MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi, the 31st March, 2023
G.S.R. 242(E). — In exercise of the powers conferred by section 133 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government, in consultation with the National Financial Reporting Authority, hereby makes the following rules further to amend the Companies (Indian Accounting Standards) Rules, 2015, namely:-
1. Short title and commencement.-(1) These rules may be called the Companies (Indian Accounting Standards) Amendment Rules, 2023.
(2) They shall come into force with effect from 1st day of April, 2023.
2. In the Companies (Indian Accounting Standards) Rules, 2015, in the “Annexure”, under the heading “B. Indian Accounting Standards (Ind AS)”,-
(A) in Indian Accounting Standard (Ind AS) 101, –
(i) after paragraph 39AG, the following shall be inserted, namely:-
“39AH Deferred Tax related to Assets and Liabilities arising from a Single Transaction, amended paragraph B1 and added paragraph B14. An entity shall apply these amendments for annual reporting periods beginning on or after 1 April 2023.”;
(ii) in Appendix B,
(a) in paragraph B1, for items (f) and (g), the following shall be substituted, namely:-
“(f) embedded derivatives (paragraph B9);
(g) government loans (paragraphs B10–B12);
(h) [Refer Appendix 1]; and
(i) deferred tax related to leases and decommissioning, restoration and similar liabilities (paragraph B14).”;
(b) after paragraph B12, the following paragraphs shall be inserted, namely:-
“B13 [Refer Appendix 1]
Deferred tax related to leases and decommissioning, restoration and similar liabilities
B14 Paragraphs 15 and 24 of Ind AS 12, Income Taxes exempt an entity from recognising a deferred tax asset or liability in particular circumstances. Despite this exemption, at the date of transition to Ind ASs, a first-time adopter shall recognise a deferred tax asset—to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised—and a deferred tax liability for all deductible and taxable temporary differences associated with:
(a) right-of-use assets and lease liabilities; and
(b) decommissioning, restoration and similar liabilities and the corresponding amounts recognised as part of the cost of the related asset.”;
(iii) in Appendix 1,
(a) in paragraph 7, item (ii) shall be omitted;
(b) after paragraph 14, the following paragraph shall be inserted, namely:-
“15. Paragraphs B1(h) and B13 of IFRS 1 related to exceptions to insurance contracts have not been included since these refer to amendments due to issuance of IFRS 17, Insurance Contracts, for which corresponding Ind AS has not been issued/notified. However, in order to maintain consistency with paragraph numbers of IFRS 1, the paragraph numbers are retained in Ind AS 101.”;
(B) in Indian Accounting Standard (Ind AS) 102, the footnote starting with the words “For example, in case” and ending with the words “not exercised”, appearing on the heading before paragraph 24 ‘If the fair value of the equity instruments cannot be estimated reliably’ shall be deleted and the same shall be added at the end of paragraph 23 at the words “equity to another”.
