified in paragraphs 7.2.4-7.2.14. This Standard shall not be applied to items that have already been derecognised at the date of initial application. 7.2.2 * Transition for classification and measurement (Chapters 4 and 5) 7.2.3 At the date of initial application, an entity shall assess whether a financial asset meets the condition in paragraphs 4.1.2(a) or 4.1.2A(a) on the basis of the facts and circumstances that exist at that date. The resulting classification shall be applied retrospectively irrespective of the ent....
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....trospectively. 7.2.10 At the date of initial application, an entity: (a) may designate a financial liability as measured at fair value through profit or loss in accordance with paragraph 4.2.2(a). (b) shall revoke its previous designation of a financial liability as measured at fair value through profit or loss if such designation was made at initial recognition in accordance with the condition now in paragraph 4.2.2(a) and such designation does not satisfy that condition at the date of initial application. (c) may revoke its previous designation of a financial liability as measured at fair value through profit or loss if such designation was made at initial recognition in accordance with the condition now in paragraph 4.2.2(a) and such designation satisfies that condition at the date of initial application. Such a designation and revocation shall be made on the basis of the facts and circumstances that exist at the date of initial application. That classification shall be applied retrospectively. 7.2.11 If it is impracticable (as defined in Ind AS 8) for an entity to apply retrospectively the effective interest method, the entity shall treat: (a) the fair value of th....
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....hese amendments; (b) may designate a financial asset as measured at fair value through profit or loss if that designation would not have previously satisfied the condition in paragraph 4.1.5 but that condition is now satisfied as a result of the application of these amendments; (c) shall revoke its previous designation of a financial liability as measured at fair value through profit or loss if that designation was previously made in accordance with the condition in paragraph 4.2.2(a) but that condition is no longer satisfied as a result of the application of these amendments; and (d) may designate a financial liability as measured at fair value through profit or loss if that designation would not have previously satisfied the condition in paragraph 4.2.2(a) but that condition is now satisfied as a result of the application of these amendments. Such a designation and revocation shall be made on the basis of the facts and circumstances that exist at the date of initial application of these amendments. That classification shall be applied retrospectively. 7.2.33 An entity is not required to restate prior periods to reflect the application of these amendments. The entity may....
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....ely:- "B4.1.12A For the purpose of applying paragraphs B4.1.11(b) and B4.1.12(b), irrespective of the event or circumstance that causes the early termination of the contract, a party may pay or receive reasonable compensation for that early termination. For example, a party may pay or receive reasonable compensation when it chooses to terminate the contract early (or otherwise causes the early termination to occur)."; (iii) In Appendix 1, (a) for paragraph 3, the following paragraph shall be substituted, namely:- "3. Paragraphs 7.1.1 to 7.1.3 of IFRS 9 related to effective date have not been included in Ind AS 109 as these paragraphs are not relevant in Indian context. Paragraph 7.1.6 has not been included as it refers to amendments due to issuance of IFRS 17, Insurance Contracts, for which corresponding Ind AS is under formulation. However, in order to maintain consistency with paragraph numbers of IFRS 9, these paragraph numbers are retained in Ind AS 109."; (b) after paragraph 3, the following paragraph shall be inserted, namely:- "4. Following paragraphs related to transition have not been included as these paragraphs are not relevant in Indian context. However, in o....
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....ed in Ind AS 109 when it recognises a liability to pay a dividend. The income tax consequences of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to owners. Therefore, an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events."; (iv) after paragraph 98H, the following paragraph shall be inserted, namely:- "98 I Annual Improvements to Ind AS (2018) added paragraph 57A and deleted paragraph 52B. An entity shall apply those amendments for annual reporting periods beginning on or after 1 April, 2019."; (v) after Appendix B, the following Appendix shall be inserted, namely:- "Appendix C, Uncertainty over Income Tax Treatments This appendix is an integral part of the Ind AS and has the same authority as the other parts of the Ind AS Background 1. Ind AS 12, Income Taxes, specifies requirements for current and deferred tax assets and liabilities. An entity applies the requirements in Ind AS 12 based on applicable tax laws. 2. It may be unclear how tax....
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.... might consider, for example, (a) how it prepares its income tax filings and supports tax treatments; or (b) how the entity expects the taxation authority to make its examination and resolve issues that might arise from that examination. 7. If, applying paragraph 6, an entity considers more than one uncertain tax treatment together, the entity shall read references to an 'uncertain tax treatment' in this Appendix as referring to the group of uncertain tax treatments considered together. Examination by taxation authorities 8. In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, an entity shall assume that a taxation authority will examine amounts it has a right to examine and have full knowledge of all related information when making those examinations. Determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates 9. An entity shall consider whether it is probable that a taxation authority will accept an uncertain tax treatment. 10. If an entity concludes it is probable that the taxation authority will acc....
