Guidelines on Accounting with respect to Indian Accounting Standards (IND AS) - SEBI - SEBI/HO/IMD-II/DOF8/P/CIR/2022/12

CIRCULAR SEBI/HO/IMD-II/DOF8/P/CIR/2022/12 February 04, 2022 All Mutual Funds (MFs)/ Asset Management Companies (AMCs)/ Trustee Companies/ Boards of Trustees of Mutual Funds/ Association of Mutual Funds in India (AMFI) Sir / Madam, Subject: Guidelines on Accounting with respect to Indian Accounting Standards (IND AS) 1. SEBI vide notification dated January 25, 2022 amended SEBI (Mutual Funds) Regulations, 1996 (MF Regulations), which, inter-alia, mandated that the AMCs shall prepare the Financial Statements and Accounts of the Mutual Fund Schemes in accordance with IND AS with effect from April 01, 2023. Accordingly, the following requirements are specified: I. Mutual Fund Schemes shall prepare the opening balance sheet as on date of transition and the comparatives as per the requirements of IND AS. II. Perspective historical per unit statistics mentioned in Clause 6 of Eleventh Schedule of MF Regulations requires disclosure of scheme wise per unit statistics for the past 3 years. In this regard, Mutual Fund schemes may not be mandatorily required to restate the previous years published perspective historical per unit statistics as per requirement of IND AS for the first two years from first time adoption of IND AS. However, Mutual Fund schemes shall furnish following additional information in perspective historical per unit statistics: a. Label the previous Generally Accepted Accounting Principles (GAAP) information prominently as not being prepared in accordance with IND AS; and b. Disclose the nature of the adjustments that would be required to make it comply with IND AS. Mutual Funds schemes need not quantify those adjustments. III. The Financial Statements of the Mutual Fund Schemes shall be prepared in the Formats given at Annexure-A. 2. Modification to Para C (2) of SEBI circular CIR/IMD/DF/24/2012 dated November 19, 2012 In order to align with IND AS requirement regarding transactions cost of investment to be expensed out (viz. to be charged to Revenue Account instead of Capitalisation) and as per the amended Regulations 52 (6A)(a) of MF Regulations, the provision of Para C (2) of SEBI circular CIR/IMD/DF/24/2012 dated November 19, 2012 is modified, and the revised provisions shall read as under: It is clarified that Brokerage and transaction cost incurred for the purpose of execution shall be charged to the schemes as provided under Regulation 52 (6A) (a) upto 12 bps and 5 bps for cash market transactions and derivatives transactions respectively. Any payment towards brokerage transaction costs, over and above the said 12 bps and 5 bps for cash market transactions and derivatives transactions respectively may be charged to the Scheme within the maximum limit of Total Expense Ratio (TER) as prescribed under Regulation 52 of the SEBI (Mutual Finds) Regulations, 1996. 3. The provisions of this Circular shall be effective from April 01, 2023. 4. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 , read with the provisions of regulations 77 of SEBI (Mutual Funds) Regulations, 1996 , to protect the interest of investors in securities and to promote the development of, and to regulate the securities market. Yours faithfully, Lamber Singh Deputy General Manager Tel No.: 022-26449667 Email ID: [email protected] ANNEXURE-A Contents of scheme-wise Balance Sheet (at Scheme level) Rupees in Lakhs Particulars Note No. Figures as at the end of current reporting period Figures as at the end of the previous reporting period Assets Financial Assets Cash and cash equivalents 1 Balances with Bank/(s) 2 Derivative financial instruments 3 Receivables 4 Investments 5 Other Financial assets 6 Non-Financial Assets Investment Property 7 Other Non -Financial assets 8 Total Assets (A) Financial Liabilities Derivative financial instruments 9 Payables 10 Borrowings 11 Other Financial Liabilities 12 Non-Financial Liabilities Provisions Other Non-Financial Liabilities 13 Total Liabilities (B) Net assets attributable to holder of redeemable units The Notes referred to herein form an integral part of the Balance Sheet Statement of changes in net asset attributable to unit holders of scheme: Rupees in Lakhs Figures for the current reporting Period Particulars Unit Capital (Rs.) Reserves Surplus (Rs.) Total (Rs.) Unit Premium Reserves Unrealised Appreciation Reserves Revenue Reserves Other Reserves (to be specified) Balance at the beginning of the reporting period Changes in accounting policy/prior period errors Movement during the reporting period Transfer from/ to Revenue account Equalisation Account Surplus distribution Others ( to be specified) Balance at the end of the reporting period Figures for the previous reporting Period Particulars Unit Capital (Rs.) Reserves Surplus (Rs.) Total (Rs.) Unit Premium Reserves Unrealise d Appreciati on Reserves Revenue Reserves Other Reserves (to be specified) Balance at the beginning of the reporting period Changes in accounting policy/prior period errors Movement during the reporting period Transfer from/ to Revenue account Equalisation Account Surplus