Monthly GAAP Bulletin December 2017

Monthly GAAP Bulletin

Introduction

Dear Reader,

Grant Thornton is delighted to present ‘Monthly GAAP Bulletin’, a bulletin that

summarises significant accounting, auditing and related updates. This publication has

been compiled to meet the needs of dynamic Indian businesses and focusses on key

developments in India and across the globe.

To access the source of information and complete details, you can click the

hyperlinked text below each update.

We would be pleased to receive your valuable feedback. Please write to us at

npsg@in.gt.com with your comments, questions or suggestions.

This edition covers updates for the month of November 2017. Abbreviations used in

the publication are explained at the end of the publication.

Following is the index of updates covered in this bulletin:

Contents Page

A. India updates – Effective

a. Auditing updates

1 Guidance note on report under section 92E of the Income Tax Act 1961 4

(Transfer Pricing) Revised 2017

b. Other regulatory updates

Companies Act, 2013 updates

1 The Companies (Accounts) Amendment Rules, 2017 5

2 The Companies (Filing of documents and forms in extensible business

reporting language) Amendment Rules, 2017

5

SEBI updates

1 Amendments to SEBI (International financial services centres)

Guidelines, 2015

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2 SEBI circular on enhancing fund governance for mutual funds 7

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Monthly GAAP Bulletin

Other updates

1 Income-tax (Twenty-fourth amendment) Rules, 2017 8

2 Due Diligence Framework under the Insolvency and Bankruptcy Code,

2016 strengthened

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3

4

Foreign Exchange Management (Transfer or issue of security by a

person resident outside India) Regulations, 2017

Foreign Exchange Management (Transfer or issue of any foreign

security) (Amendment) Regulations, 2017

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10

5 Report on Audit Quality Review (2016-17) 10

6 Secretarial standard on dividend 11

7 The Insolvency and Bankruptcy Code (amendment) ordinance 2017 11

B. International updates – Effective

a. US GAAP updates

1 ASU No. 2017-14—Income Statement—Reporting comprehensive income 12

(Topic 220), Revenue recognition (Topic 605), and Revenue from contracts

with customers (Topic 606)

b. Others

1. Staff inspection brief on preview of 2016 inspections findings 12

C. International updates – Proposed

a. US GAAP updates

1. FASB to simplify lease standard implementation 13

b. US GAAS updates

1. AICPA ASB addresses auditor’s report, other information,

standards alignment 13

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Monthly GAAP Bulletin

A. India updates – Effective a. Auditing updates

Guidance note on report under section

92E of the Income Tax Act 1961

(Transfer Pricing) Revised 2017

ICAI has released Guidance note on Report

under Section 92E of the Income Tax Act,

1961 (Transfer Pricing) Revised 2017

(‘guidance note’). This guidance note

addresses the amendments made by the

Finance Act, 2017 in the IT Act.

These amendments include amendment to

applicability of specified domestic

transactions compliance by excluding

expenditure made to person referred to in

Sec. 40A(2)(b) of the IT Act, from the ambit

of the definition of specified domestic

transactions.

Further, provisions regarding secondary

adjustments and limitation on interest

deduction were introduced and inserted as

new sections (92CE and 94B respectively)

vide Finance Act, 2017. Finance Act 2017

also introduced section 271J for levying

penalty on accountants for furnishing

incorrect information in reports or

certificates furnished under any provisions

of the IT Act or the rules made thereunder.

Click here for the guidance note.

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Monthly GAAP Bulletin

b. Other regulatory updates

Companies Act, 2013 updates

The Companies (Accounts) Amendment Rules, 2017

MCA has issued the Companies (Accounts)

Amendment Rules, 2017 (‘amended rules’)

which have substituted form no. AOC-4 in

the annexure to the Companies (Accounts)

Rules, 2014 (‘principal rules’).

Form no. AOC-4 is a form for filing financial

statement and other documents with the

Registrar pursuant to section 137 of the

2013 Act and sub-rule (1) of rule (12) of the

principal rules.

