The Companies (Accounts) Second Amendment Rules, 2015: the Munmi Phukon munmi@vinodkothari.com Corporate Law Services Division corplaw@vinodkothari.com 8 th September, 2015 Check at: http://india-financing.com/staffpublications.html Copyright: This write up is the property of Vinod Kothari & Company and no part of it can be copied, reproduced or distributed in any manner. Disclaimer: This write up is intended to initiate academic debate on a pertinent question. It is not intended to be a professional advice and should not be relied upon for real life facts.
Introduction The Ministry, on September 7, 2015, has issued the Companies (Accounts) Second Amendment Rules, 2015 (Amendment Rules, 2015). The same shall come into force from the date of publication in the Official Gazette. Seeing the contents of said Rules, it is felt that some unnecessary duplicity is being created. Also, the burden of responsibility of the professional certifying the Forms to be filed for filing of financial statements has been swelled. They shall have to be more concerned and careful before the certification and shall also have to be well versed with the provisions of the Companies Act, 2013. Here is an analysis. Scope The provisions provided hereunder are applicable to all companies except specific provisions that may be applicable to the prescribed companies such as CSR. Highlights of the Amendment Rules, 2015 The following are the of the aforesaid Rules: Clause (da) under Rule 2(1)(d) has been inserted to provide the definition of Indian Accounting Standard. The definition has been referred to be taken from the Companies (Indian Accounting Standard) Rules, 2015. The financial statement of the companies shall be in accordance with schedule III of the Companies Act, 2013 and comply with Accounting Standards (AS) or Indian Accounting Standard (Ind AS) as may be applicable. Also, the items of financial statements shall be in accordance with the definitions of AS or Ind AS. In terms of Rule 4 of the Companies (Indian Accounting Standard) Rules, 2015, Ind AS shall be applicable as follows Any company may follow Ind AS for accounting period beginning on or after 1 st April, 2015;
The following companies shall have to follow Ind AS mandatorily from the accounting year beginning from 1 st April, 2016- o Companies whose equity/ debt securities are listed or proposed to be listed in India or outside India and having net worth of Rs. 500 crores or more; o Companies other than the aforesaid and having net worth of Rs. 500 crores or more; o Holding, subsidiary, joint venture or associate companies of companies covered above. The following companies shall have to follow Ind AS mandatorily from the accounting year beginning from 1 st April, 2017 o Companies whose equity/ debt securities are listed or proposed to be listed in India or outside India and having net worth of less than Rs. 500 crores; o Unlisted companies having net worth of Rs. 250 to Rs. 500 crores; o Holding, subsidiary, joint venture or associate companies of companies covered above. Companies whose securities are listed or proposed to be listed on SME Exchange & on ITP platform without IPO are not required to follow Ind AS mandatorily. The insurance companies, banking companies and NBFCs shall not be required to apply Indian Accounting Standards (Ind AS) for preparation of their financial statements either voluntarily or mandatorily. Board s report of Govt. Co engaged in production of defence equipment Such companies are not required to include the details of conservation of energy, technology absorption and forex outgo etc. in its Board s Report. Filing of financial statements
The standalone financial statements of the company shall have to be filed in Form AOC 4 and if the company is required to prepare consolidated financial statements the same shall have to file in Form AOC- CFS with the Registrar. Additional details in form AOC 4 Earlier forms 23AC & 23ACA were required to be filed by the companies separately for balance sheet and profit and loss account. Now, only a single form AOC-4 has been introduced as a compiled one, whereby the companies shall have to file both balance sheet and Profit and Loss Account. Sl. Form AOC-4 Form 23AC & Remarks No 23ACA 1 Nature of financial statements -- 1. Earlier no such details were required; 2 Nature of revision i.e whether -- financial statements (FS) or 2. Seeing the details required Board s Report or both in this field it is not clear whether the same pertains to 3 Whether provisional FS filed -- provisional financial earlier statements; 4 Date of adjourned AGM if FS is approved thereon 5 SRN of INC- 28 -- -- 3. These details are also required to be included in Form AOC-4_CFS with regard to consolidated FS; 6 SRN of AOC-4 -- 7 Date of order of competent authority 8 Details of member signing for audit firm 9 Whether CFS is required to be prepared 10 Details of CFO along with other director/md/manager/ceo -- Earlier it was The word representing is representing the replaced with the word audit firm signing. NA Not required in Form AOC -4 CFS -- Since the FSs are mandatorily required to be signed by CFO,
