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CA P. C. SAINI
( ACA, CS, CMA-Inter)
+91 9425531645
Contents
Companies Act 2013
National Financial Reporting Authority (NFRA)
Applicability of Ind AS
Companies Act,
2013
As this provision is effective from April 1, 2014, companies shall align their
financial years as per this provision within April 1, 2016.
The exemption has not been provided for an associate or joint venture.
Key Definitions… Sec. 2(43)
“Free Reserves” means such reserves which, as per the latest audited balance sheet of a
company, are available for distribution as dividend:
Provided that—
(i) any amount representing unrealised gains, notional gains or revaluation of assets,
whether shown as a reserve or otherwise, or
(ii) any change in carrying amount of an asset or of a liability recognised in equity,
including surplus in profit and loss account on measurement of the asset or the liability at
fair value,
shall not be treated as free reserves
Key Points
Definition excludes securities premium
Instances of provisions where the definition of free reserves is referred:
• Sec.63 for Issue of Bonus Shares
• Sec.68 for purchase of its own shares or specified securities by companies
• Sec.123 for declaration of dividend.
• Sec.180(1)(c) restriction on powers of the Board
• Sec.186 Loans and investment by a company
Key Definitions…
“Net Worth” means the aggregate value of the paid-up share capital and
all reserves created out of the profits and securities premium account,
after deducting the aggregate value of the accumulated losses, deferred
expenditure and miscellaneous expenditure not written off, as per the
audited balance sheet, but does not include reserves created out of
revaluation of assets, write-back of depreciation and amalgamation.
Instances of provisions where the definition of net worth is referred:
Sec.76(1) relating to Acceptance of deposits by Companies, for
determination of eligible company.
Sec.135 determining criteria for Corporate Social Responsibility
Sec.148 where the Central Government shall specify audit of items of
cost in respect of certain Companies.
Limits for the purposes of approval by Special resolution – Related
Party transactions Sec. 2(57)
Key Definitions…
Sec. 2(76)
Related party with reference to a company means:
Director or his relative
KMP or his relative
a firm, in which a director, manager or his relative is a partner
a private company in which a director or manager or his relative is a member
or director
public company in which a director or manager is a director and holds along
with his relatives, more than 2% of its paid-up share capital
any body corporate whose Board of Directors, managing director or manager
is accustomed to act in accordance with the advice, directions or instructions
of a director or manager (excluding advice given in professional capacity)
any person on whose advice, directions or instructions a director or manager
is accustomed to act (excluding advice given in professional capacity)
any company which is—
a holding, subsidiary or an associate company of such company or
a subsidiary of a holding company to which it is also a subsidiary
• a director other than an independent director or KMP of the holding company or
his relative with reference to a company, shall be deemed to be a related party.
HOLDING
&
SUBSIDIARY
COMPANIES
Holding & Subsidiary Companies
A Company shall make investments through not more than two layers of
investment companies. (Sec.186 (1))
The provisions of this section shall not effect the following:
a company from acquiring any other company incorporated in a
country outside India if such other company has investment
subsidiaries beyond two layers as per the laws of such country
a subsidiary company from having any investment subsidiary for the
purposes of meeting the requirements under any law or under any
rule or regulation framed under any law for the time being in force
Holding & Subsidiary Companies…
Subsidiary Company
“Subsidiary Company” or “Subsidiary”, in relation to any other
company (holding company), means a company in which the holding
company—
(i) controls the composition of the Board of Directors or
(ii) exercises or controls more than one-half of the total share capital
either at its own or together with one or more of its subsidiary
companies
Provided that such class or classes of holding companies as may be
prescribed shall not have layers of subsidiaries beyond such numbers
as may be prescribed. (This proviso is not notified)
As per the Companies (Specification of definitions details) Rules, 2014,
Total share capital = paid up equity share capital + convertible
preference share capital.
Sec. 2(87)
Holding & Subsidiary Companies…
Subsidiary Company…
Explanation—For the purposes of this clause,
(a) a company shall be deemed to be a subsidiary company of the
holding company even if the control referred to above is of another
subsidiary company of the holding company
(b) the composition of a company’s Board of Directors shall be deemed
to be controlled by another company if that other company by exercise
of some power exercisable by it at its discretion can appoint or remove
all or a majority of the directors
(c) the expression “company” includes any body corporate
(d) “layer” in relation to a holding company means its subsidiary or
subsidiaries
Sec. 2(87)
Holding & Subsidiary Companies…
Company shall prepare and keep at its registered office books of account
and other relevant books and papers and financial statement for every
financial year which give a true and fair view of the state of the affairs of
the company.
Such books shall be kept on accrual basis and according to the double entry
system of accounting
All or any of the books of account aforesaid and other relevant papers may
be kept at such other place in India as the Board of Directors may decide
and where such a decision is taken, the company shall, within 7 days
thereof, file with the Registrar a notice in writing giving the full address of
that other place
Company may keep such books of account or other relevant papers in
electronic mode in such manner as may be prescribed.
