The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2023.
- The new rules introduced by MCA have amended Indian Accounting Standard (Ind AS) 101. After paragraph 39AG, a new paragraph, 39AH, has been inserted, which deals with Deferred Tax related to Assets and Liabilities arising from a Single Transaction. This amendment shall be applicable for annual reporting periods beginning on or after April 1, 2023.
- Under the amended rules, companies are now required to disclose "material accounting policy information" in their financial statements instead of "significant accounting policies." This change aims to provide a clearer and more detailed picture of the company's affairs for shareholders, investors, and lenders, as material policies have a significant impact on the financial statement users' decision-making.
- Moreover, the guidelines on determining what constitutes material accounting policy information will further enhance transparency and improve the quality of financial reporting. Industry experts have welcomed the move, noting that it will benefit stakeholders in making informed decisions.
- A new paragraph B14 has also been inserted, which deals with Deferred Tax related to leases and decommissioning, restoration, and similar liabilities. It states that at the time of transition to Ind AS’s, a first-time adopter shall recognise a deferred tax asset and a deferred tax liability for all deductible and taxable temporary differences associated with right-of-use assets and lease liabilities and decommissioning, restoration, and similar liabilities.
These amended rules are also aligned with International Financial Reporting Standards. The basic intent of the change is to ensure that only relevant and material information is shared in the financial statements, and it is not bulky, resulting in a better disclosure by the companies and better understanding of the financial statements.