Execution of Indian Accounting Standards (Ind AS) by companies in India is the memorial step taken in the history of Accounting. As stated by the Institute of Chartered Accountants of India (ICAI), Ind AS mechanism has considerably improved the quality of financial reporting from Indian companies which has led to progress and strong competitiveness and compatibility.
The trio of quality financial reporting along with a sound corporate governing mechanism and robust audit mechanism is the only mantra to success and progress of any business and on a wider level – The Economy.
Ind ASs are from IFRS Standards that are issued by the International Accounting Standards Board (IASB). IFRS are the standards that are accepted worldwide as the sound financial reporting standards having dynamic status (keeps on updating as per the need of the hour). IFRS standards due to its dynamic nature always remain in line with the evolving economic processes and businesses. Being on an economic front, every country needs to actively participate in the IASB’s standard-setting activities.
Recently, looking at the prevailing situation caused due to COVID-19 outbreak, IASB has issued an Exposure Draft on Covid-19 related Rent Concessions (Proposed amendment to IFRS 16, Leases):
Amid the COVID-19 crises prevailing globally, several lessors have either already extended or are planning to extend rent concessions on the leases for the sake of giving relief in the crises. The said concessions are specifically for leases on retail properties and under certain circumstances for government or judiciary bodies. The Exposure Draft released by the IFRS as an advantage amid COVID-19 provides relief to the lessees along with demanding them to keep on providing useful information about the leases to the users of financial statements.
Any inconvenience encountered due to COVID-19 adds on to the work being undertaken in implementing the new lessee accounting model under IFRS 16 and therefore the provisional change in the IFRS standard is brought with the intention to eliminate the issue affecting the application of IFRS 16 by providing huge concessions on rents as a direct result of corona crises during 2020.
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The Proposed Modification:
permits lessees, as a practical expedient, not to assess whether particular Covid-19-related rent concessions are lease modifications. Instead, lessees that apply the practical expedient would account for those rent concessions as if they were not lease modifications.
requires lessees that apply the practical expedient to disclose that fact.
The Exposure Draft – no Modifications on the part of lessors
Favoring several stakeholders in India, the Accounting Standards Board (ASB) of ICAI is planning to set up a platform where they could share their concerns. The initial International Standard-setting stage is inviting the comments from various stakeholders related to the Exposure Draft issued by the IASB.
Adding on, the stakeholders are requested to respond to the below questions that have relevance with the proposals of the Exposure Draft in the Indian context:
To be noted: The proposed changes apply to the rent concessions related to the COVID-19 situation (only from the annual reporting period starting from 1 June 2020).
So clearly, its applicability is for a limited period only. Keeping in mind the timeline, stakeholders must notify that whether (in Indian Context) Ind AS 116, leases need to be modified or not based on the final amendments to be issued by the IASB.
The time limit for comments on Exposure Draft is short and therefore it is requested by the stakeholders to give their valuable suggestions on time. The afore-mentioned Exposure Draft is available on the official website of ICAI (i.e. www.icai.org) along with the public comment section the last date for which is 5 May 2020.
Visit the below-mentioned link to access the knowledge sharing page of the Accounting Standards Board of ICAI:
https://www.icai.org/comments/asb/viewdetailcomment.html?commentdoc_id=78
