The government has amended certain Indian Accounting Standards (Ind-AS), including the standard relating to leases amid the coronavirus pandemic. Ind-AS 103, 116 and some other standards have been amended by the Corporate Affairs Ministry. While Ind-AS 103 pertains to business combinations, Ind-AS 116 relates to principles for recognition, presentation and disclosure of leases. In the wake of the pandemic, many lessors have extended rent concessions to lessees. However, applying the Ind-AS 116 requirements for changes to lease payments could have posed practical difficulties in the current situation.
 
What
  1. Against this backdrop, the ministry has amended the rules whereby entities would get relief from lease modification accounting due to Covid-19 related rent concessions.
  2. The amendments can be followed by lessees for annual reporting periods beginning on or after April 1, 2020.
  3. Lease modification requires re-computation of lease liability using discount rate on the date of modification. This would have posed a significant challenge to companies whose volume of leases are very high.
  4. The amendment to Ind-AS 116 will provide significant relief to such lessees for accounting for rent concessions from lessors specifically arising from the Covid-19 pandemic.
  5. Among others, the ministry has also amended rules regarding Ind-AS 103. These are aimed at helping entities to determine whether a transaction needs to be accounted as a business combination or as an asset acquisition.
  6. The previous guidance on the definition of a business created some diversity in practice. Therefore the amendment to Ind-AS 103 and additional guidance on the definition of a business in Ind-AS 103. Fair value concentration test is likely to simplify the assessment of business considerably.
  7. A notification was issued to amend the Companies (Indian Accounting Standards) Rules, 2015 and the amended rules were finalised by the ministry in consultation with the National Financial Reporting Authority (NFRA).
  8. Ind-AS are converged with International Financial Reporting Standards (IFRS).