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The CA Institute proposes to revise four key accounting standards currently followed by small and medium companies and non-corporates including unlisted banks and insurers.
The objective of these changes are to bring them as close to Indian Accounting Standards (Ind AS) but with simplification, experts said. If implemented, the changes would also “tighten” the regime as the standards will not be entirely rule based as is the case now, they said. Because of standards being rule based and not principles based, some corporates were able to avoid following certain requirements that were putting them in a disadvantageous position, they said.
The CA Institute has now issued exposure drafts of four revised accounting standards and sought comments by February 3. The four exposure drafts are on (1) AS 103, Accounting for Amalgamations; (2) AS 110, Consolidated and Separate Financial Statements (3) AS111 Financial Reporting of interest in joint ventures and (4) AS 28, Accounting for Associates and jointly controlled entities.
These exposure drafts are part of an upgradation exercise on existing Accounting Standards (AS), which are followed by companies with networth below ₹ 250 crore and non corporates including unlisted banks and insurance companies.
Of these four exposure drafts, the one on amalgamations is seen to be the most significant as it’s scope is now sought to be widened to cover acquisitions of entities and businesses. This could have material impact on the startup ecosystem that is being developed in the country, said experts.
Commenting on the proposed changes, Avinash Chander, former Technical Director at the Institute of Chartered Accountants of India (ICAI) told BusinessLine : “The proposed AS 103 is expected to be a significant improvement over the existing AS 14 by broadening its scope from only amalgamations to also cover acquisition of entities and businesses, while avoiding certain complexities of the corresponding Ind AS 103. Amongst other things, it would also improve measurement of goodwill by proposing measurement of net assets acquired and the purchase consideration at fair values, particularly in the context of acquisition of entities, compared to the existing AS 21, when read along with the proposals in this regard in the draft of AS 110.”
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