distribution Others ( to be specified) Balance at the end of the reporting period Movement of Unit Capital Rupees in Lakhs Particulars Figures for the current reporting period Figures for the previous reporting period No of Units (Rs.) No of Units (Rs.) Balance of unit capital at the beginning of the reporting period New fund / plan offer during period, Capital issued during period (including dividend reinvestment) etc. Redemptions during the period Balance of unit capital at the end of the period Note: Provide break-up of unit capital plan/option wise. Contents of Revenue Account (at Scheme level) Rupees in Lakhs Particulars Note No. Figures for the current reporting Period Figures for the previous reporting period Income Interest Income Dividend Income Rental Income Gain on fair value changes 14 Gain on Sale/Redemptions of Investments 15 Others ( to be specified) Total Income (A) Expenses Finance Costs Fees and commission expenses 16 Loss on fair value changes 17 Loss on Sale/Redemptions of Investments 18 Others ( to be specified) 19 Total Expense (B) Surplus/ Deficit for the Reporting Period (A-B) The Notes referred to herein form an integral part of the Revenue Account Notes to Balance Sheet and Revenue Account Note 1 Cash and cash equivalents Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Reverse repurchase transactions / Triparty Repo (TREPs) etc. Cash on Hand Total Note 2 Balances with Bank/(s) # Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Balances with banks in current account Deposits with scheduled banks - (Specify the nature as ASBA deposits, Margin deposits etc.) Others ( to be specified) Total Note 3 Derivative financial instruments receivable Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Stock Futures/ Options Index Futures/ Options Commodity Futures/Options Interest Rate Futures/ Swaps Currency Futures Others (to be specified) Total Note 4 Receivables # Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Contracts for sale of investments in securities Receivable from AMC Receivable from other schemes of Mutual Fund Others (to be specified) Total Note 5 Investments Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Equity shares Preference shares Debentures/bonds Central and State Government Securities Treasury bills Commercial Paper Certificate of Deposits Units of Domestic Mutual Fund Commodities (Gold, Silver etc.) Foreign Securities Exchange Traded Funds ( ETFs) Infrastructure Investment Trust units (INVITS) Real Estate Investment Trust (REITs) Calls paid in advance Securitized Assets Others (to be specified) Total Wherever applicable, the assets shall be further classified according to its nature such as Listed/Awaiting listing/ Unlisted Convertible/Non-convertible Investment Grade/Below Investment Grade Note 6 Other Financial assets # Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Interest Accrued Dividend Receivable Margin money Shares/debentures application money, pending allotment Others (to be specified) Total Note 7 Non-Financial Assets - Investment Property Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Real Estate Assets Residential * Commercial * Others ( to be specified) Total * Shall be sub-classified on the basis of developers, location and project. Particulars shall include area, cost, fair value, basis of fair value, and legal disputes, etc. Specify non- performing Investment properties separately. Note 8 Other Non - Financial assets # Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Fixed Assets @ Tax credit receivable Others (to be specified) Total @ Depreciated cost of the Fixed Assets as a whole or net block may be disclosed. # Allowances for the impairment loss/doubtful receivable/diminution in the value of the assets shall be disclosed under relevant heads of this notes. Note 9 Derivative financial instruments payable Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Stock Futures/ Options Index Futures/ Options Commodity Futures/Options Interest Rate Futures/ Swaps Currency Futures Others (to be specified) Total Note 10 Payables Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Contract for purchase of investments in securities Income distribution payable Payable to AMC Payable to other schemes of Mutual Fund Payable on redemption of units Others (to be specified) Total Note 11 Borrowings Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Loans/Borrowings From Reserve Bank of India From Settlor/Sponsor From other Commercial Banks From Triparty Repo (TREPs) From others ( to be specified) Total If the above loans/borrowings are secured, the nature and extent of security should be disclosed. Loans/Borrowings by the scheme with amount, rate of interest, source and other terms shown separately, source-wise. Note 12 Other Financial Liabilities Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Finance Cost on Loans/Borrowing/(s) Management Fees Payable Trusteeship Fees Payable Commission to Distributors Payable Custodian Fees and Expenses Payable Registrar Fees and Expenses Payable Marketing/Publicity/Advertisement Expenses Payable Audit Fees Payable Investor Communication Expense Payable Investor Education Awareness Expenses