ICDS - Framework

ICDS - Framework

Impact Analysis - ICDS

ICDS, are standards that all taxpayers are required to follow while computing their taxable income chargeable under the head ‘Profit and Gains of business or profession’ or ‘Income from other Sources’

Taxable profits would now be determined after making appropriate adjustments to the financial statements to bring them in conformity with ICDS

Construction contracts and revenue recognition

  • ICDS does not permit accounting under the completed contract method, and mandates that only the percentage of completion method should be applied for recognition of revenue
  • ICDS prescribes non-recognition of margins during the early stages of the contract and this allowing contract revenue only to the extent of costs incurred. It prohibits such deferral if the stage of completion exceeds 25%
  • Under ICDS, retention money is specifically included as part of contract revenue
  • Contract revenue is to be recognized when there is reasonable certainty of its ultimate collection

Effects of changes in foreign exchange rates

  • No deduction for marked-to-market or expected and probable losses, since they are unrealized in nature
  • ICDS requires premium, discount or exchange difference on forward contracts that are intended for trading or speculation purpose, or that are entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction to be recognized only at the time of settlement

Lease arrangements

  • In the case of finance leases, depreciation will now be allowed to the lessee even though the asset is owned by the lessor