Some of these changes go beyond the matters of accounting and reporting. They potentially impact the internal controls and information systems of companies and their business decisions, such as buying versus leasing decisions.
Financial reporting for financial year 2020-21 will be a reflection of how companies have fared in mitigating the effect of the pandemic and their resilience. As companies prepare for their annual results, it is critical for them to ensure that readers of financial statements adequately understand the impact of the pandemic on the financial results of the company. Hence, assessment of the impact on significant estimates and judgment, and appropriate COVID-19 disclosures will be key focus areas for companies while preparing their financial results.
Whilst there are no new accounting standards issued in current year, there have been few amendments to the existing standards. Also, there are a slew of regulatory measures which may have a bearing on accounting and reporting.
As companies prepare for closing the financial year, we have summarized the key changes and their impact to assist companies in ensuring compliance with these developments while finalizing their annual financial statements. The three broad updates will highlight the key aspects of these changes: New accounting pronouncements relevant for financial statements of FY 2020-21 or thereafter, key hot topics and other regulatory changes.
1. New accounting pronouncements relevant for financial statements of FY 2020-21:
During the financial year (FY) 2020-21, there have been certain amendments in the existing Indian Accounting Standards (Ind AS). Various committees/board of the Institute of Chartered Accountants of India (ICAI) have rolled out additional guidance.
On 24 July 2020, the Ministry of Corporate Affair (MCA) vide notification dated 24 July 2020 made the rules to amend the Companies (Indian Accounting Standards) Rules, 2015. Some of these amendments have been made to alleviate practical challenges faced by companies due to pandemic. Publication covers a summary of the key changes and the potential impact that these changes may have on the financial statements of companies.