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INCOME COMPUTATION & DISCLOSURES STANDARDS (ICDS)

Section 145(2) empowers the Central Government to notify in the Official Gazette from time to time, Income computation and disclosure standards (ICDS) to be followed by any class of assessees or in respect of any class of income, Accordingly, the Central Government has, in exercise of the powers conferred under section 145(2), notified ten income computation arid disclosure standards (ICDS,) to be followed by ALL ASSESSEES, FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, FOR THE PURPOSES OF COMPUTATION OF INCOME CHARGEABLE TO INCOME-TAX UNDER THE HEAD “PROFIT AND GAINS OF BUSINESS OR PROFESSION” OR “INCOME FROM OTHER SOURCES”. This notification shall come into force with effect from 1st April, 2015, and shall accordingly apply to the A.Y. 2016-17 and subsequent assessment years.

IN THE CASE OF CONFLICT BETWEEN THE PROVISIONS OF THE INCOME-TAX ACT, 1961 AND THE NOTIFIED ICDSs, THE PROVISIONS OF THE ACT SHALL PREVAIL TO THAT EXTENT.

Salient Features of ICDS:-

ü  ICDS I :- Accounting Policies

o   This ICDS deals with significant accounting policies.

o   While it recognise the fundamental accounting assumptions of Going Concern, Consistency & accrual, it does not recognise the concepts of Materiality & prudence, in select ion of accounting policies.

o   Treatment & presentation of transactions are to be governed by their substance not form.

o   Marked to market loss or an expected loss is not be recognised unless recognition of loss in accordance with the provisions of any other ICDS.

ü ICDS II :- Valuation of Inventories

o   Inventories has been defined to mean assets held for:-

§  Sale in the ordinary course of business;

§  In production process for such sale;

§  In form of materials or supplies to be consumed in the production process or in the rendering of services.

o   This ICDS requires inventory to be valued at cost or NRV whichever is lower

o   This ICDS requires disclosure of accounting policies adopted in measuring inventories including the cost formulae used  and total carrying amount of inventories and its classification to the appropriate person.

ü  ICDS III :- Construction Contracts

o  This ICDS is required to be applied in determination of income for a construction contract of a contractor.

o  It recognises percentage of completion Method (POCM) for recognizing the contract revenue  & contract cost associated with the construction Contracts.

o  This ICDS also contains certain disclosures requirements , like amount of contract revenue  recognised as revenue during the period, the methods used to determine the stage of completion of contracts in progress etc.

ü ICDS IV :- Revenue Recognition

o  This ICDS deals with the bases for  recognition of revenue arising in the course of ordinary activities of a person from –

§  The Sale of goods;

§  The rendering of services;

§  The use by others of the person’s resources yielding interest, dividends or royalities.

o   It does not deal, however, with the aspects of revenue recognition which are dealt with by other ICDSs.

o    Revenue & is the gross inflow of cash, receivables or other consideration arising in  the course of the ordinary activities of a person  from the sale of goods, from the rendering of services, or from the use by others of the person’s resources yielding interest, royalties or dividends. In an agency relationship, the revenue is the amount of commission and not the gross inflow of cash, receivables or other consideration.

o    This ICDS also contains a provision wherein the revenue from sale of goods could be recognized when there is reasonable certainty of its ultimate collection.

o   However, “reasonable certainty for ultimate collection” is not a criterion for recognition of revenue from rendering of services or use by others of person’s resources yielding interest, royalties or dividends.

o   This ICDS contains certain disclosure requirements, like the amount of revenue from service transactions recognized as revenue during the previous year, the method used to determine the stage of completion of service transactions in progress, information relating to service transactions in progress at the end of the previous year etc.

ü ICDS V: Tangible Fixed Assets:-

o     This ICDS deals with the treatment of tangible fixed assets.

o     It contains the definition of tangible fixed assets which also provides the criteria for determining whether an item is to be classified as a tangible fixed asset.

o     “Tangible fixed asset” is an asset being land, building, machinery, plant or furniture held with the intention of being used for the purpose of producing or providing goods or services and is not held for sale in the normal course of business.

o     This ICDS provides the components of actual cost of such assets and valuation of such assets in special cases.

o     The fair value of a tangible fixed asset acquired in exchange for shares or other securities or another asset shall be its actual cost.

o     The ICDS also provides that depreciation on such assets and income arising on transfer of such assets shall be computed in accordance with the provisions of the Income-tax Act, 1961.

o     The ICDS also contains disclosure requirements in respect of such assets, like the description of asset or block of assets, rate of depreciation, actual cost or written down value, as the case may be, etc.

