Financial transaction

Sebi sets guidelines for MFs regarding Ind AS

The new framework will be effective from April 1, 2023, Sebi said.

On Friday, capital markets regulator Sebi issued guidelines for asset management companies (AMCs) regarding compliance with Indian accounting standards (Ind AS).

This comes after Sebi amended mutual fund rules which required AMCs to prepare mutual fund financial statements and accounts in accordance with Ind AS, effective April 1, 2023.

Under the guidelines, mutual fund schemes will be required to prepare the opening balance sheet as of the date of transition and comparatives in accordance with Ind AS requirements, Sebi said in a circular.

In accordance with mutual fund rules, historical prospective per unit statistics require the disclosure of per unit statistics by plan for the past three years.

In this regard, Sebi stated that mutual fund schemes may not be required to restate historical per unit statistics published in previous years in accordance with Ind AS requirements for the first two years from the first adoption of the Ind AS. ‘Ind AS. However, UCITS will have to provide certain additional information in view of historical statistics per unit.

This additional information relates to the labeling of the previous Generally Accepted Accounting Principles (GAAP) information as not having been prepared in accordance with Ind AS; and disclose the nature of the adjustments that would be necessary to make it Ind AS compliant. Mutual fund plans do not need to quantify these adjustments.

Mutual fund financial statements will need to be prepared in a format specified by the regulator.

In addition, Sebi has changed some guidance to align with Ind AS’s requirements for the cost of investment transactions to be expensed (i.e. charged to income instead of capitalization).

As part of the amendment, Sebi said brokerage and transaction fees incurred for execution purposes will be charged to schemes up to 12 basis points and 5 basis points for spot market transactions and derivative transactions, respectively.

Any payment for brokerage and transaction fees, in excess of the said 12 bps and 5 bps for spot market transactions and derivatives transactions, respectively, may be charged to the scheme up to the maximum limit of the expense ratio. total (TER). The new framework will come into effect on April 1, 2023, the Securities and Exchange Board of India (Sebi) said.

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