4 minute read 3 Apr 2020
Organizations responding to Year-end considerations

How well is your organization responding to Year-end considerations?

By EY India

Multidisciplinary professional services organization

4 minute read 3 Apr 2020

Show resources

With significant updates under Indian Accounting Standards (Ind AS), here are a few year-end considerations for organizations to evaluate and prepare themselves while responding to new accounting standards and regulatory changes in the financial year 2019-20.

Companies reporting under Indian Accounting Standards (Ind AS) continued to face steady flow of new accounting standards and regulatory changes in the financial year 2019-20. These changes range from significant amendments of fundamental accounting principles, enhanced disclosure requirements to some minor updates arising from changes in International Financial Reporting Standards (IFRS)

Some of these changes go beyond the matters of accounting and reporting. They potentially impact the internal controls and information systems of companies and their business decisions, such as buying versus leasing decisions.

With regulatory environment becoming more stringent, stakeholders’ expectations from companies and auditors are increasing. Stakeholders now demand enhanced level of transparency and disclosures. Consequently, there is a need for companies to proactively understand the changes, assess their impact on financial statements and prepare their systems and processes to ensure smooth transition to new accounting standards and regulatory changes.

As we come close to the end of the financial year,  we had discussed this during the webinar (Year-end considerations) our Financial accounting advisory services (FAAS) have summarized the key changes and their impact to assist companies in ensuring compliance with these developments while finalizing their annual financial statements.

Companies will need to look out for accounting standards and regulatory updates and to monitor the current and potential effects that the Coronavirus will have on their financial statements. The three broad updates will highlight the key aspects of these changes: New accounting pronouncements relevant for financial statements of FY 2019-20 or thereafter, new auditing pronouncements applicable to financial statements of FY 2019-20 or thereafter, regulatory changes and other developments.

1.  New accounting pronouncements relevant for financial statements of FY 2019-20 or thereafter

During the financial year 2019-20, there have been certain amendments in the existing Indian Accounting Standards (Ind AS). Various groups and committees of the Institute of Chartered Accountants of India (ICAI) have rolled out additional guidance through Educational Material and clarifications provided by Ind AS Technical Facilitation Group (ITFG). Organizations may have to watch out for key changes and the potential impact that these changes may have on their financial statements. 

The new guidance on Uncertainty over Tax Treatments changes the way companies compute their provisions for taxation. The appendix is based on IFRIC 23 and now aligns Ind AS with the principles laid down in US GAAP – FIN 48 as well.
Jigar Parikh
EY India Financial Accounting Advisory Services Partner

2. New Auditing pronouncements applicable to financial statements of FY 2019-20 or thereafter

The efforts from the government in the recent time are crucial for the organization since auditors are likely to demand enhanced information from them to discharge their reporting responsibilities. While the reporting responsibilities and guidance enhance the role of auditors. But the companies may also need to strengthen their internal controls systems to ensure robustness of data/information provided to auditors.

The government’s announcement to defer CARO 2020 is a big relief for Indian corporates and auditors since all companies are grappling with uncertainties due to the outbreak of Coronavirus.
Ajith Thambi
Director, Financial Accounting Advisory Services (FAAS), EY India

3.  Regulatory changes and other developments

Amendments including - the Companies (Amendment) Act, 2019, the Specified Companies (Furnishing of information about payment to Micro and Small enterprise suppliers) Order, 2019, the finance act, 2020 and many more will bring in a renewed focus on improved corporate governance by way of better structure, more rigorous checks and balances, and greater independence of all key gate-keepers, including the Board of Directors and auditors.

It is imperative for companies to evaluate the impact of tax rate changes on financial statements as it would have significant impact on effective tax rate for companies.
Jalpa Sonchhatra
Director, Financial Accounting Advisory Services (FAAS), EY India

Show resources

Continue learning at all times via EY FAAS Learning Solutions

Connect with our specialists on Covid-19 Accounting and Reporting Helpline

Send your queries

Summary

Organizations are required to keep pace with the new accounting standards and regulatory changes impacting financial statements for the year ended March 31, 2020 including impact of COVID-19 while preparing their financial statements. These developments have a potential impact on the internal controls and information systems of the companies and their business decisions.

About this article

By EY India

Multidisciplinary professional services organization