ü ICDS VI: The Effects of changes in foreign exchange rates

o     This ICDS deals with treatment of transactions in foreign currencies, translating the financial statements of foreign operations and treatment of foreign currency transactions in the nature of forward exchange contracts.

o  This ICDS requires exchange differences arising on settlement of monetary items or conversion thereof at last day of the previous year to be recognized as income or as expense in that previous year.

o  In respect of non-monetary items, exchange  differences arising on  conversion thereof as at the last day of the previous year shall not be recognized as income or as expense in that previous year.

o  The ICDS contains provisions for initial recognition, conversion at the last date of the previous year and recognition of exchange differences. These provisions shall be subject to the provisions of section 43A of the Income-tax Act, 1961 and Rule 115 of the Income-tax Rules, 1962.

o   The ICDS requires classification of a foreign operation as an integral foreign operation or a non-integral foreign operation.

ü ICDS VII: Government Grants

o  This ICDS deals with the treatment of government grants. It recognizes that government grants are sometimes called by other names such as subsidies, cash incentives, duty drawbacks etc.

o  This ICDS does not deal with Government assistance other than in the form of Government grants and Government participation in the ownership  of the enterprise.

o It requires recognition of Government Grants when there is a reasonable assurance that (h. person shall comply with the conditions attached to them and the grants shall be received. However, it also states that recognition of Government grant shall not be postponed beyond the date of actual receipt.

o  This ICDS requires Government grants relatable to depreciable fixed assets to be reduced from actual cost/WDV, It further provides that where the Government grant is not directly relatable to the asset acquired, then a pro-rata reduction of the amount of grant should be made in the same proportion as such asset bears to all assets with reference to which the Government grant is so received.

o     The standard requires grants relating to non-depreciable fixed assets to be recognized as income over the same period over which the cost of meeting such obligations is charged to income.

o  The standard also requires Government grants receivable as compensation for expenses or losses incurred in a previous financial year or for the purpose of giving immediate financial support to the person will no further related costs to be recognized as income of the period in which it is receivable.

o  All other Government Grants have to be recognized as income over the periods necessary to match them with the related costs which they are intended to compensate.

o   The standard contains certain disclosure requirements, like nature and extent of Government grants recognized during the previous year as income , nature and extent of Government grants not recognised during the previous year as income and reasons thereof etc.

ü ICDS VIII: Securities

o  This ICDS deals with securities held as stock-in-trade.

o  It requires securities to be recognized at actual cost on acquisition, which shall comprise of its purchase price and include acquisition charges like brokerage, fees, tax, duty or cess.

o The actual cost of a security acquired in exchange for other securities or another asset shall be the fair value of the security so acquired.

o  Subsequently, at the end of any previous year, securities held as stock-in-trade have to be valued at actual cost initially recognized or net realizable value at the end of that previous year, whichever is lower.

o  It goes on to provide that such comparison of actual cost initially recognized and net realizable value has to be done category-wise and not for each individual security.

ü ICDS IX: Borrowing Costs

o  This ICDS deals with the treatment of borrowing costs. It does not deal with the actual or imputed cost of owners’ equity and preference share capital.

o  It requires borrowing costs which are directly attributable to the acquisition, construction or production of a qualifying asset to be capitalized as part of the cost of that asset. Other borrowing costs have to be recognized in accordance with the provisions of the Act.

o   Qualifying asset has been defined to mean –

§  land, building, machinery, plant or furniture, being tangible assets;

§ know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets;

§ inventories that require a period of twelve months or more to bring them to a saleable condition.

o   This ICDS requires capitalization of specific borrowing costs and general borrowing costs.

o   This ICDS provides the formula for capitalization of borrowing costs when funds are borrowed generally and used for the purpose of acquisition, construction or production of a qualifying asset.

o  It also provides as to when capitalization of borrowing costs would commence and cease.

o   It requires disclosure of the accounting policy adopted for borrowing costs and the amount of borrowing costs capitalized during the year.