(C) in Indian Accounting Standard (Ind AS) 103, in Appendix C, in paragraph 13, for item (b), the following item shall be substituted, namely:-
“(b) the date on which the transferee obtains control of the transferor;”;
(D) in Indian Accounting Standard (Ind AS) 107, –
(i) for paragraph 21, the following paragraph shall be substituted, namely:-
“21 In accordance with paragraph 117 of Ind AS 1, Presentation of Financial Statements, an entity discloses material accounting policy information. Information about the measurement basis (or bases) for financial instruments used in preparing the financial statements is expected to be material accounting policy information.”;
(ii) after paragraph 44HH, the following paragraph shall be inserted, namely:-
“44II Disclosure of Accounting Policies, which amends Ind AS 1 amended paragraphs 21 and B5. An entity shall apply that amendment for annual reporting periods beginning on or after 1 April 2023.”;
(iii) in Appendix B, in paragraph B5,-
(a) for the opening paragraph, the following shall be substituted, namely:-
“Paragraph 21 requires disclosure of material accounting policy information, which is expected to include information about the measurement basis (or bases) for financial instruments used in preparing the financial statements. For financial instruments, such disclosure may include:”
(b) for the closing paragraph, the following shall be substituted, namely:-
“Paragraph 122 of Ind AS 1 also requires entities to disclose, along with material accounting policy information or other notes, the judgements, apart from those involving estimations, that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.”;
(E) in Indian Accounting Standard (Ind AS) 109, in Appendix B, in paragraph B4.3.12, for item (b), the following item shall be substituted, namely:-
“(b) a combination of entities or businesses under common control as described in Appendix C of Ind AS 103; or”;
(F) in Indian Accounting Standard (Ind AS) 115, in Appendix 1,-
(i) in paragraph 2, for the words and figure “paragraph of 15”, the word and figure “paragraph 51” shall be substituted;
(ii) in paragraph 5, for the word and letter “Appendix D” the word and letter “Appendix B” shall be substituted.;
(G) in Indian Accounting Standard (Ind AS) 1, –
(i) in paragraph 7, before the definition of “General purpose financial statements”, the following shall be inserted, namely:-
“Accounting policies are defined in paragraph 5 of Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors, and the term is used in this Standard with the same meaning.”;
(ii) in paragraph 10, in item (e), for the words “significant accounting policies”, the words “material accounting policy information”, shall be substituted.;
(iii) in paragraph 114, in item (c), for sub-item (ii), the following sub-item shall be substituted, namely:-“(ii) material accounting policy information (see paragraph 117);”;
(iv) for paragraph 117, the following paragraph shall be substituted, namely:-
“Disclosure of accounting policy information
117 An entity shall disclose material accounting policy information (see paragraph 7). Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements. ”
(v) after paragraph 117, the following shall be inserted, namely:-
“117A Accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed. Accounting policy information may nevertheless be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial. However, not all accounting policy information relating to material transactions, other events or conditions is itself material.
117B Accounting policy information is expected to be material if users of an entity’s financial statements would need it to understand other material information in the financial statements. For example, an entity is likely to consider accounting policy information material to its financial statements if that information relates to material transactions, other events or conditions and:
(a) the entity changed its accounting policy during the reporting period and this change resulted in a material change to the information in the financial statements;
(b) the entity chose the accounting policy from one or more options permitted by Ind ASs;
(c) the accounting policy was developed in accordance with Ind AS 8 in the absence of an Ind AS that specifically applies;
(d) the accounting policy relates to an area for which an entity is required to make significant judgements or assumptions in applying an accounting policy, and the entity discloses those judgements or assumptions in accordance with paragraphs 122 and 125; or
(e) the accounting required for them is complex and users of the entity’s financial statements would otherwise not understand those material transactions, other events or conditions— such a situation could arise if an entity applies more than one Ind AS to a class of material transactions.
117C Accounting policy information that focuses on how an entity has applied the requirements of the Ind ASs to its own circumstances provides entity-specific information that is more useful to users of financial statements than standardised information, or information that only duplicates or summarises the requirements of the Ind ASs.
117D If an entity discloses immaterial accounting policy information, such information shall not obscure material accounting policy information.
