In its circular released on July 5, 2016, the Securities and Exchange Board of India (SEBI) relaxed the norms of reporting quarterly financials, which will be applicable for companies adopting the new accounting standards (Ind AS) for the first time from FY17. The norms shall also be applicable to all companies subsequently adopting Ind AS. That said, these relaxations are optional and companies may choose to opt out. Further, the existing format for the presentation of quarterly financial statements will be continued until 3QFY17, which, in our opinion, is likely to create ambiguity whether revenues have to be reported as gross of excise (as required under Ind AS) or as net of excise (as required under the existing format).
- The relaxation has been spread across two phases: (1) Q1 and Q2FY17 and (2) Q3FY17.- For Q1 and Q2FY17, companies have been granted the following relaxations:
(a) Extension of the timeline for reporting financial statements by one month;
(b) YoY comparable financials have to be provided (wherein limited review/audit will not be compulsory); and
(c) Presentation of yearly financials for FY16 is not mandatory.- For Q3FY17, presentation of financial statement for FY16 is not mandatory. However, if the company opts to do so, the same is subject to audit/limited review.
- Further, for Q1FY17, provision of QoQ comparable financials is not mandatory.
- The circular also relaxes the norm for not providing the balance sheet for the year ended FY16 along with Q2FY17. However, it is silent on providing the comparable half yearly balance sheet with Q2FY17 results. Looking into the kind of relaxations provided, the same will also be granted subsequently, in our view.
- Companies currently have a one-time yearly choice (in line with the listing agreement) in Q1 of either reporting standalone or consolidated quarterly financials. For first-time adopters, this option will also be available in Q2 this year.