This month the Accounting and Auditing Update focuses on the power sector and highlights key matters relating to accounting, financial reporting and regulatory areas relevant to this sector.
The adoption of Ind AS in general and Ind AS 115, Revenue from Contracts with Customers in particular could be challenging for the power sector entities. We have analysed the five-step model needed to be applied under the new standard and highlighted the key impact areas.
The sector and its entities could get covered in the scope of new guidance on service concession arrangements and embedded leases. We highlight the accounting requirements relating to these areas in this issue of the Accounting and Auditing Update.
Additionally, certain power sector entities are governed by the regulations set-up by the government e.g. tariff earned is governed by the Central Electricity Regulatory Commission (CERC) and the State Electricity Regulatory Commission (SERC). We provide an overview of the guidance note on Accounting for Rate Regulated Activities and Ind AS 114, Regulatory Deferral Accounts. We have also discussed implications of other Ind AS on rate regulated entities e.g. income taxes, earnings per share, impairment of assets, consolidated financial statements and presentation.
This sector is also capital intensive in nature and considerations around depreciation and borrowing costs are significant for many companies. Our articles on depreciation and borrowing costs highlight some of the nuances and challenges associated with applying judgements and accounting policies in these areas.
We also highlight salient aspects of Goods and Services Tax (GST) and Income Computation and Disclosure Standards (ICDS) in addition to our regular round up of regulatory updates.
© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.