As cloud computing arrangements have rapidly shifted from a niche technology consideration to a core element of enterprise infrastructure, accounting for these arrangements has grown increasingly complex. Although cloud solutions are often marketed in similar ways, the contractual rights and obligations conveyed to customers can vary significantly, resulting in different accounting outcomes. Determining whether an arrangement represents a service, a lease, or the acquisition of a software intangible asset requires careful assessment of the specific terms of each contract. In addition, entities must consider the appropriate accounting treatment for upfront and ongoing implementation costs incurred in connection with such arrangements. In this edition of the Accounting and Auditing Update (AAU), the key accounting considerations and judgements involved in applying Indian Accounting Standards to cloud computing arrangements are examined in depth.
The Government of India implemented four new Labour Codes effective 21 November 2025, consolidating 29 labour laws and standardising the definition of wages across employee benefits. The revised definition of wages and expanded employee coverage have had a direct impact on employee benefit obligations, particularly gratuity and leave encashment. This edition of the AAU covers an article that examines the financial reporting effects arising from implementing the new Labour Codes in relation to the one-time impact arising from remeasurement of provision for gratuity and leave encashment, as seen in top companies' results for the quarter ending 31 December 2025. There have been other regulatory developments in India during the month. The Reserve Bank of India (RBI) issued Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 to address practical, regulatory, and policy gaps that had emerged in cross border borrowing and lending. Further, the RBI issued Directions on Prudential Norms on Declaration of Dividend and Remittance of Profit by Regulated Entities promote prudent capital management and ensure that dividends and profit remittances by regulated entities are aligned with their financial strength, risk profile, and long term stability.
As always, we have included a digest of recent regulatory updates in India and internationally.
We would be delighted to receive feedback/suggestions from you on the topics we should cover in the forthcoming editions of AAU.
For more information on this update, please write to aaupdate@kpmg.com.