Payable Brokerage Transaction Costs Payable Unclaimed dividend/income distribution Unclaimed redemptions Sundry Creditors Others (to be specified) Total Note 13 Other Non-Financial Liabilities Particulars Figures as at the end of current reporting period Figures as at the end of the previous reporting period Statutory taxes payable Others ( to be specified) Total Note 14 Gain on fair value changes Particulars Figures for the current reporting Period Figures for the previous reporting period Gross change on account of Gain on fair value changes (MTM) Gross change on account of Gain on fair value changes- Derivative Instruments (MTM) Change in unrealised gain in the value of investments due to foreign exchange fluctuation Others ( to be specified) Total Note 15 Gain on Sale/Redemptions of Investments Particulars Figures for the current reporting Period Figures for the previous reporting period Profit on sale/redemption of investments (Gross) Profit on inter-scheme sale of Investments (Gross) Profit on derivatives transactions (Gross) Profit on sale of real estate assets Profit on inter-scheme sale of real estate assets (Gross) Others ( to be specified) Total Note 16 Fees and commission expenses Particulars Figures for the current reporting Period Figures for the previous reporting period Management Fees GST on Management Fees Trusteeship Fees Commission to Distributors Total Note 17 Loss on fair value changes Particulars Figures for the current reporting Period Figures for the previous reporting period Gross change on account of Gain on fair value changes (MTM) Gross change on account of Gain on fair value changes - Derivative Instruments (MTM) Change in unrealised gain in the value of investments due to foreign exchange fluctuation Others ( to be specified) Total Note 18 Loss on Sale/Redemptions of Investments Particulars Figures for the current reporting Period Figures for the previous reporting period Loss on sale/redemption of investments (Gross) Loss on inter-scheme sale of Investments (Gross) Loss on derivatives transactions (Gross) Loss on exchange rate fluctuation Loss on sale of real estate assets Loss on inter-scheme sale of real estate assets (Gross) Others ( to be specified) Total Note 19 Expenses Others Particulars Figures for the current reporting Period Figures for the previous reporting period Custodian Fees and Expenses Registrar Fees and Expenses Marketing/Publicity/Advertisement Expenses Audit Fees Investor Communication Expenses Investor Education and Awareness expenses Brokerage Transaction Costs Insurance Security Expenses Statutory Taxes Advisory Fee in respect of real estate asset Repairs and Maintenance in case of real estate asset. Registration and local charges Legal Title Search Fee Depreciation of fixed assets Other Operating expenses Others (to be specified) Total Notes (i) All disclosures required by Indian Accounting Standards (IND AS) shall be applicable with respect to preparation of annual statements of accounts of the schemes, shall form part of notes to account. (ii) Accounting policy in respect of recognition of revenue and income from investments (including dividend and interest in case of securities and rental income in case of real estate asset) shall be disclosed by way of a note. (iii) If a security is in default beyond its maturity date, then disclosure to this effect shall be provided. Such disclosure shall include details of the security including ISIN, name of security, value of the security considered under net receivables (i.e. value recognized in NAV in absolute terms and as % to NAV) and total amount (including principal and interest) that is due to the scheme on that investment. Further, this disclosure shall continue till the value of the security recognized in the NAV is received or for a period of 3 years from the date of maturity of security, whichever is later. (iv) The total income and expenditure expressed as a percentage of average net assets, calculated on a Daily Average Net Asset basis should be indicated. Expenditure expressed as a percentage of average net assets should be at plan level. (v) Accounting policy of valuation of Investments shall be disclosed. (vi) Contingent liabilities disclosure should be made of all contingent liabilities, showing separately:- (a) Underwriting commitments; (b) Uncalled liability on partly paid shares; (c) Other commitments; and (d) Others (specifying details). (vii) The Balance Sheet and the Revenue Account shall be signed by the Chief Executive Officer, Chief Operating Officer/Chief Finance Officer/ such other KMP as designated by Board of AMC who is responsible for preparation of financial statements, Chief Investment Officer, scheme wise fund manager/s, and the Board of Trustees, and reported upon by the Auditors. The financial statements of the scheme should be approved at a meeting of the Board of Directors of the Asset Management Company and also at a meeting of the trustees or in the case of a trustee company by the Board of Directors of the trustee company. (viii) Disclosures as required by the Regulations or as may be prescribed by the Board from time to time shall form part of notes to accounts.