1. Recent Amendments to CRAR
ICAI SIRC
August
CMA S. A. Murali Prasad

2. The Timeline
Feb Ind AS rules notified by MCA July 2016 Ind AS implemented for Q! financial results by Cos. March 2017 Limited Revision to CAS based on Ind AS by CASB April 2017 Annual financial Statements issued by Cos under IFRS August 2017 Draft Amendments to CRAR issued by MCA Effective for FY !!!

3. The Revision/Amendment
The Limited Revision to CAS was limited in scope!
The Amendment to Rules is sketchy!
The management and the auditor left to fend for themselves while dealing with key issues.

4. The break-up of the Changes to CRA 1
Total of 41 changes
14 of them deal with treatment of subsidies/ grants against various cost elements!
19 paras deleted under depreciation and replaced with a terse reference to Companies Act

5. Material Ind AS CRA amended
Items such as spare parts, stand-by equipment and servicing equipment are recognised in accordance with this Ind AS when they meet the definition Of property, plant and equipment.
Otherwise, such items are classified as inventory.(16.8) …
items such as
spare parts, stand-by equipment and servicing equipment are recognised as property, plant and equipment when they meet the definition of property, plant and equipment and depreciated accordingly.
Otherwise, such items are classified as Inventory

6. Employee Cost Ind AS CRA
An entity shall recognise the components of defined benefit cost, as follows (19.120)
(a) service cost (see paragraphs 66–112) in profit or loss;
(b) net interest on the net defined benefit liability (asset) (see paragraphs 123–126) in profit or loss; and
(c) remeasurements of the net defined benefit liability (asset) (see paragraphs 127–130) in other comprehensive income.
“including the cost of retirement benefits charged in the financial statements in an accounting period” added.
In case of companies to which Indian Accounting Standards apply, any re- measurement of such costs recognized in other comprehensive income shall not form part of the employee cost.

7. Employee Cost Ind AS CRA
to be recognised in other comprehensive income, comprising:
(i) actuarial gains and losses (see paragraphs 128 and 129);
(ii) return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset) (see paragraph 130); and
(iii) any change in the effect of the asset ceiling (see paragraph 64), excluding amounts included in net interest on the net defined benefit liability (asset).

8. Grants relating to Various Costs
Ind AS
CRA
Government grants related to assets, … shall be presented in the balance sheet by setting up the grant as deferred income. (20.24)
The grant set up as deferred income is recognised in profit or loss on a systematic basis over the useful life of the asset. (20.26)
In case of companies to which Indian Accounting Standards apply, any Grants recognized as deferred income shall be reduced from the cost in the financial year when such deferred income is recognised as income.

9. Grants relating to Various Costs
Ind AS
CRA
Grants related to income are presented as part of profit or loss, either separately or under a general heading such as ‘Other income’; alternatively, they are deducted in reporting the related expense. (20.29).
A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs shall be recognised in profit or loss of the period in which it becomes receivable. (20.20)
Grants have to be only deducted from cost.
Treatment of grants against Past costs and losses not clarified.

10. Grants relating to various costs
Ind AS
CRA
Non monetary grants will be accounted at fair value (20.23)
Fair value is offset to cost?

11. Changes relating to grants
Materials
Employee Cost
Utilities
Direct Expenses
Repairs and Maintenance
Overheads
Administration overheads
8. Royalty and technical Knowhow costs
9. R & D expenses
10. Quality Control Expenses
Pollution Control Expensess
Service Department Expenses
Packing Costs
Interest and financing costs

12. Other Changes to CRA 1 Para on high value spare deleted.
Amortisation added to Depreciation.
19 paras deleted under depreciation. Replaced with the following:
The Depreciation and Amortisation shall be measured as per provisions contained in Companies Act, 2013 and Rules made thereunder.
Reference to service included in impairment.
Para on spares included under depreciation.

13. Other Changes to CRA 1 1. Opening para under Interest changed to:
Interest and Financing Charges are interest and other costs incurred by an entity in connection with the financing arrangements which shall be measured in accordance with the provisions contained in Companies Act, 2013 and Rules made thereunder.
Which rules?
2. Services included in capacity determination.

14. Changes to CRA 3
Inclusion of Exceptional, Extra Ordinary and Other Comprehensive Income, if any in place of extra ordinary income in Product Service details for the company as a whole.
Revenue to be net of taxes and duties for Ind As companies
Profit as per financial accounts in Recon to exclude OCI.
PBT in ratio analysis to exclude OCI.

15. Changes to CRA 3.
VAS to include extraordinary, exceptional and other comprehensive income and extra ordinary and exceptional expenses.

16. What is Extra ordinary and exceptional
Extra ordinary items are those relating to ordinary activities of the entity and are not expected to recur.
Exceptional items relate to ordinary activities of the entity but are exceptiona l in terms of sizeor incidence.
Pray, which of them correspond to “abnormal”?

17. Comments
Clarification needed that all OCI items will be treated as non cost.
In first time adoption, treatment of “deemed cost” of PPE.
To clarify on treatment of depreciation on revalued fixed assets
Depreciation/amortisation on fair value of assets acquired under Business Combinations.
Loss on replacement of individual parts of PPE treated as cost?
To clarify on treatment of FVTPL items.
Implicit interest removed from material cost?
Changes in fair value of stock options to employees
Omission of words “for use of non equity funds in definition of interest costs- treatment of share issue and equity raising costs.
Implicit interest removal in Revenues.
Treatment of expected credit losses

18. The End