ü ICDS X: Provisions. Contingent Liabilities and Contingent Assets

o  This ICDS deals with Provisions, Contingent Liabilities and Contingent Assets. However, it does not deal with provisions, contingent liabilities and contingent assets -

o  resulting from financial instruments,

o  resulting from executory contracts,

o  arising in insurance business from contracts with policyholders and

o  covered by another ICDS.

It also does not deal with recognition of revenue dealt with by ICDS on Revenue Recognition.

o The ICDS specifies the conditions for recognition of a provision, namely, existence of a present obligation as a result of a past event, reasonable certainty that outflow of resources embodying economic benefits will be required to settle the obligation and making a reliable estimate of the amount of the obligation.

o  It provides that a person shall not recognize a contingent liability or a contingent asset However, it requires contingent assets to be assessed continually. When it becomes reasonably certain that inflow of economic benefit will arise, the asset and related income have to be recognized in the previous year in which the change occurs.

o  It contains provisions for measurement and review of a provision and asset and related income.

o  It also provides that a provision shall be used only for expenditures for which the provision was originally recognized.

o   The ICDS also contains specific disclosure requirements in respect of each class of provision, asset and related income recognized.

Statutory Registers to be maintained under Companies Act, 2013

Statutory Registers to be maintained under Companies Act, 2013

The Companies Act, 2013(the Act) and the rules made there under (‘’the rules’’) lays down that every company incorporated under the act has to maintain Statutory Registers (“the Registers”).

The Registers need to maintained and updated eventually and should be kept at the Registered Office of the Company. Some of the registers are required to be kept open for inspection by Directors, Members, Creditors and by other persons. A company is required to provide the extracts from the registers, if demanded by the Directors, Members, Creditors and by other persons on payment of specified fees.

List of Registers to be maintained by the Company:-
1. Section 88(1) and Rule3(1) of Companies (Management and Administration) Rules , 2014 MGT -1:
Registers of Members

2. Section 88(1) and Rule 4 of Companies (Management and Administration) Rules , 2014 MGT -2:
Registers of Debenture Holders

3. Section 88(2) and Rule 6 of Companies (Management and Administration) Rules , 2014
Index of Members

4. Section 88(2)
Index of debenture holders

5. Section 88(3)
Registers and Index of Beneficial Owner

6. Section 88(4) and Rule 7 of the Companies (Management and Administration) Rules, 2014 MGT -3:
Foreign Register of Members, Debenture holders, other security holders or beneficial owners residing outside the India

7. Rule 6 of the Companies (Share Capital & Debentures) Rules, 2014 Form SH-2 :
Register of Renewed and Duplicate Share Certificate

8. Section 54 and Rule 8(14) of the Companies(Share Capital & Debentures) Rules, 2014 Form SH-3:
Register of Sweat Equity Shares

9. Section 62 and Rule 12(10) Form SH-6:
Register of Employee Stock Options

10. Section 68 and Rule 17 (12) of the Companies(Share Capital & Debentures) Rules, 2014 Form SH-10:
Register of Shares or Securities Bought Back

11. Section 170(1) and Rule 17 of the Companies(Appointment and Qualification of Directors)Rules, 2014
Registers of Directors and KMPs

12. Section 73 and Rule 14 of the Companies(Acceptance of Deposits) Rules,2014  
Register of Deposits

13. Section 85 and Rule 7 of the Companies(Registration of Charges) Rules, 2014 Form CH-7:
Register of Charges

14. Section 186 and Rule 12 of the Companies(Meeting of Board and its Powers) Rules, 2014  Form MBP -2:
Register of Loans/Guarantee/Security and Acquisition by Company

15. Section 187 and Rule 14 of the Companies (Meeting of Board and its Powers) Rules , 2014 Form MBP-3 :
Register of Investments not held in its own name

16. Section 189 and Rule 16 of the Companies (Meeting of Board & its Powers) Rules, 2014 Form MBP -4 :
Register of Contracts or Arrangements in which Directors are interested.

