Companies Act M P Vijay Kumar FCA, ACMA, FCS

Transcription

1 Companies Act 2013 M P Vijay Kumar FCA, ACMA, FCS

2 90 minutes.. Chapter IX Accounts of companies slide minutes My learning 10 minutes

3 CHAPTER IX S No Section no Provision Books of Account, etc Financial Statements Mandatory Re-opening of Accounts Voluntary Re-opening of Accounts NFRA CG to Prescribe AS Financial Statement, Board Report, etc CSR Right of Member to Copiesof FS File FS with RoC Internal Audit

4 FINANCIAL YEAR Key changes Implications The period ending on the 31st dayofmarcheveryyear, Uniform FY similar to Tax law Company incorporated on or after the 1st Jan, the period ending on the 31 st Mar of the following year, No provisions for extension of FY

5 FINANCIAL YEAR Exemption: If H Co. or S Co of a company incorporated outside India is required to follow a different FY for consolidation of its accounts outside India, the Tribunal may, allow any other periodasitsfy Current Flexibility removed Companies with different FY, to start efforts immediately to realign Transition Period: 2years

6 BOOKS & PAPERS Book and paper and book or paper include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form; Minutes and registers added now

7 ACCOUNTING STANDARDS Standards of accounting or any addendum thereto for companies or class of companies The CG to prescribe the AS recommended by the ICAI in consultation with and after examination of the recommendations made by the NFRA Definition yet to be notified ICAI Role continues; in fact appears to be higher Present CAS, Rules,2006 continue till fresh notification comes

8 BoA BASICS Accrual& Double Entry To be maintained for every financial year. Shouldgiveatrueandfairviewofthestateofaffairs. Should contain details of transactions effected both at the registered office and branch offices..

9 BoA BASICS Receipts and Payments Sale and purchase of goods and services Assets and liabilities Items of cost as may be prescribed in section 148 for certain companies.

10 BoA Electronic Form Electronic Record as per Information Technology Act means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche. Records in electronic form to be accessible in India and usable for subsequent reference. Records to be maintained in same form as they were generated, sent or received. Information to remain complete and unaltered. Information to be capable of legible display Proper systems to be devised for storage, display, retrieval and print out of records. Records not to be disposed off or made useless unless permitted by law.

11 BoA LOCATION & PERIOD To be kept at registered office. Can be maintained at any other place as the Board may decide - Notice to be filed with ROC within 7 days giving full address of the other place. To be maintained for atleast 8 preceding financial years. CG may provide for a longer period in case of companies for whom inspection has been ordered.

12 BoA-OUTSIDE INDIA Branches outside India Books of accounts can be maintained outside India. Summarized returns of books maintained outside India to be sent to registered office at monthly or quarterly intervals as may be decided by Board. Can be maintained in electronic mode

13 BoA Director Inspection On any day during business hours Inspection in respect of any S Co shall be done only by the person authorised in this behalf by BoD Resolution Directors can inspect the summarised returns of books of accounts maintained outside India.

14 BoA Director Inspection IF Director, requires any other financial information maintained outside India, he has to make written request himself providing complete details of information required, period and reason for which information is required. Company has to provide same within 15 days. Officers/ employees shall give all assistance

15 FINANCIAL STATEMENTS (i) B/s (ii) P&L a/c SOCIE for listed companies (iii) Cash flow statement ( NA for OPC and SC) (iv) SOCIE if applicable; and (v) Explanatory notes

16 SOCIE? Examples of items in SOCIE Issue of share capital Payment of dividend Transaction cost associated with issue of equity Equity Share options issued

17 SOCIE?

18 CFS Presently - only for listed entities Now mandatory or all companies which have one or more subsidiaries includes associates and JVs Prescribes the format (similar to existing Schedule VI R) Minority interestto be presented separately within Equity on the balance sheet Requirement is largely consistent with internationally accepted practices. Internationally, CFS is only to listed companies; and unlisted intermediate entities are generally exempted. The existing Indian and international accounting practices do not require preparation of CFS when the Company has investments only in associates and joint ventures (no subsidiaries).

19 ASSOCIATE - SI Controlof at least 20 % of total share capital or of business decision under an agreement. Different from AS -"the power to participate in financial and/or operating policy decisions of the investee but not control over those policies". Appears the standing committee recognised the difference and concluded that in due course the accounting standards will get aligned to the definition in the 2013 Act.

20 RESTATEMENT OF FS Mandatory restatement:in case of fraud and when a Court/ the Tribunal passes an order for restatement Application can be made by CG/ IT Dept/SEBI or any other statutory authority/ any person concerned Restatement is an internationally required practice. SEBI has also recently mandated that it may require companies to restate financial statements in case of justified audit qualifications. This provision will enable the implementation of the SEBI requirements. Once reopened and revisedconsidered as final

21 RESTATEMENT of FS Voluntary restatement: To comply with accounting standards with the approval of the tribunal. Note more than once a FY Cannot go beyond 3 years Detailed reasons to be given Tribunal will send notice to CG and IT Dept Application within 2 weeks of Board decision If Auditor has changed, reasons to be given and notice to be sent GM to be called, reasons given, 2 newspapers publication Statement to carry prefix revised Order of Tribunal to RoC within 30 days Restatement is an internationally required practice. SEBI has also recently mandated that it may require companies to restate financial statements in case of justified audit qualifications. This provision will enable the implementation of the SEBI requirements.