The revised Form no. AOC-4 has added

two more segments: Segment V – Auditor’s

Report and Segment VI – Miscellaneous.

Segment V requires disclosure in the form

of qualification, reservation and adverse

remarks by auditors, including auditor’s

comments on items specified under CARO,

and supplementary or test audit of

government company by CAG. These

disclosures were required to be given under

segment I in the erstwhile form no. AOC-4.

Segment V also requires disclosure

regarding whether the auditors have

reported on SBN disclosures by the

company.

Further, segment VI, inter alia, includes

reporting on whether secretarial audit is

required.

The revised form has also made changes in

other segments which, inter alia, include

disclosure of nature of financial statements,

nature of revision if any which may be on

financial statements or board’s report or

both, disclosure on whether consolidated

financial statements are required, whether

company is maintaining books of accounts

in electronic form, etc.

The amended rules have come into force

on 7 November 2017.

Click here for the amended rules. The Companies (Filing of documents and forms in extensible business reporting language) Amendment Rules, 2017 MCA has issued the Companies (Filing of

documents and forms in extensible

business reporting language) Amendment

Rules, 2017 (‘amended rules’) to amend the

Companies (Filing of documents and forms

in extensible business reporting language)

Rules, 2015 (‘principal rules’).

The amended rules have substituted rule 3

and Annexure-I, and have inserted

Annexure-II A in the principal rules.

Rule 3 deals with filing of financial

statements with Registrar and prescribes

the classes of companies required to file

their financial statements and other

documents under section 137 of the

Companies Act, 2013 with the Registrar in

e-form AOC-4 XBRL as per Annexure-I.

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Monthly GAAP Bulletin

The amended rules now, inter alia, provide

that companies which are required to

prepare their financial statements in

accordance with the Companies (Indian

Accounting Standards) Rules, 2015 should

also file the financial statements with the

Registrar as aforesaid.

It has been further prescribed that the

companies preparing their financial

statements under the Companies

(Accounting Standards) Rules, 2006 should

file the statements using the taxonomy

provided in Annexure-II and companies

preparing their financial statements under

Companies (Indian Accounting Standards)

Rules, 2015 should file their statements

using the taxonomy provided in

Annexure-II A.

The amended rules have come into force

on 6 November 2017.

Click here for the amended rules.

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Monthly GAAP Bulletin

SEBI updates Amendments to SEBI (International financial services centres) Guidelines, 2015 SEBI has issued a circular to amend SEBI

(International financial services centres)

Guidelines, 2015 (‘guidelines’). The circular

amends the definition of issuer given in

clause 2(1)(i) of the guidelines.

The amended definition of issuer reads as

follows:

a. any entity incorporated in India seeking

to raise capital in foreign currency other

than Indian rupee which has obtained

requisite approval under Foreign

Exchange Management Act, 1999

(FEMA) or exchange control

regulations as may be applicable; or

b. an entity incorporated in a foreign

jurisdiction, provided such entity is

permitted to issue securities outside the

country of its incorporation or

establishment or place of business as

per the laws and regulations of its

country of incorporation, jurisdiction or

its constitution, or

c. any supranational, multilateral or

statutory organisation/ institution/

agency provided such organisation/

institution/ agency is permitted to issue

securities as per its constitution.

The term issuer was earlier defined as a

company incorporated in India seeking to

raise capital in foreign currency other than

Indian rupee which has obtained requisite

approval under Foreign Exchange

Management Act, 1999 (FEMA) or

exchange control regulations as may

be applicable, or a company incorporated in

a foreign jurisdiction.

Click here for the circular. SEBI circular on enhancing fund governance for mutual funds SEBI has issued a circular strengthening

the governance structure for mutual funds.

The circular provides implementation

requirements in relation to

i) tenure of independent trustees and

independent directors and

ii) auditors of mutual funds.

Click here for the SEBI circular.

