Key Amendments In Ind AS

Standard

Overview of the amendments

Ind AS 107, F i n a n c i a l I n s tr u m e n t s : Disclosures

Additional disclosures included relating to interest rate benchmark reform. Some of the important disclosures would include information about:

• Nature and extent of risks to which the entity is exposed arising from financial instruments subject to interest rate benchmark reform and how the entity manages these risks and
• Entity's progress in completing the transition to alternative benchmark rates and how the entity is managing the transition.

Effective date: An entity should apply the amendments when it applies amendments to Ind AS 109, Ind AS 104 or Ind AS 116.

Ind AS 109, F i n a n c i a l Instruments

A new paragraph has been included on changes in the basis for determining the contractual cash flows as a result of Interest rate Benchmark Reform (IBOR reform).

As per the guidance provided, the basis for determining the contractual cash flows of a financial asset or financial liability can change in the following manner:

• By amending the contractual terms specified at the initial recognition of the financial instrument
• In a way that was not considered by or contemplated in the contractual terms at the initial recognition of the financial instrument, without amending the contractual terms
• Due to the activation of an existing contractual term.

Guidance has been provided on accounting for modifications of contracts resulting from changes in the basis for determining the contractual cash flows as a result of the IBOR reform.

Additionally, various exceptions and relaxations have been provided in terms of various aspects of hedge accounting.

Effective date: An entity should apply the amendments for annual reporting periods beginning on or after 1 April 2021.

Ind AS 116, Leases

In July 2020, MCA had issued amendments to Ind AS 116 with regard to COVID-19 related rent concessions. The aforementioned amendments introduced an optional practical expedient that simplified how a lessee accounted for rent concessions that were a direct consequence of COVID-19. Under that practical expedient a lessee was allowed to opt not to assess whether eligible rent concessions are lease modifications, and instead account for it under other applicable guidance provided certain conditions are met.

MCA has extended the practical expedient by 12 months - i.e., by permitting lessees to apply it to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2022.

The 2021 amendments are effective for annual reporting periods beginning on or after 1 April 2021. Lessees are permitted to apply these amendments early, including in financial statements not authorized for issue before the issuance of the 2021 amendment.

The 2021 amendments are applied retrospectively with the cumulative effect of initially applying it, being recognized in opening retained earnings. The disclosure requirements of paragraph 28(f) of Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors do not apply on initial application.

Additionally, guidance has been provided on accounting for modifications of lease contracts resulting from the IBOR reform.

References to C o n c e p t u a l Framework

The ICAI has developed the Conceptual Framework for Financial Reporting (the Conceptual Framework) under Ind AS, which corresponds to IASB's revised Conceptual Framework for Financial Reporting, 2018. The 2021 amendments aim to align certain standards with the Conceptual Framework.

For example, in Ind AS 102, Share-Based Payment definition of liabilities has been amended to 'a present obligation of the entity to transfer an economic resource as a result of past events.

In Ind AS 103, the MCA clarified that for the purpose of this Ind AS, acquirers are required to apply the definitions of an asset and a liability given in the Framework for Preparation and Presentation of Financial Statements with Indian Accounting Standards rather than the Conceptual Framework

Other minor / clerical changes

Other amendments refer to clerical changes, including rectification of certain errors, references or italics being brought in or some other minor changes to bring in convergence with IFRS. For example, the definition of 'recoverable amount' has been updated in Ind AS 105, Ind AS 36 and Ind AS 16 by substituting the term 'fair value less cost to sell' with 'fair value less cost of disposal'. There is no significant impact of these changes.