117E An entity’s conclusion that accounting policy information is immaterial does not affect the related disclosure requirements set out in other Ind ASs.”;
(vi) paragraphs 118, 119, 120 and 121 shall be omitted*;
(vii) for paragraph 122, the following paragraph shall be substituted, namely:-
“122 An entity shall disclose, along with material accounting policy information or other notes, the judgements, apart from those involving estimations (see paragraph 125), that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.”;
(viii) after paragraph 139T, the following shall be inserted, namely:-
“139U [Refer Appendix 1]
139V Disclosure of Accounting Policies, amended paragraphs 7, 10, 114, 117 and 122, added paragraphs 117A–117E and deleted paragraphs 118, 119 and 121. An entity shall apply the amendments to Ind AS 1 for annual reporting periods beginning on or after 1 April 2023.”;
(ix) in Appendix 1,-
(a) in paragraph 6, for the item (x), the following item shall be substituted, namely:-
“(x) paragraphs 118-121”
(b) after paragraph 10, the following shall be inserted, namely:-
“11. Paragraph 139U of IAS 1 related to effective date of Amendments to IAS 1: Classification of Liabilities as Current or Non-current has not been included in Ind AS 1 as the corresponding amendments to Ind AS 1 have not been issued or notified. However, in order to maintain consistency with paragraph numbers of IAS 1, the paragraph number is retained in Ind AS 1.”;
in Indian Accounting Standard (Ind AS) 8, –
(i) in paragraph 5, for the definition of change in accounting estimate starting with the words “A change in” and ending with the words “corrections of errors”, the following shall be substituted, namely:-
“Accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty.”;
(ii) for paragraph 32 and its heading, the following shall be substituted, namely:-
“Accounting estimates
32 An accounting policy may require items in financial statements to be measured in a way that involves measurement uncertainty—that is, the accounting policy may require such items to be measured at monetary amounts that cannot be observed directly and must instead be estimated. In such a case, an entity develops an accounting estimate to achieve the objective set out by the accounting policy. Developing accounting estimates involves the use of judgements or assumptions based on the latest available, reliable information. Examples of accounting estimates include:
(a) a loss allowance for expected credit losses, applying Ind AS 109, Financial Instruments;
(b) the net realisable value of an item of inventory, applying Ind AS 2 Inventories;
(c) the fair value of an asset or liability, applying Ind AS 113, Fair Value Measurement;
(d) the depreciation expense for an item of property, plant and equipment, applying Ind AS 16; and
(e) a provision for warranty obligations, applying Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets.
32A An entity uses measurement techniques and inputs to develop an accounting estimate. Measurement techniques include estimation techniques (for example, techniques used to measure a loss allowance for expected credit losses applying Ind AS 109) and valuation techniques (for example, techniques used to measure the fair value of an asset or liability applying Ind AS 113).
32B The term ‘estimate’ in Ind AS sometimes refers to an estimate that is not an accounting estimate as defined in this Standard. For example, it sometimes refers to an input used in developing accounting estimates.”;
(iii) for paragraph 34, the following shall be substituted, namely:-
“Changes in accounting estimates
34 An entity may need to change an accounting estimate if changes occur in the circumstances on which the accounting estimate was based or as a result of new information, new developments or more experience. By its nature, a change in an accounting estimate does not relate to prior periods and is not the correction of an error.
34A The effects on an accounting estimate of a change in an input or a change in a measurement technique are changes in accounting estimates unless they result from the correction of prior period errors.”;
(iv) before paragraph 36, the following heading shall be inserted, namely:-
“Applying changes in accounting estimates”;
(v) for paragraph 38, the following shall be substituted, namely:-
“38 Prospective recognition of the effect of a change in an accounting estimate means that the change is applied to transactions, other events and conditions from the date of that change. A change in an accounting estimate may affect only the current period’s profit or loss, or the profit or loss of both the current period and future periods. For example, a change in a loss allowance for expected credit losses affects only the current period’s profit or loss and therefore is recognised in the current period. However, a change in the estimated useful life of, or the expected pattern of consumption of the future economic benefits embodied in, a depreciable asset affects depreciation expense for the current period and for each future period during the asset’s remaining useful life. In both cases, the effect of the change relating to the current period is recognised as income or expense in the current period. The effect, if any, on future periods is recognised as income or expense in those future periods.”;
(vi) for paragraph 48, the following paragraph shall be substituted, namely:-
