9870310368 8860712800

Learning

Learning » CFO Service » Finance & Accounting » Financial Reporting » Financial Reporting Disclosures & Global Ethical Standards: Auditor’s Role

SP Services

Financial Reporting Disclosures & Global Ethical Standards: Auditor’s Role

Ashish M. Shaji

| Updated: Jul 27, 2021 | Category: Financial Reporting

Financial Reporting Disclosures & Global Ethical Standards: Auditor’s Role

Financial reporting includes various disclosure of financial information to the stakeholders regarding the financial performance and organizations’ financial position over a period of time. Components of financial reporting includes financial statements, notes and also various reports that are asked by regulatory authorities. To standardize the accounting information in the financial statements, specific accounting policies based on Generally Accepted Accounting Principles are required.  In this article, we will discuss financial reporting disclosures requirements concerning accounting standards and global ethical standards.

Financial Reporting Disclosures: Overview of Financial Reporting

In the last few years, financial reporting in India has witnessed massive changes. As the trade globalizes, the compliance and reporting requirements also increases. Producing financial statements of a company as per the reporting requirements of every country it operates in would be a tough ask and is not practically possible as well. Therefore the need for International Financial Reporting Standards came into existence. International Financial Reporting Standards refers to accounting standards issued by the International Accounting Standards Board. Its primary objective is to provide a common accounting language to increase transparency in the financial information presentation.

What is International Accounting Standards Board?

It is an independent body that was formed in 2001. Its responsibility was to establish the international financial reporting standards. It replaced the International Accounting Standards Committee, which used to establish international accounting standards. 

The International Accounting Standards Board is based in London and has provided the conceptual framework for financial reporting. It provides a conceptual understanding and the basis of accounting practices. International Accounting Standards Committee has already issued specific international standards called International Accounting Standards. Currently, International Accounting Standards and IFRS is in force.

The IFRS are as follows:

  • IFRS-1: First adoption of International Financial Reporting;
  • IFRS-2: Share based Payment
  • IFRS-3: Business Combination
  • IFRS-4: Insurance Contracts
  • IFRS-5: Non-current Assets held for sale and discontinued operations
  • IFRS-6: Exploration for & Evaluation of Mineral Resources
  • IFRS-7: Financial Instruments – Disclosure
  • IFRS-8: Operating Segments
  • IFRS-9: Financial Instruments
  • IFRS-10: Consolidated Financial Statements
  • IFRS-11: Joint Arrangements
  • IFRS-12: Disclosure of interest in other entities
  • IFRS-13: Fair value measurement
  • IFRS-14: Regulatory Deferral Accounts
  • IFRS-15: Revenue from Contracts
  • IFRS-16: Lease Accounting
  • IFRS-17: Insurance Contracts

This was the list of International Financial Reporting Standards issued by the International Accounting Standards Board. It may be noted that in India, Ind AS are issued by the ASB (Accounting Standards Board) to converge Generally Accepted Accounting Principles with International Financial Accounting Standards.

Financial Reporting Disclosures: Amendments to Ind AS by MCA

Some of the recent amendments notified by MCA include the following:

Financial Reporting Disclosures: Amendments to Ind AS by MCA
  • Covid-19 related concession– Amendments to Ind AS 116, leases, to extend the availability of the practical expedient in para 46A so that it may apply to rent concession for which reduction in lease payments affect only payments originally due on or prior to 30th June 2022 subject to other conditions for applying the practical expedient are met.
  • Interest rate benchmark reform- Phase II– Amendment to Ind AS 104, 107, 109 and 116- This relates to the effects on financial statements when a company replaces an old interest rate benchmark with alternative benchmark rate due to the reform.
  • Amendment to Ind AS consequential to conceptual framework under Ind AS- Amendments to the following:
    1. Amendments to Ind AS 102- Share based payment;
    2. Ind AS 103- Business Combinations;
    3. Ind AS 106- Exploration for & Evaluation of Mineral Resources;
    4. Ind AS 114- Regulatory Deferral Accounts;
    5. Ind AS 1- Presentation of Financial Statements;
    6. Ind AS 8- Accounting policies, changes in accounting estimates and errors;
    7. Ind AS 34- Interim Financial Reporting;
    8. Ind AS 37- Provisions, Contingent Liabilities and Contingent Assets;
    9. Ind AS 38- Intangible Assets
  • Editorial correction in Ind AS– Editorial Corrections include small inaccurate things like punctuations, spelling mistakes, font or grammatical errors etc.

Global Ethical Standards and the Role of Auditor

The Council of Institute of CAs of India has emphasised keeping the code before legal requirements. Various ICAI pronouncements became applicable before the concept of non-assurance services got codified in Section 144 (Companies Act 2013)[1].

The International Ethics Standard Board for Accountants provides the ethical standards which have to be complied with by the professional accountants. In 2009, the council of ICAI adopted the International Ethics Standard Board for Accountants code, also called as IFAC code of ethics. In 2018, IESBA issued the code of ethics. The ICAI adopted these standards, and it was issued in code of ethics in 2019 and made applicable in a staggered way from 1st July 2020.

The code of ethics has some significant features such as:

  • Prohibition of Management representation to audit client;
  • Responding to the non-compliance of laws & regulations;
  • Duty of accountant if there is a breach of independence standards;
  • Restriction on fee from a single client over 15% and;
  • Restriction on taxation services to audit clients.

It is worth mentioning here that the 1st and 3rd points have been implemented with effect from 1st July 2020 but remaining has been deferred.

Conclusion

With increase in transparency through financial disclosures, disclosure of information related to finances under financial reporting is becoming more significant. Financial reporting disclosures is essential for stakeholders, investors, lenders, regulators etc.

Read our article:National Financial Reporting Authority (NFRA) – Composition, Role and Powers

Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

Business Plan Consultant


Request A Call Back

Are you human?: 5 + 4 =

Categories

Startup CFO

Trending Articles

Hey I'm Suman. Let's Talk!