Presentation on theme: "RECENT TRENDS IN FINANCIAL REPORTING – INDIAN CONTEXT"— Presentation transcript:
1 RECENT TRENDS IN FINANCIAL REPORTING – INDIAN CONTEXT
2 INDIAN FINANCIAL REPORTING SYSTEM In order to maintain uniformity and enable inter and intra firm comparison, the disclosure requirements are governed by :The Companies Act, 2013SEBI Requirements
3 Under section 3 of SEBI Act 1992, with statutory powers for : SEBI RequirementsUnder section 3 of SEBI Act 1992, with statutory powers for :Protecting the interests of investorsPromoting the development of the securities market andRegulating these securities market
4 Its regulatory jurisdiction extends over corporate in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market.It has the power for :Regulating the business in stock exchanges and any other securities marketsRegistering and regulating the working of stock brokers, sub-brokers, etc.Promoting and regulating self-regulatory organizationsProhibiting fraudulent and unfair trade practices
5 Some important requirements are as follows: Dispatch of a copy of the complete & full annual report to the shareholders (Clause32).Disclosure on the Y2K preparedness level (Clause32).Disclosure of Cash Flow Statement (Clause32).Disclosure of material developments and price sensitive informations (Clause36).Compliance with Takeover Code (Clause40B).
6 Disclosure of interim unaudited financial result (Clause41) Disclosure regarding listing fee payment status and the name and address of each stock exchange where the comapany’s securities are listed (Clause48B)Corporate governance report (Clause 49).Compliance with Accounting Standards issued by the ICAI (Clause50).
7 2. Companies Act 2013 Requirements a) As per section 2 (40) of the Companies Act,2013, the Financial statements of the company should include:-A balance sheetA profit and Loss accountCash flow statementA statement of changes in equity , if applicableAny explanatory note
8 b)The MCA (Ministry of Corporate Affairs) on 6 April 2016, amended Schedule III to the Companies Act 2013 , the amendment divides Schedule III into two parts:Division I – whose financial statements are required to comply with the current accounting standardsDivision II – whose financial statements are drawn up in compliance with Ind AS.
9 The following is and overview of the Division II of the Schedule III: It is applicable to every company to which Ind AS apply in preparation of its financial statements.When a company is required to prepare consolidated financial statements
10 The general instructions for the prepareation of financial statements are as follows: Balance sheetSchedule III provides a format of the balance sheetItems presented in the balance sheet are to be classified as current and non-current.Schedule III does not permit companies to avail of the option of presenting assests and liabilites in the order of liquidity
11 B.Statement of profit and loss Schedule III provides a format of the statement of profit and lossThe statements of profit and loss is to be presented in accordance with the nature of expenses and would include profit or loss for the period and other comprehensive income for the period
12 C.Statement of changes in equity This is a new concept for preparers of financial statements that have historically prepared financial statements under Indian GAAP.The Statement of changes in equity would reconcile opening to closing amounts for each component of equity including reserves and surplus.
13 4. STATEMENT OF CASH FLOWS The Statement of cash flows would be presented when required in accordance with Ind AS 7, Statement of Cash Flows
14 5. NOTESNotes containing information in addition to that which is presented in the financial statements would be provided ,including where required, narrative descriptions recognized in the financial statements .Indian financial reports include much more than the above stated legal minimum requirements. The following are the most common elements:
15 Notice of annual general meeting Chairman report*Summary of financial results*The financial highlights for a no. of years*Director’s reportCorporate governance reportBalance sheetProfit and loss accountCash flow statement
16 Supplementary statements Value added statements*Corporate social report*Environment report*Information on brand*EVA report*Business Responsibility report*
17 II. MODERN VOLUNTARY DISCLOSURES Management policies & overview of company-Product & Product range-Area of specialization-Customers profile & market stage-Competitors-Future plans and trends-Financial goals-Govt. policy
18 (B) Economic value Added - EVA is residual income after charging the company for the cost of capital provided by lenders and shareholders. -It is those companies which earn higher returns than cost of capital, that create value. - Big companies have started showing EVA information in their annual reports for the benefit of stakeholders.
