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Instances of non-compliance with Indian Accounting Standards (Ind ASs) on Accounting Policies for measurement of Revenue from Contracts with Customers and Trade Receivables - Companies Law - NF-25011/1/2023Extract ..... ce compliance with accounting standards and auditing standards. Further, NFRA is required by sub-section 2( d) of section 132 of the Act read with rule 4(2) (g) of NFRA Rules, to perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties. 2. NFRA monitors compliance with accounting standards by Companies as part of its review of published financial s t atements of companies. During its recent review, instances of apparent noncompliance wi t h t he prescriptions of the Ind ASs in the critical areas of Revenue Recognition and Measuremen t , and Ini t ial Measuremen t of corresponding Trade Receivables have come to light. In order t o ensure ad h erence to h igh-quali t y Ind AS Reporting Fr ..... x x x x x Extracts x x x x x Instances of non-compliance with Indian Accounting Standards (Ind ASs) on Accounting Policies for measurement of Revenue from Contracts with Customers and Trade Receivables - Companies Law x x x x x Extracts x x x x x ..... n price of goods sold and services rendered is net of variable consideration on account of various discounts and schemes offered by the Company as part of the contract ... 4. Appendix A to Ind AS 115 defines the 'transaction price' as the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to am customer, excluding amounts collected on behalf of third parties. It is important to note that the transaction price defined in appendix A to Ind AS 115 is different from 'fair value' de f ined in Ind AS 113 and Ind AS 32, Financial Instruments: Presentation. Under Ind AS 115, the application of fair value is relevant only in a limited set of situations; for exampl ..... x x x x x Extracts x x x x x Instances of non-compliance with Indian Accounting Standards (Ind ASs) on Accounting Policies for measurement of Revenue from Contracts with Customers and Trade Receivables - Companies Law x x x x x Extracts x x x x x ..... ed by a large listed company [ Names of companies withheld ] is as follows: Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision/or impairment. 7. Further, there have also been instances of inconsistency between the accounting policy for initial measurement of trade receivables and the accounting policy for measurement of corresponding revenue leading to misleading and confusing information to the users of the financial statements. An example of such inconsistent accounting policy stated by a company is as follows Financial Assets Initial Recognition and Measurement All financial assets are recognized initially at fair value plus, in the case ..... x x x x x Extracts x x x x x Instances of non-compliance with Indian Accounting Standards (Ind ASs) on Accounting Policies for measurement of Revenue from Contracts with Customers and Trade Receivables - Companies Law x x x x x Extracts x x x x x ..... deration on account of various discounts and schemes offered by the Company as part of the contract ... 8. The above instances of wrong accounting policies by a few companies reflect inadequate understanding of the measurement and disclosure requirements of the relevant Ind ASs. Accordingly, all listed companies and other entities falling with the domain of NFRA which are required to follow Ind ASs are hereby advised to comply with the provisions of lnd AS 115 and Ind AS 109, as discussed above. The auditors of these companies are required to ensure strict compliance, in the performance of their audits, with the provisions of the Ind ASs as brought out above. 9. Company Secretaries of the above companies are hereby requested to bring this c ..... x x x x x Extracts x x x x x Instances of non-compliance with Indian Accounting Standards (Ind ASs) on Accounting Policies for measurement of Revenue from Contracts with Customers and Trade Receivables - Companies Law x x x x x Extracts x x x x x
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