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Monthly GAAP Bulletin

Other updates Income-tax (Twenty-fourth amendment) Rules, 2017 CBDT has issued Income-tax (Twenty-

fourth amendment) Rules, 2017 (‘amended

rules’) to add new rules 10DA and 10DB,

and new Form no. 3CEAA, Form no.

3CEAB, Form no. 3CEAC, Form no.

3CEAD and Form no. 3CEAE in the IT

Rules.

The new rule 10DA prescribes the

information and documents to be kept and

maintained under proviso to sub-section (1)

of section 92D and to be furnished in terms

of sub-section (4) of section 92D. The new

rule 10DB deals with furnishing of report in

respect of an international group.

Proviso to sub-section (1) of section 92D

provides that a person, being a constituent

entity of an international group, should keep

and maintain such information and

document in respect of an international

group as may be prescribed. Sub-section

(4) of section 92D specifies the authority to

whom the information and document

referred to in the aforesaid proviso is to be

submitted.

Further the new Form no. 3CEAA, Report

to be furnished under sub-section (4) of

section 92D of the Income-tax Act, 1961

and Form no. 3CEAB, Intimation by a

designated constituent entity, resident in

India, of an international group, for the

purposes of sub-section (4) of section 92D

of the IT Act, have been issued pursuant to

rule 10DA and Form No 3CEAC, Intimation

by a constituent entity, resident in India, of

an international group, the parent entity of

which is not resident in India, for the

purposes of sub-section (1) of section 286

of the IT Act, Form No 3CEAD, Country-by-

country report and Form No 3CEAE,

Intimation on behalf of the international

group for the purposes of the proviso to

sub-section (4) of section 286 of the IT Act

have been issued pursuant to rule 10DB.

Click here for the amended rules. Due Diligence Framework under the Insolvency and Bankruptcy Code, 2016 strengthened IBBI has issued Insolvency and Bankruptcy

Board of India (Insolvency resolution

process for corporate persons) (Third

amendment) Regulations, 2017 and

Insolvency and Bankruptcy Board of India

(Fast track insolvency resolution process

for corporate persons) (Third amendment)

Regulations, 2017 (both referred to as

‘amended regulations’) to amend the

Insolvency and Bankruptcy Board of India

(Insolvency resolution process for corporate

persons) Regulations, 2016 and the

Insolvency and Bankruptcy Board of India

(Fast track insolvency resolution process

for corporate persons) Regulations, 2017

(both referred to as ‘principal regulations’)

respectively.

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Monthly GAAP Bulletin

As per the amended regulations, the

resolution professional should ensure that

the resolution plan presented to the

committee of creditors contains relevant

details to assess the credibility of the

resolution applicants. The details to be

provided would include details with respect

to the resolution applicant in terms of

convictions, disqualifications, criminal

proceedings, categorisation as wilful

defaulter as per RBI guidelines, debarment

imposed by SEBI, if any, and transaction, if

any, with the corporate debtor in the last

two years. This would enable the committee

of creditors to assess credibility of such

applicant and other connected persons to

take a prudent decision while considering

the resolution plan for its approval.

Further, the amended regulations also

require the resolution professional to submit

to the committee of creditors all resolution

plans which comply with the requirements

of the Code and regulations made

thereunder, along with details of preferential

transactions, undervalued transactions,

extortionate credit transactions, and

fraudulent transactions as given under

various sections of the Code.

Click here for the press release.

Click here for Insolvency and Bankruptcy

Board of India (Insolvency resolution

process for corporate persons) (Third

amendment) Regulations, 2017.

Click here for Insolvency and Bankruptcy Board of India (Fast track insolvency resolution process for corporate persons) (Third amendment) Regulations, 2017.

Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2017 RBI has issued Foreign Exchange

Management (Transfer or issue of security

by a person resident outside India)

Regulations, 2017 (‘regulations’) to regulate

investment in India by a person resident

outside India.