19 (C) Brand Value A Brand is much more than a trade mark or a logo. It is a trust mark of promise of quality & authenticity that client can rely upon.It is the financial pursuit that a buyer is willing to pay for a brand over a generic =or less worthy brand.
20 (D) Human Resource Accounting - HRA is one such process of measuring and reporting the human resources of an organization.It is the process of identifying and measuring data about human resources & communicating the information to the interested parties.There are two for valuing HRACost based approachvalue based approach
21 (E) Other voluntary Disclosures Impact of inflationCorporate social responsibilityAccounting and disclosure of environmental matter.
22 (F) Latest Mandatory Requirements under Companies Act 2013 Report of board of directors should be ‘ATTACHED’ to the balance sheet laid before the AGM.Director report is intended to explain the shareholders, the company affairs, including its subsidiaries and the nature and scope of company’s business.
23 2. PROVISIONS RELATING TO DIRECTOR’S REPORT: APPLICABILITY OF PROVISION OF SECTION -134 OF DIRECTOR’REPORTB.SIGNING OF DIRECTOR’S REPORT: As per section 134(6)Board Report shall be signed by:1.Its chairperson2.At least 2 directorsIf there is no managing director then by 2 directorsBASIS OF BOARD REPORT: The board report shall be prepared on the basis of STAND ALONE FINANCIAL STATEMENT OF THE COMPANY
24 D. Approval of board report Approval of board report shall be done by in meeting of the board of director onlyMeeting of board of directors can’t be done by ‘’video conferencing’’E.E-FILING OF RESOLUTION FOR APPROVING BOARD REPORT:
25 3. CONTENT OF BOARD REPORT EXTRACT OF ANNUAL RETURNNO. OF BOARD MEETINGCOMMENT ON AUDITOR REPORTCOMMENT ON SECRETARIAL Audit reportParticular of loan and investment
26 6. DISCLOUSURE OF RELATED PARTY TRANSACTION 7.DIVIDEND RECOMMENDED8.POST BALANCE SHEET EVENTS9.RISK MANAGEMENT POLICY10.CORPORATE SOCIAL RESPONSIBILITY
27 12.SECRETARIAL AUDIT REPORT: 11.REPORT ON PERFORMANCE OF SUBSIDIARIES , ASSOCIATES AND JOINT VENTURE COMPANIES.12.SECRETARIAL AUDIT REPORT:Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its board report ,a Secretarial audit report.The board of directors , in their report shall explain in full any qualification or observation or other remarks made by the Company Secretary
28 13.DISCLOUSURE ABOUT COST AUDIT COMPANIES SHALL BE REQUIRED TO ANNEX SECRETARIAL AUDIT REPORT WITH DIRECTOR REPORTAll listed companiesEvery public company having a paid up share capital of RS.50 Crore or more.Every public company having a turnover of RS. 250 CRORE or more.13.DISCLOUSURE ABOUT COST AUDIT
29 14. DISCLOUSURE OF BOARD REPORT: AS PER SECRETARIAL STANDARD OF ICSI SS-1 Annual report of company should disclose the no. Of meetings of boardSS-2 Annual report should disclose particulars of general meeting held during last 3 year15.DISCLOUSURE WHERE COMPANY IS REQUIRED TO CONSITUTE NOMINATION AND REMUNERNATION COMMITTEE .The policy of qualificationThe remuneration of directors16.DISCLOUSURE IF MD/WTD IS RECEIVING REMUNERATION OR COMMISION FROM A HOLDING COMPANY OR SUBSIDIARY COMPANY.17.DISCLOUSURE OF VIGIL MECHANISM IN BOARD REPORT.
