This requirement is likely to give rise to some confusion, as currency translated financials (translated in accordance with Ind AS 21) would likely not be audited but only certified by an auditor (and typically by a chartered accountant, which is not the statutory auditor of the relevant subsidiary). For instance, the New ICDR Regulations state that in the event a material subsidiary presents its financial statements in a currency other than the Indian Rupee, the issuer is required to ensure that such financial statements are currency translated into Indian Rupees. The New ICDR Regulations include certain additional requirements with respect to such financial statements of material subsidiaries. The availability of such financial information gives rise to similar questions as set out above. In terms of the New ICDR Regulations, an issuer is also required to make available on its website the audited standalone financial statements of each of its material subsidiaries (a subsidiary is considered material if it contributes 10% or more to the turnover or net-worth or profits before tax in the annual consolidated financial statements of the respective year of the issuer) for the past three full financial years, or a link to such financial information. Disclosure of Financial Statements of Material Subsidiaries It is also important to note that the issuer is not required to provide standalone financial statements for any stub period for which restated consolidated financial statements are included in the offer document. As such, it is debatable to what extent investors can rely on such financial information and what liability the issuer and other transaction participants have in relation to such financial information. The audited standalone financial statements are not incorporated into the offer document by reference (a concept recognised in other jurisdictions but not contemplated under the Companies Act, 2013 or the New ICDR Regulations).Further, in the event there are any errors in such standalone financial statements, these would not be subject to any rectification and would need to be presented as is. Further, significant errors, non-provisions, regrouping or any other adjustments must be reflected in the corresponding period and such changes are required to be disclosed in accordance with the relevant accounting standards.The audited standalone financial statements, however, will not give effect to restatement adjustments, and it may therefore be difficult for a reader to comprehend and compare such audited standalone financial statements to the restated consolidated financial statements included in the offer document. The consolidated financial statements included in the offer document are restated to ensure consistency of presentation, disclosures and accounting policies for all the periods presented in line with those applicable for the latest financial year or stub period.This is a significant departure from the erstwhile disclosure regime, and gives rise to two concerns: In addition, however, the New ICDR Regulations require an issuer to make available its audited standalone financial statements for the past three full financial years on its website and include a web link to such financial statements in the offer document. Further, the period of disclosure of such information has also been brought in line with global practices and an issuer is only required to provide financial information for the last three financial years (and any stub period). This has been rationalised under the New ICDR Regulations and an issuer is now required to provide only restated consolidated financial statements. The Old ICDR Regulations required an issuer to provide five years of restated consolidated and standalone financial statements in the offer document. Reduction in Time Period of Financial Statements But certain key changes from the Old ICDR Regulations have already caught the eye and it will be interesting to see how market practice evolves in this regard. There have not yet been a significant number of offer documents filed under the New ICDR Regulations. The New ICDR Regulations particularly emphasise streamlining disclosure requirements with respect to financial statements in offer documents for initial public offerings, by reducing the volume of disclosures and focusing on what is considered material and relevant to an investor in making an investment decision. The overhaul of the regulations followed a robust public consultative process, aimed at getting views from stakeholders and at bringing the Indian regulations closer to global best practices. In November 2018, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 ( New ICDR Regulations) came into force, replacing the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 ( Old ICDR Regulations).
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