These regulations supersede notification

no. FEMA 20 /2000-RB dated 3 May 2000

regarding Foreign Exchange Management

(Transfer or issue of security by a person

resident outside India) Regulations, 2000

and notification no. FEMA 24 /2000-RB

dated 3 May 2000 regarding Foreign

Exchange Management (Investment in firm

or proprietary concern in India) Regulations,

2000.

The regulations have come into force on 7

November 2017, except a few provisions

which will come into force on a date to be

notified.

Click here for the regulations.

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Monthly GAAP Bulletin

Foreign Exchange Management (Transfer or issue of any foreign security) (Amendment) Regulations, 2017 RBI has issued Foreign Exchange

Management (Transfer or issue of any

foreign security) (Amendment) Regulations,

2017 (‘amended regulations’) which

amends the Foreign Exchange

Management (Transfer or issue of any

foreign security) Regulations, 2004

(‘principal regulations’).

The amended regulations modify

Regulation 15(v)(a) of the principal

regulation by requiring the statutory

auditors of the Indian Party to certify that

the law of the host country does not

mandatorily require audit of the books of

accounts of the joint venture/ wholly owned

subsidiary and that the figures in the APR

are as per the un-audited accounts of the

overseas joint venture/ wholly owned

subsidiary. Earlier the statutory auditors of

the Indian party were required to certify that

unaudited financial statements of the joint

venture/ wholly owned subsidiary give a

true and fair view.

It further adds clause (c) to Regulation 15

which provides that the above exemption of

filling the APR based on unaudited balance

sheet will not be available for joint venture/

wholly owned subsidiary in a country /

jurisdiction which is either under the

observation of the Financial Action Task

Force (FATF) or in respect of which

enhanced due diligence is recommended

by FATF or the any other country/

jurisdiction as prescribed by Reserve Bank

of India.

The amended regulations have come into

force from 14 November 2017.

Click here for the notification. Report on Audit Quality Review (2016-17) The Quality Review Board has issued

Report on Audit Quality Review (2016-17)

which provides findings, analysis and

summary of observations made by the

technical reviewers.

The findings are based on the review of 74 audit files which covered 47 entities and 64 audit firms. The findings were in the following areas: 1) Standards on Quality Control

2) Standards on auditing

3) Accounting standards

4) Revised schedule VI of the 1956 Act/

Schedule III of the 2013 Act

5) Other relevant laws and regulations (for

e.g. Companies (Auditor’s Report)

Order, (CARO))

Click here for the report.

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Monthly GAAP Bulletin

Secretarial standard on dividend ICSI has issued secretarial standard on

dividend, SS-3. The standard prescribes

the set of principles in relation to

declaration and payment of dividend.

The principles set out in SS-3 relate to

declaration and payment of Dividend on

equity as well as preference share capital in

accordance with the provisions of the 2013

Act and are in respect of dividend as it

relates to a going concern. These are

equally applicable to final as well as interim

dividend unless otherwise stated.

ICSI had earlier also issued revised

secretarial standard on meetings of board

of directors, SS-1 and revised secretarial

standards on general meetings, SS-2. The

revised standards are applicable to all

companies (except the exempted classes of

companies) from 1st October 2017.

Accordingly, all board meetings (including

meetings of committees of Board) and

general meetings in respect of which

Notices are issued on or after 1st October,

2017 need to comply with the revised SS-1

and SS-2.

Click here for SS-3

Click here for revised SS-1

Click here for revised SS-2

The Insolvency and Bankruptcy Code (amendment) ordinance 2017 The president of India has promulgated the

Insolvency and Bankruptcy Code

(Amendment) Ordinance, 2017 amending

the following sections in the Code

i) Section 2, Application

ii) Section 5, Definitions

iii) Section 25, Duties of resolution

professional

iv) Section 30, Submission of resolution

plan

v) Section 35, Powers and duties of

liquidator

vi) Section 240, Power to make

regulations

The ordinance also introduces the following

new sections in the Code:

i) Section 29A, Persons not eligible to be

resolution applicant

ii) 235A, Punishment where no specific

penalty or punishment is provided

This ordinance has come into force

immediately.