These 10 nations are all rich but hold massive debt as a percentage of their GDP

Ø Japan               400 %

Ø Irelan               390 %

Ø Singapore        382 %

Ø Portugal           358 %

Ø Belgium           327 %

Ø Netherland       325 %

Ø Greece              317 %

Ø Spain                313 %

Ø Denmark          302 %

Ø Sweden            290 %

#IMF World Economy Outlook,As of February 2015

Companies(Amendment) Act,2015

Several major changes have been brought to the Companies Act, 2013 by the COAMPANIES (AMENDMENT) ACT, 2015. Two of the major changes impacting the holding & subsidiary transactions are as follow:  

Section 185 has been amended to exempt loans given by holding companies to its wholly-owned subsidiary companies and also to security or guarantees given by holding companies to their subsidiary companies with respect to loans advanced by bank or financial Institutions provided they are used for the principle business activity of the subsidiary company.  

Section 188 deals with the related party transactions has been relaxed by amending it and by removing the need for passing a special resolution. Further, need for passing any resolution has been done away with when it comes to a wholly owned-subsidiary.

 

These steps will indeed increase ease of doing business in India. But several section of the society are arguing that some of these measures will be against the spirit of Corporate Governance. Shareholders powers will significantly decrease and investors will have little power to control related party transactions and other holding-subsidiary transactions due to these changes. This may lead to grievances even from minority shareholders, institutional investors and other sections that might find such related party transactions opaque and might not have much power to exercise.        

Woman In Kanpur Woke Up To A Shocking Rs 95,000 Crore In Her Account

State Bank Of India (SBI) might
be reputed and all but they still
ended up making one of the
most epic blunders till date.
In a shocking incident, a
woman, Urmila Yadav’s bank
account was credited
with Rs 95,000 crores in
Kanpur. Rs. 95,000
CRORES!!!

This naturally got Urmila Yadav
panic stricken. She had
deposited Rs. 2000/- to open an
SBI bank account.
The amount credited was
roughly 95,711,69,86,47,130.14
rupees .
In a state of utter disbelief, she
immediately went to her
guarantor Lalta Prasad Tiwari,
who in turn approached the
bank. The bank had a very
surprising response to the whole
incident.
According to them, since the
woman’s account did not have
sufficient balance, the bank
decided to transfer a ‘fictitious’
amount into her account.
The honest woman did not want
any kind of controversy and
just wants her amount to be
returned.

Some facts about Richard Branson Everyone should know.

His Mother Knew He Would Be
Successfull In his life: ‘He’ll Become
The Prime Minister Of England’
Born on July 18, 1950, in the
small British town of Surrey,
Branson’s mother always had
really high hopes for her son,
often telling people he would
become the prime minister of
England. Well, to Mrs. Branson’s
delight, her son achieved what
others could only wish for.

His first Business Venture?
The Magazine ‘Student’
Branson dropped out of school
at the age of 15 and started a
magazine by the name Student.
This magazine was his first ever
business venture (1968). Who
knew things would soar for this
young lad so much that he would
become one of the most sought
after personalities of the world.

The Hot Air Balloon
Adventurer, Breaking World
Records
Known for his adventurous
streak, in 1987 Branson broke
the world record for being the
first and only person to cross
the Atlantic in the largest hot
air balloon! Following this, in
1991 he again broke his own
record by crossing 6700 miles of
the Pacific in a Virgin hot air
balloon of 2600,000 cubic feet
at a speed of 245 miles per hour.

All Virgin Business Ventures
Are Very Close To His Heart
Being a self-made man, Richard
Branson is known to be very
touchy about the welfare of his
companies. In June 1992, when
he sold Virgin Records to Thorn
EMI for a reported $1 billion, he
cried the entire time the deal
was being carried out.

Virgin Records, Richard
Branson’s ‘first time’
The name Virgin isn’t just a
coincidence. According to Richard
Branson, when he first started
his record company in 1969, he
had no experience in handling a
business on his own. Therefore,
he called his record label, Virgin
Records , standing for ‘first
timer’. The name spread like
wildfire and soon every business
venture he started had ‘Virgin’
along with it as a trademark of
being Branson’s business
venture.

Family Comes First For
Richard Branson
A man of his words, Branson is a
devotee when it comes to his
family and beliefs. According to
a British poll, he is one of those
few men, after Mother Teresa,
who could be eligible to write the
Ten Commandments.