30 Declaration by independent director. Disclosure of composition of audit committee and their recommendations not accepted :section – 117(8)Composition of Audit Committee shall be disclosed in Board’s report of the company.If the board doesn’t accept recommendation of audit committees , it shall be disclosed along with reason in board’s report.Declaration by independent director.Director will disclose the statement on declaration on declaration given by Independent directorDetails relating to deposit:Details of deposit which are not in compliance with the requirement of chapter v of the act.Deposit accepted during the year.Unpaid and unclaimed deposit at the end of the year.If there is any default in repayment of deposit or payment of interest thereon during the year then; number of such cases and total amount involvedAt the beginning of the yearMaximum during the yearAt the end of the year
31 xxii. General disclosure’s Details of director KMP(Key Managerial Personnel) : There should be disclosure in the director’s report about:Director’s and KMP appointed during the yearDirector’s and KMP resigned during the yearxxii. General disclosure’sName of retiring directors and whether or not they offer themselves for reappointmentCasual vacancies in the board filled during the yearRe-appointmentCasual vacancy in the board not filled during the yearChanges in board during the year due to change in nominees, appointment of additional directors, death, resignation or any other reasonDetails if anyone is contesting for elections as director/small shareholder directorDisclosure about ESOP and sweat equity share:Director report shall disclose following about sweat equity shares: (Rule 7 of unlisted companies issue of sweat equity shares) Rules 2003Number of shares issued condition of issue of sharesPricing formulaTotal sweat equity share issued
32 Money realized and benefit accrued Diluted EPS pursuant to issue of sweat equity sharesIf ESOP has been given, its details are to be disclosedStatement of the affairs of the company: generally following information is given about current year and previous year:TurnoverProfitProduction of yearDirector perception of future of company: in this report directors perception of future of company given in consideration of:Market competitionProduction constraintsGovernment policies etcOrder of court:the details of significant and material orders passed by the regulators of court or tribunals impacting the going concern status and companies operation in future .
33 Details of employees drawing salary above prescribed limits: Every listed company shall disclose in the board’s report the ratio of the remuneration and such other details as may be prescribed [197(12)]. The disclosures are summarized as below:Comparison between remuneration of managerial personnel and remuneration to employees.Details of employees drawing salary of Rs /- or more per month.Details of remuneration to person holding 2% or more equity shares.Details of employees posted outside India.Conservation of energy , technology absorption and foreign exchange dealing : Rule 8(3) the report of the board shall contain the following information and details , namely:-Conservation of energy-The steps taken or impact on conservation of energy.The steps taken by the company for utilising alternate sources of energy.The capital investment on energy conservation equipments.Technology absorption-The efforts made towards technology absorptionThe benefits derived like product improvement, cost reduction, product development or import substitution.
34 Director responsibility statement 134(5) In case of imported technology ( imported during the last three years reckoned from the beginning of financial year) --The details of technology importedThe year of importWhether the technology been fully absorbedIf not fully absorbed, areas where absorption has not taken place, and the reasons thereofThe expenditure incurred on research and developmentForeign exchange earnings and outgo-The foreign exchange earned in terms of actual inflows during the year and the foreign exchange outgo during the year in terms of actual outflows.Director responsibility statement 134(5)The directors responsibility statement referred to in clause (c) of subsection (3) shall state that—In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;The directors had selected such accounting policies and applied them consistently and judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit & loss of the company for that period.
35 The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provision of this act for safeguarding the assets of the company and for preventing and detecting frauds and other irregularities.The directors had prepared the annual accounts on a going concern basisThe directors ,in the case of a listed company , had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively .The directors had devised proper systems to ensure compliance with the provisionsOther details:The names of companies which have become or ceased to be its subsidiaries, joint ventures or associated company during the year.The change in the nature of business , if anyThe financial summary or highlightsThe details in respect of adequacy of internal financial controls with reference to the financial statementsMajor evens concerning the company are highlighted.
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