Skip to main content

Decoding Ind- AS impact on India Inc’s balance sheet

By
AUTOMOTIVE Companies made adjustments to revenue recognition. This was more visible in case of deferment of revenue of future performance obligations, or for recognition of cash/ trade discounts
ENERGY, METALS AND MINING The sector is heavily capital- intensive and exposed to the global commodity/ currency markets. Some high- value adjustments arose due to: Forex gains and losses, particularly due to change in the functional currency of the company and of its foreign operations Change in accounting policy, primarily for oil companies with respect to capitalisation of expenditure and depletion of producing assets Adjustments in fixed assets. Saw capitalisation of new assets as a result of major overhauling costs Presence of embedded finance lease arrangements. This was more visible for the power companies; Companies that had previously capitalised fixed assets on their balance sheet have de- capitalised these assets, reversed the corresponding depreciation charged and recognised finance lease receivables Accounting for service concession arrangements by some of the power companies Restatement of past business combinations, including common control acquisitions
INFORMATION TECHNOLOGY SECTOR Companies in the sector have made adjustments for share- based payments (SBP). Given that SBP is a common incentive for employees in this sector, multiple companies have made adjustments with respect to expense arising from these payments
MANUFACTURING SECTOR Sector- specific adjustments made by companies include recognition of embedded lease arrangements. This had an impact on revenue from operations and de- capitalisation of borrowing costs from inventory
TELECOMMUNICATIONS SECTOR Companies in this sector made significant adjustments with respect to Forex gains/ losses due to change in the functional currency of company’s foreign operations Restatement of past business combinations, resulting in a significant reversal of goodwill amortisation charge Discounting of asset retirement obligations previously recognised, resulting in a lower depreciation charge Adjustments related to service income
Adoption of the new accounting standard under the Ind- AS framework had an impact on some of the key financial reporting parameters of corporate India. A study by Protiviti, a risk- consulting and internal audit firm, of FY17 first- quarter results of around 125 companies shows the manufacturing and information technology sectors had to make the highest number of accounting adjustments under Ind- AS, followed by telecommunications, mining/ metals and the energy sectors. On an average, 50 per cent of the companies have made around 10 adjustments to the reported profit for the quarter ended June 30, 2015. Capital intensive sectors such as telecommunication and the metals/ mining and energy industries, contributed around 70 per cent of the total adjustments ( in absolute value). These two sectors include major business groups thathave significant global operations with a history of multiple business acquisitions, the study noted. Here are some key sector- specific takeaways:
Business Standard New Delhi,22th August 2016

Comments

Post a Comment

Popular posts from this blog

Govt’s gamble on GST cuts: What do the bond and currency markets signal?

By
  It’s not just humans who suffer from cognitive biases; markets do too. Interestingly, different financial markets exhibit distinct biases, each interpreting events through its own prism of prejudice. Take the recent announcements on GST reforms: equity markets have chosen to view them through the lens of growth, while bond and currency markets are focusing on potential macroeconomic risks—fiscal pressures and current account challenges. So, which lens captures the true pulse?Equity markets may be right in expecting GST reforms to revive consumption, which has remained lacklustre for a while. But the key question remains—will this revival come at the cost of broader macro stability?It is well known that consumption stocks have rallied since the GST rationalisation announcement. But what about bond markets? What signals are they sending since this rejig was announced from the ramparts of the Red Fort?The signs aren't encouraging. Bond prices have slumped and yields have surged sinc...
Post a Comment
Read more

Luxury carmakers urge clarity on GST rates to boost festive season sales

By
  A clear picture regarding new GST rates at the earliest will help the overall auto industry, including the luxury car segment, to regain momentum in the ongoing quarter, which generally sees enhanced sales on account of the festive season.The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation.In an interaction with PTI, BMW Group India President and CEO Hardeep Singh Brar said the recent speculation about the change in GST rates has caused uncertainty in the minds of consumers.Consumer interest and demand is strong, but they (prospective buyers) have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level, he noted."Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar stated.He also hoped that the sustainable p...
Post a Comment
Read more

Sebi proposes tighter norms for green bond third-party reviewers

By
  Sebi on Friday said it has proposed to tighten the norms to appoint independent third-party reviewers or certifiers for green debt securities to align them with requirements for other ESG-linked bonds.In a draft circular, Sebi said that the current norms for green bonds, introduced in February 2023, lack detailed requirements around reviewer independence, conflict of interest mitigation, and disclosure standards that are now in place for other ESG-linked securities under a June 2025 circular.The regulator's latest proposal seeks public comments on a revised framework that would bring parity by incorporating comprehensive criteria for third-party certifiers of green bonds on non-convertible securities.Under the proposed norms, issuers of green debt securities will need to appoint reviewers who are independent of their management, directors, and key managerial personnel. These reviewers will be remunerated in a way that prevents any conflicts of interest and possess relevant expert...
Post a Comment
Read more