In order to facilitate smooth transition during the first year of India accounting standard (IND-AS) implementation, market regulator Securities Exchange Board of India (SEBI) issued a circular
(No. CIR/CFD/FAC/62/2016) on 5 July 2016 (the Circular). The Ministry of Corporate Affairs (MCA) had issued the Companies (Indian Accounting Standards) Rules, 2015
(IND-AS Rules) (notification no. G.S.R. 111(E) dated 16 February, 2015). According to IND-AS Rules, companies and their auditors are mandated to comply with the IND-AS Rules in preparation of their financial statements and auditor’s reports respectively.
However, the Circular neither draws reference to Regulation 52 of Listing Regulations nor to SEBI Circular dated 27 November 2015. Therefore, the Circular will apply only to companies having its specified securities listed on stock exchanges. Non-convertible debentures (NCD) or non-convertible redeemable preference shares NCRPS listed entities may await similar circular from SEBI.
IND-AS Rules are aligned with the International Financial Reporting Standards (IFRS) and are mandatorily applicable on the following class of companies from 1 April 2016:
(a) companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of rupees five hundred crore or more;
(b) companies other than those above and having net worth of rupees five hundred crore or more;
(c) holding, subsidiary, joint venture or associate companies of companies covered by sub-clause (a) and (b) above;
Companies required following IND-AS Rules from 1 April 2016 are in the process of finalizing accounts for the quarter ended 30 June 2016. The Circular facilitates smooth transition and provides certain relaxations to listed entities. Further, the listed entities mandatorily required to follow IND-AS in subsequent years shall avail the benefit of transition in the same manner as provided in the Circular.
Reporting under existing format
Listed entities can continue to report their financial results in the format prescribed under SEBI Circular dated 30 November 2015 till the period ending 31 December 2016. Hence, financial results shall be prepared in the existing format for the quarter ended June 2016, September 2016 and December 2016.
For period ending 31 March 2017, the Circular prescribes following the format under Schedule III to Companies Act, 2013 (Act, 2013) for submission of unaudited or audited quarterly financial results i.e. statement of profit and loss and the unaudited or audited half-yearly balance sheet.
However, please note that there is a clear contradiction between the language of para 2.1 and point (v) of para 2.6.1. On one hand, para 2.1 of the Circular prescribed to use the existing format of balance sheet prescribed in SEBI Circular dated 30 November 2015 for half-yearly ended 30 September 2016, on the other hand, for the same quarter, point (v) of para 2.6.1 of the Circular prescribed to use the format of Schedule III of the Act 2013. Since, the format of balance sheet provided under Annexure IX of the earlier circular dated 30 November 2015 and the format prescribed under Schedule III of the Act 2013 are almost similar, the contradiction between the languages does not make much difference.
Banking and insurance companies will follow the formats as prescribed under the respective Acts and Regulations as specified by their regulators.
Due date of submission of financial results
The existing due dates for submission of financial results for the quarter ended June 2016 and September 2016 has been extended by one month. The deadline for submission of the quarterly results of June 2016 and September 2016 is 14 September 2016 and 14 December 2016, respectively. No such extension has been provided for quarter ended December 2016 and March 2017.
Extension for submission of consolidated financial result
Regulation 33(3)(b)(i) of the Listing Regulations mandates intimating the stock exchange regarding its intention to additionally submit quarterly/ year-to-date consolidated financial results in the first quarter of the financial year and the option cannot be changed during the financial year.
The Circular extends this period for listed entities required to comply with IND-AS and permits intimating the decision in the second quarter instead of first quarter. The option intimated continues for the rest of the year.
Revised format for publishing the financial results in newspapers
The format of newspaper publication in case of financial results as required under Regulation 47 (1) (b) was prescribed under Annexure XI of SEBI Circular dated 30 November 2015.
The Circular necessitates the Quarterly / Annual Segment Information published in compliance with the requirements as prescribed under Accounting Standard (AS) 17/ IND-AS-108 of the AS Rules/ IND-AS Rules, as applicable, following minimum information: -
(a) Segment Revenue (including inter-segment revenue);
(b) Segment Results;
(c) Segment Assets;
(d) Segment Liabilities.
Unallocated items, wherever applicable, shall be shown separately in respect of the above information. Aggregate inter-segment revenue shall be shown as a deduction from the segment revenue.
Details to be provided for following period:
Relaxation from providing comparable figures and other changes
The SEBI Circular provides relaxation from providing comparable figures. The details have been shown below in the tabular form:
(Jyoti Srivastva is a Company Secretary by qualification and works in the Corporate Law Services Division at Vinod Kothari Consultants Pvt Ltd)