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....r a change that occurs after the reporting period is an adjusting or non-adjusting event. Application Guidance This Application Guidance is an integral part of Appendix C and has the same authority as the other parts of Appendix C. Changes in facts and circumstances (paragraph 13 A1 In applying paragraph 13 of this Appendix, an entity shall assess the relevance and effect of a change in facts and circumstances or of new information in the context of applicable tax laws. For example, a particular event might result in the reassessment of a judgement or estimate made for one tax treatment but not another, if those tax treatments are subject to different tax laws. A2 Examples of changes in facts and circumstances or new information that, depending on the circumstances, can result in the reassessment of a judgement or estimate required by this Appendix include, but are not limited to, the following: (a) examinations or actions by a taxation authority. For example: (i) agreement or disagreement by the taxation authority with the tax treatment or a similar tax treatment used by the entity; (ii) information that the taxation authority has agreed or disagreed with a similar tax ....
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.... and before the words and figure "and SIC 25," the words and figure "IFRIC 23 Uncertainty over Income Tax Treatments" shall be inserted; (b) in the heading, after the words "Income Taxes", the word and figure "IFRIC 23" shall be inserted; (c) in paragraph 4, for items (iv) to (x), the following items shall be substituted, namely:- "(iv) paragraph 52B (v) paragraph 61 (vi) paragraphs 62(b) and (d) (vii) paragraph 69 (viii) paragraph 70 (ix) paragraph 77A (x) paragraph 81(b) (xi) paragraph 83.". VI. in "Indian Accounting Standard (Ind AS) 19", - (i) in paragraph 57, in item (c), for sub-item (i), the following sub-item shall be substituted, namely:- "(i) current service cost (see paragraphs 70-74 and paragraph 122A)."; (ii) for paragraph 99, the following paragraph shall be substituted, namely:- "99 When determining past service cost, or a gain or loss on settlement, an entity shall remeasure the net defined benefit liability (asset) using the current fair value of plan assets and current actuarial assumptions, including current market interest rates and other current market prices, reflecting: (a) the benefits offered under the plan and the plan assets b....
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.... (asset) determined in accordance with paragraph 99(b); and (b) the discount rate used to remeasure the net defined benefit liability (asset) in accordance with paragraph 99(b). In applying paragraph 123A, the entity shall also take into account any changes in the net defined benefit liability (asset) during the period resulting from contributions or benefit payments."; (viii) for paragraph 125, the following paragraph shall be substituted, namely:- "125 Interest income on plan assets is a component of the return on plan assets, and is determined by multiplying the fair value of the plan assets by the discount rate specified in paragraph 123A. An entity shall determine the fair value of the plan assets at the start of the annual reporting period. However, if an entity remeasures the net defined benefit liability (asset) in accordance with paragraph 99, the entity shall determine interest income for the remainder of the annual reporting period after the plan amendment, curtailment or settlement using the plan assets used to remeasure the net defined benefit liability (asset) in accordance with paragraph 99(b). In applying paragraph 125, the entity shall also take into account....
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....ever, in order to maintain consistency with paragraph numbers of IAS 19, the paragraph numbers are retained in Ind AS 19.". VII. in "Indian Accounting Standard (Ind AS) 23", - (i) for paragraph 14, the following paragraph shall be substituted, namely:- "14 To the extent that an entity borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the entity shall determine the amount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the expenditures on that asset. The capitalisation rate shall be the weighted average of the borrowing costs applicable to all borrowings of the entity that are outstanding during the period. However, an entity shall exclude from this calculation borrowing costs applicable to borrowings made specifically for the purpose of obtaining a qualifying asset until substantially all the activities necessary to prepare that asset for its intended use or sale are complete. The amount of borrowing costs that an entity capitalises during a period shall not exceed the amount of borrowing costs it incurred during that period."; (ii) after paragraph 28, the following paragraph shall be inserted, namely:- ....