signing FS 11 Under financial parameters balance sheet items- - deleted the detail earlier to be provided 14 Disclosure of RPT- 1. Number of contracts/arrangements not at arm s length along with name related party, nature of relationship of RP and nature of RPT, duration of RPT, Board approval, advance paid if any, date of GM approving 2. Number of material contracts/arrangements not at arm s length along with name & nature of relationship of RP and nature of RPT duration, Board approval, advance paid, if any. Earlier details regarding share application money received and due for refund was to be provided NA wherever applicable, as per Act, 2013, the same has been included. No such details required now 1. The details are required in Form AOC-4 only; 2. The details are similar to the details as per AOC- 2 provided under MBP Rules, 2014 except the salient terms of the contract and justification of entering into RPT which is not at arm s length; 3. The form AOC- 2 is also required to be attached with the form; 4. This is an unnecessary repetition of filing documents, which is already included in the Boards Report, in the Form itself and also as an attachment to the form. 15 Additional attachments in form AOC-4-1. CSR policy 2. Details of salient features and justification of entering into RPTs- AOC-2 3. Details of comments of CAG 4. Secretarial audit report Additional attachments in form NA 1. CSR Policy is to be attached with the form which is a new requirement; 2. AOC- 2, Secretarial Audit Report etc. as aforesaid are also to be annexed with Board s Report, hence the same is an unnecessary repetition only;
AOC-4 CFS- 1. Details of comments of CAG 2. Secretarial audit report 16 Reporting CSR- 1. Average net profit of last 3 years as per sec 135; 2. 2% of above 3. Total amount spent 4. Amount spent in local area 5. Details of implementing agencies 6. Explanation for not spending 7. Manner of spending amount as follows- 3. The following documents are to be attached with both form, which are similara. Statement of subsidiaries in form AOC-1; b. Supplementary or test audit report u/s 143; c. Details of other entity; d. Details of comments of C&AG; e. Secretarial Audit Report; f. Director s Report Since all the companies are anyway required to file form AOC-4 for their standalone FSs, there is no rationale behind attaching the similar documents simultaneously with both the forms. NA Similar to the details provided by CSR Rules which forms part of the Board s Report seemingly is a repetition except the following additional details- 1. Brief outline of the company s CSR policy; 2. Composition of committee 3. Cumulative expenditure These are also included in the Board s Report. CSR project Sector of Sate / union District where Amount outlay (budget)project Amount spent Exp on admin Mode of amount
project covered territory where it is undertaken undertaken wise overhead spent Other details in Form AOC-4 which are also included in Form MGT-7 1. Details of all principal products or services of the company along with turnover of the product and the details of product or services contributing highest turnover is required to be provided in form AOC-4. Similar information is also required to be provided in the Annual Return of the company in form MGT -7. 2. Form AOC 4 requires details of holding and subsidiary companies. Further, Form AOC- CFS again requires details of subsidiary companies which do not seem relevant, since the requirement of filing form CFS only arise when a company has subsidiary or subsidiaries and the details with this regard have already been included in form AOC- 4. Similar details are also required in the Annual Return to be filed by the company, however, the Annual Return requires percentage of holding also. 3. Approval letter of extension of AGM is required to be attached with Aoc-4 and MGT- 7 both. Certification by professionals Certification of earlier forms 23AC/ACA Earlier the certification from a practicing professional was only with regard to verification of the particulars (including attachment(s)) from the records of the company and true and correctness of the same. The professional also required to certify to the effect of all attachment(s) having been required to attach with the forms are completely attached to this form.
Certification of the New forms Seeing the certification part of the Forms, it seems that the liability of the practicing professionals certifying the forms has been enhanced. The practicing professionals shall have to verify the particulars including attachments of the forms from the records of company and certify the true and correct nature and completeness of the same and having no suppression of facts thereon. The practicing professionals shall also have to verify of the proper preparation and maintenance of the records along with signing of the same by required officials as per relevant provisions of the Act. Accordingly, the certifying professional shall have to check, verify and certify all the details such as RPTs, CSR policy, CSR expenditure etc. Otherwise, they shall be liable for action u/s 448 for wrong certification. In essence, it is not a mere certification but the practicing professionals shall also have to certify the records of the company making it like a mini audit of the company. View our recent articles at: http://www.indiafinancing.com/component/content/article/281.html