22 DEPRECIATION Provides for indicativeuseful lives and RVs under Part C of Schedule II NOtransition period & change needs to be applied prospectively. If on the date of transition there is no useful life left for an asset with carrying value, adjust through opening reserves. Questions life assumption to date Life is function of several factors, including usage, conditions of usage, etc No necessity of making an appropriate assessment of the useful life of the asset. Could lead to impairment later Date of transition adjustment to be exercised carefully, else previous year will be treated as wrong

23 DEPRECIATION Useful life shall not normallybe different from Part C RV shall notbe different from Part C Specific industries (civil construction, telecom, exploration, oil and gas, etc.- ) useful life should normally be same; deviations allowed if justified Some Regulatory Authority/ Govt prescribes different follow same Component method of depreciation recognised RV- expression estimated is not there RVordinarilyhastobeNil If different useful life or RV, disclose justification for same. Fromdateofadditiontodateofexit Shift: Secondshift 50%more Third shift- 100% more

24 NFRA Constitution Similar to NACAS Monitor and Enforce Compliance of AS and Audit Standards Oversee Quality of Service of associated Profession and suggest improvement. Chairperson-independent and post appointment 2 years cooling : New Delhi Power to Investigate Suomoto/reference Scope includes Displinary action on ICAI Members If NFRA has initiated action, then other bodies (ICAI) shall not.. Same powers as Civil Court Evidence /Punishment /Debarring professionals Appeal to Appellate Authority.Applicable to Listed companies, N/w above Rs.500cr., Turnover above Rs.1000cr..

25 NFRA PERSONAL VIEW SAD!!! ICAI -also, a statutory body, role!!! (FRRB / Disciplinary Committee, etc)

26 FS & BOARD REPORT-Additional DISCLOSURE Financial Summary/Highlights Managerial Personnel: + & - Changes in Sco. Associate & JV Appropriation :Reserve, Dividend Material orders of Courts/ Tribunal /Regulators impacting Going Concern and future operations Extract of annual return, Number of meetings, Related party transactions Deposits, Loan, Guarantees Declaration by Independent Directors Directors remuneration, positive attributes, etc Response to Audit Remarks Risk management Policy- status Conservation of Energy Technology Absorption Forexin and out Listed Co: Directors Self evaluation report

27 OTHER PROVISIONs Filing of Balance Sheet and P/L separately has been withdrawn Financials not adopted at AGM or AGM got adjourned, then unadopted FS shall be filed with ROC within 30 days t Financials have to be filed along with Annual Return Unadopted to be filed in an exigency

28 OTHER PROVISIONs XBRL GovttoNotifyclassofcompaniestofile Salient Features of S Co, Associate and JV to be prepared Form 9.1 Report

29 CSR Applicability Constitute CSR committee NetworthofRs.500croreormore,or TurnoverofRs.1000croreormore,or NetProfitofRs.5croreofmore Committee to consist of atleast 3 directors out of which atleast 1 to be independent director. Board s Report to disclose composition of CSR Committee. CSR rules shall be applicable from the financial year

30 CSR Functions of CSR Committee: Formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the company as specified in Schedule VII Recommend the amount of expenditure to be incurred on each of the activities Monitor the CSR Policy implementation from time to time. Prepare a transparent monitoring mechanism for ensuring implementation of CSR initiatives

31 CSR Atleast 2% of average net profit of last 3 preceding years is spent on CSR activities every year. Net Profit shall mean, PBT excluding profits arising from branches outside India Before TAX profits Exclude profits outside India For First CSR Net profit hall mean average of the PBT of the preceding three financial years ending on or before 31 March 2014.

32 CSR ELIGIBILITY CSR activities- only in India considered. Only activities NOT exclusively for the benefit of employees of the company or their family members shall be considered as CSR. Company shall give preference to the local area and areas around it where it operates Format of annual report on CSR initiatives to be included in the board report by qualifying companies prescribed under draft Rules.

33 CSR WHAT?? Activities relating to: (i) eradicating extreme hunger and poverty; (ii) promotion of education; (iii) promoting gender equality and empowering women; (iv) reducing child mortality and improving maternal health; (v) combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria and other diseases; (vi) ensuring environmental sustainability; (vii) employment enhancing vocational skills; (viii) social business projects;.

34 CSR LIKELYTOBEADDED Contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and Such other matters as may be prescribed.

35 CSR BOARD RESPONSIBILITY To approvethe CSR Policy after considering recommendations of CSR Committee. To disclose CSR policy and initiatives in Board s report and Company s website To ensure that activities reflected in CSR policy are actually undertaken by company. If the company does not spend 2% of net profits as required, then Board to report the reasons in the Board s report.

36 INTERNAL AUDIT (Sec. 138) Shall either be a Chartered Accountant or a Cost Accountant, or such other professionalas may be decided by the Board Audit committee to formulate scope in consultation with Internal Auditor Transition time 6 months Internal Auditor may be an employee Mandatory for: Listed Companies Unlisted Public company Paid up capital > Rs 50cr Debt > Rs.100cr or Deposits > Rs.25cr at any time during the year Turnover of > Rs.200cr Private companies Debt > Rs.100cr at any time during the year Turnover. Rs.200cr

37 CHAPTER IX S No Section no Provision Books of Account, etc Financial Statements Mandatory Re-opening of Accounts Voluntary Re-opening of Accounts NFRA CG to Prescribe AS Financial Statement, Board Report, etc CSR Right of Member to Copiesof FS File FS with RoC Internal Audit

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39 Satya CA T G Suresh Senior members of the profession Fellow knowledge seekers Anjan