“48 Corrections of errors are distinguished from changes in accounting estimates. Accounting estimates by their nature are approximations that may need changing as additional information becomes known. For example, the gain or loss recognised on the outcome of a contingency is not the correction of an error.”;
(vii) after paragraph 54H, the following paragraph shall be inserted, namely:-
“54I Definition of Accounting Estimates, amended paragraphs 5, 32, 34, 38 and 48 and added paragraphs 32A, 32B and 34A. An entity shall apply these amendments for annual reporting periods beginning on or after 1 April 2023. An entity shall apply the amendments to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the first annual reporting period in which it applies the amendments.”;
(I) in Indian Accounting Standard (Ind AS) 12, –
(i) in paragraph 15, in item (b),-
(a) in sub-item (i), the word “and” shall be omitted.;
(b) for sub-item (ii), the following shall be substituted, namely:-
“(ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss); and
(iii) at the time of the transaction, does not give rise to equal taxable and deductible temporary differences.”;
(ii) in paragraph 22, for items (b) and (c), the following items shall be substituted, namely:-
“(b) if the transaction affects either accounting profit or taxable profit, or gives rise to equal taxable and deductible temporary differences, an entity recognises any deferred tax liability or asset and recognises the resulting deferred tax expense or income in profit or loss (see paragraph 59);
(c) if the transaction is not a business combination, affects neither accounting profit nor taxable profit and does not give rise to equal taxable and deductible temporary differences, an entity would, in the absence of the exemption provided by paragraphs 15 and 24, recognise the resulting deferred tax liability or asset and adjust the carrying amount of the asset or liability by the same amount. Such adjustments would make the financial statements less transparent. Therefore, this Standard does not permit an entity to recognise the resulting deferred tax liability or asset, either on initial recognition or subsequently (see example below). Furthermore, an entity does not recognise subsequent changes in the unrecognised deferred tax liability or asset as the asset is depreciated.”;
(iii) after paragraph 22, the following paragraph shall be inserted, namely:-
“22A A transaction that is not a business combination may lead to the initial recognition of an asset and a liability and, at the time of the transaction, affect neither accounting profit nor taxable profit. For example, at the commencement date of a lease, a lessee typically recognises a lease liability and the corresponding amount as part of the cost of a right-of-use asset. Depending on the applicable tax law, equal taxable and deductible temporary differences may arise on initial recognition of the asset and liability in such a transaction. The exemption provided by paragraphs 15 and 24 does not apply to such temporary differences and an entity recognises any resulting deferred tax liability and asset.”;
(iv) in paragraph 24,-
(a) in item (a), the word “and” shall be omitted.
(b) for item (b), the following shall be substituted, namely:-
“(b) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss); and
(c) at the time of the transaction, does not give rise to equal taxable and deductible temporary differences.”;
(v) after paragraph 98I, the following shall be inserted, namely:-
“98J Deferred Tax related to Assets and Liabilities arising from a Single Transaction, amended paragraphs 15, 22 and 24 and added paragraph 22A. An entity shall apply these amendments in accordance with paragraphs 98K–98L for annual reporting periods beginning on or after 1 April 2023.
98K An entity shall apply Deferred Tax related to Assets and Liabilities arising from a Single Transaction to transactions that occur on or after the beginning of the earliest comparative period presented.
98L An entity applying Deferred Tax related to Assets and Liabilities arising from a Single Transaction shall also, at the beginning of the earliest comparative period presented:
(a) recognise a deferred tax asset—to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised—and a deferred tax liability for all deductible and taxable temporary differences associated with:
(i) right-of-use assets and lease liabilities; and
(ii) decommissioning, restoration and similar liabilities and the corresponding amounts recognised as part of the cost of the related asset; and
(b) recognise the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at that date.”;
(J) in Indian Accounting Standard (Ind AS) 34, –
(i) in paragraph 5, in item (e), for the words “significant accounting policies”, the words “material accounting policy information” shall be substituted.;
(ii) after paragraph 59, the following shall be inserted, namely:-
“60 Disclosure of Accounting Policies, which amends Ind AS 1, amended paragraph 5. An entity shall apply that amendment for annual reporting periods beginning on or after 1 April 2023.”.
[F. No. 01/01/2009-CL-V (Part. XII)]
MANOJ PANDEY, Jt. Secy.
Note : The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 111(E), dated the 16th February, 2015 and last amended vide notification number G.S.R. 255 (E), dated the 23rd March, 2022.
* Refer Appendix 1
