It will be part of the set of ‘Accounting Standards’ and not part of Ind AS
Small corporates with annual turnover less than ₹250 crore will soon get an accounting standard on ‘share-based payments’ to comply with if the CA Institute has its way.
The CA Institute has embarked on an exercise of framing an accounting standard also for the non-corporate entities in the country that are increasingly resorting to share-based payments.
In India, there are two types of accounting standards – Accounting Standards and Indian Accounting Standards (Ind AS).
The proposed accounting standard on ‘share-based payments’ (AS 102) will be part of the set of ‘Accounting Standards’ and not part of Ind AS, which is applicable for large listed entities.
Till date, the ICAI had only a guidance note on ‘share-based payments’ for entities required to adopt Accounting Standards. Now the ICAI has decided to move from a guidance note level to a full fledged accounting standard and therefore introduced an exposure draft of this new accounting standard ( AS 102) for this purpose, sources said. “The new accounting standard will largely be similar to the guidance note,” they added.
Revamping and upgrading
The CA Institute is in the process of revamping and upgrading all its 30-odd Accounting Standards through a separate project. This new AS 102 will also get notified when all the 30-odd accounting standards get notified in one go after the completion of the project, sources said.
Interestingly, this new AS-102 provides guidance regarding employee share-based payment plan administered through a Trust. Ind AS 102 – which is applicable for large listed companies – does not deal with the same.
Stakeholders and public have been given time till August 7 for sending their comments on the proposed accounting standard.
Share-based payments have taken wings in a big way in the Indian corporate landscape. Capital market regulator SEBI has recently proposed in a consultation paper that companies be allowed to offer stock options to non-permanent employees and non-executive directors of the company. The regulator may eventually see merit in allowing stock options to contractual or part-time workers or gig-workers that may not be “employed” by the company (such as delivery services, transport services etc provided to a web-based platform).
Meanwhile, the CA Institute has come up with a revised guidance note on ‘Accounting for Derivative Contracts’. The earlier guidance note on this matter was issued in 2015. The latest revision comes in the wake of global developments in respect of Interbank Offered Rates (IBOR), which has been revised.
It maybe recalled that a report on “Reforming Major Interest Rate Benchmarks” was issued by the Financial Stability Board (FSB). Consequently, some major interest rate benchmarks like the LIBOR will cease to be published across the globe after December 2021.
The ongoing reform in IBORs will impact the way financial information is accounted for in financial statements. The guidance note has been revised primarily to address replacement issues relating to hedge accounting arising from Interest Rate Benchmark Reform.
Team – Intellex Strategic Consulting Pvt Ltd
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