Click here for the ordinance.

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Monthly GAAP Bulletin

B. International updates - Effective

a. US GAAP updates

ASU No. 2017-14—Income Statement—

Reporting comprehensive income (Topic

220), Revenue recognition (Topic 605),

and Revenue from contracts with

customers (Topic 606)

FASB has issued ASU No. 2017-14, that

amends the SEC paragraphs in Topic 220,

Topic 605 and Topic 606 pursuant to the

Staff Accounting Bulletin No. 116 and SEC

Release 33-10403.

The amendments introduced by this ASU

will also result in changes to the U.S. GAAP

Financial Reporting Taxonomy.

Click here for the ASU.

b. US GAAS updates

Staff inspection brief on preview of 2016

inspections findings

The PCAOB has published a staff

inspection brief (Vol. 2017/4 – November

2017) which provides a preview of the

observations from 2016 inspections of

auditors of public companies and other

issuers.

It highlights the three key areas where most

frequent audit deficiencies were observed

in the 2016 inspection cycle.

These three key areas are:

- assessing and responding to risks of

material misstatement;

- auditing internal control over financial

reporting (‘ICFR’); and

- auditing accounting estimates, including

fair value measurements.

It also points out other audit areas with

continued audit deficiencies, which included

areas affected by certain economic risks,

auditing of certain financial reporting areas,

audit work regarding multinational audits,

and certain aspects of a firm's system of

quality control.

Click here for the news release.

Click here for the staff inspection brief.

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Monthly GAAP Bulletin

C. International updates – Proposed

a. US GAAP updates

FASB to simplify lease standard

implementation

In order to reduce the challenges that

financial statement preparers are facing

while implementing the new leases

standard, FASB has decided to issue an

ASU providing practical expedients in

relation to transition and also clarifying that

the new or modified lease easements

should be evaluated under Topic 842.

FASB has also decided to issue a proposed

ASU with regard to transition and provide a

practical expedient with regard to

separation of non-lease components from

lease components.

Click here for the news

b.US GAAS updates

AICPA ASB addresses auditor’s report,

other information, standards alignment

To enhance the relevance and usefulness

of the auditors reports for audits of non-

issuers, AICPA ASB has issued three

proposals, 1) Proposed Statement on

Auditing Standards: Auditor Reporting and

Proposed Amendments—Addressing

Disclosures in the Audit of Financial

Statements, 2) Proposed Statement on

Auditing Standards: The Auditor’s

Responsibilities Relating to Other

Information Included in Annual Reports and

3) Proposed Statement on Auditing

Standards: Omnibus Statement on Auditing

Standards—2018.

Comments on the above proposals can be

submitted by 15 May 2018.

Click here for the news.

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Monthly GAAP Bulletin

Abbreviations used in this publication

1956 Act Companies Act, 1956

2013 Act Companies Act, 2013

ASU Accounting Standards Update

CAG Comptroller and Auditor General of India

CARO Companies (Auditor's Report) Order

CBDT Central Board of Direct Taxes

Code Insolvency and Bankruptcy Code, 2016

FASB Financial Accounting Standards Board

GAAP Generally Accepted Accounting Principle

IBBI Insolvency and Bankruptcy Board of India

ICAI Institute of Chartered Accountants of India

IFSC International financial services centres

IT Act Income-tax Act, 1961

IT Rules Income-tax Rules, 1962

MCA Ministry of Corporate Affairs

NCLT National Company Law Tribunal

PCAOB Public Company Accounting Oversight Board

RBI Reserve Bank of India

SBN Specified Bank Notes

SEBI Securities and Exchange Board of India

SEC Securities and Exchange Commission

XBRL Extensible Business Reporting Language

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Monthly GAAP Bulletin

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