SEBI has recently issued a clarification on the applicability of Indian Accounting Standards or ‘Ind AS’ to disclosures made under the offer documents under SEBI (ICDR) Regulations, 2009. This clarification shall be applicable to all issuer companies whose offer document is filed with SEBI on or after April 1, 2016. Hitherto, most issuer companies followed the Indian Generally Accepted Accounting Principles or ‘Indian GAAP’ while disclosing financial statements in offer documents. Earlier, the Ministry of Corporate Affairs had issued a roadmap for implementation of ‘Ind AS’ in a phased manner beginning from the accounting period 2016-17. SEBI has issued this clarification in order to align the disclosure requirements for financial information in offer documents as specified under the SEBI ICDR Regulations. Typically, SEBI requires issuer companies to disclose financial information for the previous 5 financial years immediately preceding the filing of the offer document, while following uniform accounting policies for each of the financial years. The road map issued by SEBI through this clarification is as follows:
- For those issuer companies filing an offer document upto March 31, 2017 all of the financial statements filed by them can be under Indian GAAP.
- For those issuer companies filing an offer document between April 1, 2017 and March 31, 2018, disclosures in the latest previous three financial years will have to be made under the ‘Ind AS’ principles while disclosures for the remaining two financial years may be done under Indian GAAP. However, as far as disclosures for the third latest financial year are concerned, suitable restatement adjustments to the accounting heads from their values as on the date of transition following accounting policies consistent with that used at date of transition to Ind AS.
- For those issuer companies filing an offer document between April 1, 2018 and March 31, 2019, disclosures in the latest previous three financial years will have to be made under the ‘Ind AS’ principles while disclosures for the remaining two financial years may be done under Indian GAAP.
- For those issuer companies filing an offer document between April 1, 2019 and March 31, 2020, disclosures in the latest previous four financial years will have to be made under the ‘Ind AS’ principles while disclosures for the remaining one financial year may be done under Indian GAAP.
- For those issuer companies filing an offer document on or after April 1, 2020, disclosures in all the previous five financial years will have to be made under the ‘Ind AS’ principles.
SEBI has also provided discretion to issuer companies to present financial statements for all five financial years under ‘Ind AS’ should those companies volunteer to do so. Issuer companies are also required to disclose the fact that the financial information has been disclosed in accordance with Ind AS while suitably explaining the difference between Ind AS and the previously applicable accounting standards, and the impact of transition to Ind AS.
However, it has to be noted that this clarification issued by SEBI only relates to disclosures made in initial public offers or follow on public offers. This clarification does not apply to issuer companies coming out with rights issue. It remains to be seen whether SEBI would be issuing a separate clarification for those companies or whether they would be expected to follow the road map provided through this clarification.