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....quired to restate prior periods to reflect the application of the amendments. The entity may restate prior periods only if it is possible without the use of hindsight. 45J * 45K If an entity does not restate prior periods applying paragraph 45I , at the date of initial application of the amendments it shall recognise in the opening retained earnings (or other component of equity, as appropriate) any difference between: (a) the previous carrying amount of long-term interests described in paragraph 14A at that date; and (b) the carrying amount of those long-term interests at that date. Appendix A Illustrative Example-Long-term Interests in Associates and Joint Ventures This example portrays a hypothetical situation illustrating how an entity (investor) accounts for long-term interests that, in substance, form part of the entity's net investment in an associate (long-term interests) applying Ind AS 109 and Ind AS 28 based on the assumptions presented. The entity applies Ind AS 109 in accounting for long-term interests. The entity applies Ind AS 28 to its net investment in the associate, which includes long-term interests. The analysis in this example is not intended to r....
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.... (fair value) LT Loan applying Ind AS 109 (amortised cost) Profit (Loss) of the associate Year 1 ₹ 110 ₹ 90 ₹ 50 Year 2 ₹ 90 ₹ 70 Rs.(200) Year 3 ₹ 50 ₹ 50 Rs.(500) Year 4 ₹ 40 ₹ 50 Rs.(150) Year 5 ₹ 60 ₹ 60 - Year 6 ₹ 80 ₹ 70 ₹ 500 Year 7 ₹ 110 ₹ 90 ₹ 500 Analysis Year 1 The investor recognises the following in Year 1: Investments in the associate: DR. O Shares ₹ 200 DR. P Shares ₹ 100 DR. LT Loan ₹ 100 CR. Cash ₹ 400 To recognise the initial investment in the associate DR. P Shares ₹ 10 CR. Profit or loss ₹ 10 To recognise the change in fair value (₹ 110 − ₹ 100) DR. Profit or loss ₹ 10 CR. Loss allowance (LT Loan) ₹ 10 To recognise an increase in the loss allowance (₹ 90 − ₹ 100) DR. O Shares ₹ 20 CR. Profit or loss ₹ 20 To recognise the investor's share of the associate's profit (₹ 50 × 40%) At the end of Year 1, the carrying amount of O Shares is ₹ 220, P Shares is ₹ 110 and the LT Loan (net....
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....zero. Accordingly, the investor recognises the following: DR. Profit or loss ₹ 40 CR. LT Loan ₹ 40 To recognise the investor's share of the associate's loss At the end of Year 4, the carrying amount of O Shares is zero, P Shares is zero and the LT Loan (net of loss allowance) is zero. There is also an unrecognised share of the associate's losses of ₹ 30 (the investor's share of the associate's cumulative losses of ₹ 340 - ₹ 320 losses recognised cumulatively + ₹ 10 losses reversed). Year 5 Applying Ind AS 109 to its interests in the associate, the investor recognises the following in Year 5: DR. P Shares ₹ 20 CR. Profit or loss ₹ 20 To recognise the change in fair value (₹ 60 − ₹ 40) DR. Loss allowance (LT Loan) ₹ 10 CR. Profit or loss ₹ 10 To recognise a decrease in the loss allowance (₹ 60 - ₹ 50) After applying Ind AS 109 to P Shares and the LT Loan, these interests have a positive carrying amount. Consequently, the investor allocates the previously unrecognised share of the associate's losses of ₹ 30 to these interests. DR. Profit or loss ₹ 30 CR. P Shar....
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....gnised in profit or loss This table summarises the amounts recognised in the investor's profit or loss. Items recognised During Impairment (losses), including reversals, applying Ind AS 109 Gains (losses) of P Shares applying Ind AS 109 Share of profit (loss) of the associate recognised applying the equity method Interest revenue applying Ind AS 109 Year 1 Rs.(10) ₹ 10 ₹ 20 ₹ 5 Year 2 Rs.(20) Rs.(20) Rs.(80) ₹ 5 Year 3 Rs.(20) Rs.(40) Rs.(200) ₹ 5 Year 4 - Rs.(10) Rs.(30) ₹ 5 Year 5 ₹ 10 ₹ 20 Rs.(30) ₹ 5 Year 6 ₹ 10 ₹ 20 ₹ 200 ₹ 5 Year 7 ₹ 20 ₹ 30 ₹ 200 ₹ 5 (iv) In Appendix 1, after paragraph 4, the following paragraphs shall be inserted, namely:- "5. Paragraph 41 appears as 'deleted' in IAS 28. In order to maintain consistency with paragraph numbers of IAS 28, the paragraph number is retained in Ind AS 28. 6. Paragraph 45F of IAS 28 has not been included as it refers to amendments due to issuance of IFRS 17, Insurance Contracts, for which corresponding Ind AS is under formulation. Paragraph 45J of IAS 28 related to tempor....