Implementation of new accounting standards postponed

Breather for companies as norms are deferred by a year

The income tax (I-T) department has postponed the implementation of the new accounting standards for computation of business income by a year, a move that will give companies a breather.

Now, the Income Computation and Disclosure Standards (ICDS) will be applicable on the income earned in the current financial year.

ICDS was notified by the government on April 1, 2015. It aims to ensure consistency and help minimise tax-related disputes.

"It has been decided that the ICDS shall be applicable from April 1, 2016 i.e. previous year 2016-17 (assessment year 2017-18)," the tax department stated.

Revenue Secretary Hasmukh Adhia also said in a tweet that ICDS would be implemented from assessment year 2017-18 in view of the difficulties expressed.
 

"We hope that audit reports will now be ready by CAs (chartered accountants) in time this year," Adhia added.

ICDS does not recognise expected losses or mark-to-market losses, unless specifically provided by any of the ICDS. This is in sharp divergence with accounting standard (AS 1), which allows recognition of expected losses.

Vishal J Shah, partner (tax & regulatory) at PwC India, said: "The ICDS deferral is a pragmatic step in a series of recent initiatives to make the regime taxpayer friendly, both in terms of compliance and certainty. The government should work out a plan for convergence of the taxation framework with the IND-AS regime before implementing the ICDS."

Subsequent to ICDS notification on April 1, 2015, the Central Board of Direct Taxes received representations saying that certain provisions of ICDS may need further clarification for proper implementation.

The implementation issues in ICDS, which were raised by the stakeholders were referred to an expert committee comprising departmental officers and professionals.

"The committee has recommended amendments to the notified ICDS and also issuance of clarification in respect of certain points raised by the stakeholders," the statement added.

The tax department said the revision of ICDS or issue of clarifications as recommended by the committee, was under consideration.