Sec. 128
Books of Accounts…
The books of account and other relevant books and papers maintained in
electronic mode shall remain accessible in India so as to be usable for
subsequent reference.
The books of account and other relevant books and papers shall be retained
completely in the format in which they were originally generated, sent or
received, or in a format which shall present accurately the information
generated, sent or received and the information contained in the electronic
records shall remain complete and unaltered.
The information received from branch offices shall not be altered and shall
be kept in a manner where it shall depict what was originally received from
the branches.
The information in the electronic record of the document shall be capable of
being displayed in a legible form.
There shall be a proper system for storage, retrieval, display or printout of the
electronic records as the Audit Committee, if any, or the Board may deem
appropriate and such records shall not be disposed of or rendered unusable, unless
permitted by law.
The back-up of the books of account and other books and papers of the company
maintained in electronic mode, including at a place outside India, if any, shall be
kept in servers physically located in India on a periodic basis.
The company shall intimate to the Registrar on an annual basis at the time of filing
of financial statement-
the name of the service provider
the internet protocol address of service provider
the location of the service provider (wherever applicable)
where the books of account and other books and papers are maintained on
cloud, such address as provided by the service provider.
Sec. 128
ACCOUNTING
STANDARDS
Accounting Standards
The financial statements shall give a true and fair view of the state
of affairs of the company or companies, comply with the
accounting standards notified under section 133 and shall be in the
form or forms as may be provided for different class or classes of
companies in Schedule III.
The items contained in such financial statements shall be in
accordance with the accounting standards.
These provisions shall not apply to any insurance or banking
company or any company engaged in the generation or supply of
electricity, or to any other class of company for which a form of
financial statement has been specified in or under the Act
governing such class of company:
Sec. 129
Financial Statements…
As per the proviso to Sec. 129(3), the Central Government may provide
for the consolidation of accounts of companies in such manner as may
be prescribed.
As per Rule 6 of Companies (Accounts) Rules, 2014 Manner of
consolidation of accounts.-
The CFS of the company shall be made in accordance with the
provisions of Schedule III of the Act and the applicable accounting
standards.
In case of a company covered under Sec. 129(3) which is not
required to prepare CFS under the Accounting Standards, it shall be
sufficient if the company complies with provisions on CFS provided
in Schedule III of the Act.
As per Companies (Meetings of Board and its Powers) Second Amendment
Rules, 2014 consideration of financial statements, including CFS, if any,
shall not be dealt with in a meeting held through video conferencing.
Financial Statements…
Sec. 129
Financial Statements…
Consolidated Financial Statements – Key Points
Companies having one or more subsidiaries, shall also prepare CFS and the
same shall be laid before the AGM of the Company along with standalone
financial statements.
A separate statement containing salient features of the financial statement of
subsidiaries to be attached to the holding company’s financial statements. –
Form AOC - I
‘Subsidiary’ includes ‘associate company’ and ‘joint venture’
Associate means a company other than a subsidiary company and joint
venture company, in which the other company has a significant influence.
Significant influence means control of at least 20% of total share capital or
of business decisions under an agreement.
In case of a company covered u/s 129(3), which is not required to prepare
CFS under the Accounting Standards, it shall be sufficient if the company
complies with provisions on CFS provided in Schedule III of the Act.
Financial Statements…
Form AOC-I
Part A – Subsidiaries
Information in respect of each subsidiary to be presented with amounts in `
1. Sl. No.
7. Total assets
2. Name of the subsidiary 8. Total Liabilities
3. Reporting period for the subsidiary 9. Investments
concerned, if different from the holding 10. Turnover
company’s reporting period
11. Profit before taxation
4. Reporting currency and Exchange rate as 12. Provision for taxation
on the last date of the relevant Financial
13. Profit after taxation
year in the case of foreign subsidiaries.
14. Proposed Dividend
5. Share capital 15. % of shareholding
6. Reserves & surplus
1. Names of subsidiaries which are yet to commence operations
2. Names of subsidiaries which have been liquidated or sold during the year.
Financial Statements…
Form AOC-I
Part B – Associates and Joint Ventures
Name of Associates/Joint Ventures Name 1 Name 2
1. Latest audited Balance Sheet Date
2. Shares of Associate/Joint Ventures held by the company on the year
end
No.
Amount of Investment in Associates/ Joint Venture
Extend of Holding %
3. Description of how there is significant influence
4. Reason why the associate/joint venture is not consolidated
5. Net worth attributable to Shareholding as per latest audited Balance
Sheet
6. Profit / Loss for the year
i. Considered in Consolidation
ii. Not Considered in Consolidation
Sec. 137
REVISION OF
FINANCIAL
STATEMENTS
Revision of Financial Statements
Financial position,
Cash flows
Qualitative characteristics are the attributes that make the information provided
in financial statement useful to users.
Materiality
Faithful Substance
Neutrality Prudence Completeness
Representation Over Form
Element of Financial Position
Going Accrual
Consistency
concern basis
NW - Rs. 250 NW -
NW - Rs. NW – Less NW - Rs.
