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TMI BlogCompanies (Indian Accounting Standards) Second Amendment Rules, 2019X X X X Extracts X X X X X X X X Extracts X X X X ..... 39AD * 39AE * 39AF Appendix C, Uncertainty over 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 afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AS is under formulation. However, in order to maintain consistency with paragraph numbers 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 Transition 1 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of the facts and circumstances that exist at the date of initial application. That classification shall be applied retrospectively. 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 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation was previously made in accordance with the condition in paragraph 4.1.5 but that condition is no longer satisfied as a result of the application of these 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 classificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, which may include reasonable compensation for the early termination of the contract; and ; (c) after paragraph B4.1.12, the following paragraph shall be inserted, namely:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely;- Example illustrating paragraphs 52A and 57A ; (iii) after paragraph 57, the following paragraph shall be inserted, namely:- 57A An entity shall recognise the income tax consequences of dividends as defined 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch uncertain tax treatment separately or together with one or more other uncertain tax treatments based on which approach better predicts the resolution of the uncertainty. In determining the approach that better predicts the resolution of the uncertainty, an entity 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eflect the effect of a change in facts and circumstances or of new information as a change in accounting estimate applying Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors. An entity shall apply Ind AS 10, Events after the Reporting Period, to determine whether 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying the Appendix as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate). The date of initial application is the beginning of the annual reporting period in which an entity first applies this Appendix. ; (vi) in Appendix 1,- (a) in the related Note, after the words Income Taxes, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit liability (asset) and the discount rate determined 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 net interest for the remainder of the annual reporting period after the plan amendment, curtailment or settlement using: (a) the net defined benefit liability (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 reme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2019. ; (xii) in Appendix 1, after paragraph 5, the following paragraph shall be inserted, namely:- 6 Paragraphs 172 to 177 of IAS 19 have not been included as these paragraphs relate to transition and effective date that are not relevant in Indian context. Paragraph 178 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 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraph 45G after it first applies Ind AS 109 shall apply the transition requirements in Ind AS 109 necessary for applying the requirements set out in paragraph 14A to long-term interests. For that purpose, references to the date of initial application in Ind AS 109 shall be read as referring to the beginning of the annual reporting period in which the entity first applies the amendments (the date of initial application of the amendments). The entity is not required 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 hypothetica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 100. On acquisition of the investment, the cost of the investment equals the investor s share of the net fair value of the associate s identifiable assets and liabilities. This table summarises the carrying amount at the end of each year for P Shares and the LT Loan applying Ind AS 109 but before applying Ind AS 28, and the associate s profit (loss) for each year. The amounts for the LT Loan are shown net of the loss allowance. At the end of P Shares applying Ind AS 109 (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 80 To recognise the investor s share of the associate s loss (₹ 200 40%) At the end of Year 2, the carrying amount of O Shares is ₹ 140, P Shares is ₹ 90 and the LT Loan (net of loss allowance) is ₹ 70. Year 3 Applying paragraph 14A of Ind AS 28, the investor applies Ind AS 109 to P Shares and the LT Loan before it applies paragraph 38 of Ind AS 28. Accordingly, the investor recognises the following in Year 3: DR. Profit or loss ₹ 40 CR. P Shares ₹ 40 To recognise the change in fair value (₹ 50 ₹ 90) DR. Profit or loss ₹ 20 CR. Loss allowance (LT Loan) ₹ 20 To recognise an increase in the loss allowance (₹ 50 ₹ 70) DR. Profit or loss ₹ 200 CR. O Shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing 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 Shares ₹ 20 CR. LT Loan ₹ 10 To recognise the previously unrecognised share of the associate s losses At the end of Year 5, the carrying amount of O Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 200 To recognise the investor s share of the associate s profit (₹ 500 40%) At the end of Year 7, the carrying amount of O Shares is ₹ 280, P Shares is ₹ 110 and the LT Loan (net of loss allowance) is ₹ 90. Years 1 7 When recognising interest revenue on the LT Loan in each year, the investor does not take account of any adjustments to the carrying amount of the LT Loan that arose from applying Ind AS 28 (paragraph 14A of Ind AS 28). Accordingly, the investor recognises the following in each year: DR. Cash ₹ 5 CR. Profit or loss ₹ 5 To recognise interest revenue on LT Loan based on the effective interest rate of 5% Summary of amounts recognised 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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