Crore or more Less than
500 Crore than Rs. 500 Crore
but less than Rs. 250
or more 500 Crore or more
Rs. 500 Crore Crore
Net worth is the agreegate value of the paid up share capital and all
reserves created out of the profits and securities premium account, after
deducting the aggregate value of the accumulated losses, deferred
expenditure and miscellanous expenditure not written off, as per the
audited balance sheet, but does not include reserves created out of
revaluation of assets, write-back of depreciation and amalgamation.
Principle-based Standards
Applicable on separate as well as consolidated
financial statements.
Give more importance to concept of ‘substance
over form’, i.e., economic reality of a transaction.
Rely more on fair valuation approach, and
measurements based on time value of money.
Require more disclosures of all the relevant
information and assumptions used.
Require higher degree of judgment and estimates.
Understanding Ind AS from AS
Implications:
Tax: Income from sale of car to be recognised when car
sold
VAT: To be levied on invoice price exclusive of value of
extended warranty
Service Tax: To be levied on value of extended warranty
Substance over form (Contd.)
Implications:
TDS
MAT on account of change in Book Profit
Greater use of Fair Value (FV) as Measurement Basis
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 5 Net Profit or Loss for IAS 8 Ind AS Accounting
the Period, Prior 8 Policies, Changes
Period Items and in Accounting
Changes in Estimates and
Accounting Policies Errors
AS 6 Depreciation - - -
Accounting
AS 7 Construction IAS 11 Ind AS Revenue
Contracts 115
Comparative Summary of Indian Accounting Standards,
IFRS & Present AS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 9 Revenue IAS 18 Ind AS Revenue
Recognition 115
AS 10 Accounting for IAS 16 Ind AS Property, Plant and
Fixed Assets 16 Equipment
AS 11 The Effects of IAS 21 Ind AS The Effects of
Changes in Foreign 21 Changes in Foreign
Exchange Rates Exchange Rates
Comparative Summary of Indian Accounting Standards,
IFRS & Present AS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 12 Accounting for IAS 20 Ind AS Accounting for
Government 20 Government Grants
Grants and Disclosure of
Government
Assistance
AS 13 Accounting for IAS 40 Ind AS Investment Property
Investments 40
IAS 27 Ind AS Separate Financial
27 Statements
Comparative Summary of Indian Accounting Standards,
IFRS & Present AS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 14 Accounting for IFRS 3 Ind AS Business
amalgamations 103 combinations
AS 15 Employee Benefits IAS 19 Ind AS Employee
19 Benefits
AS 16 Borrowing costs IAS 23 Ind AS Borrowing costs
23
AS 17 Segment Reporting IFRS 8 Ind AS Operating
108 Segments
Comparative Summary of Indian Accounting Standards,
IFRS & Present AS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 18 Related Party IFRS Ind AS Disclosure of Interests
Disclosures 12 24 in other Entities
AS 19 Leases IAS 17 Ind AS Leases
17
AS 20 Earnings Per Share IAS 33 Ind AS Earnings Per Share
33
Comparative Summary of Indian Accounting Standards,
IFRS & Present AS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS Consolidated IFRS Ind AS Consolidated
21 Financial 10 110 Financial Statements
Statements
IAS Ind AS Separate Financial
27 27 Statements
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 26 Intangible assets IAS 38 Ind AS Intangible
38 Assets
Comparative Summary of Indian Accounting Standards,
IFRS & Present AS
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS Financial Reporting of IAS 28 Ind AS Investments in
27 Interests in Joint 28 Associates and
Ventures Joint Ventures
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
AS 28 Impairment of assets IAS 36 Ind AS Impairment of
36 assets
AS 29 Provisions, Contingent IAS 37 Ind AS Provisions,
Liabilities and 37 Contingent
Contingent Assets Liabilities and
Contingent Assets
AS IFRS Ind-AS
Indian Standard IFRS
No. No. No.
- - IFRS Ind AS Regulatory Deferral
12 114 Accounts
- - IFRS Ind AS Fair Value
13 113 Measurement
Ind AS 1: Presentation of Financial Statement
Earlier there is Schedule VI, now Schedule III is there for Presentation of
Financial Statement as per Accounting Standard.
Financial
Statement
1. Should have comparatives with all the amounts reported in current period
financial statements
2. When Change in Accounting policy retrospectively, Retrospective
restatement / Reclassifies items
Present 3 balance sheets and two statements
Current period end
Previous period end
Beginning of earliest comparative period end
3. When the entity changes the presentation or classification of items in its
financial statements, the entity shall reclassify comparative amounts unless
reclassification is impracticable and disclose Nature, amount and reasons
of Reclassification in Notes.
4. When impossible to reclassify, disclose the reason for not reclassifying the
amounts and Nature of the adjustments that would have been made if the
amounts had been reclassified.
Balance Sheet
Balance sheet include Statement of change in equity which is presented as a
part of the Balance Sheet.
Notes
Notes comprises of summary of accounting policies and other
explanatory information about items of financial statement.
Ind AS use ‘Other Comprehensive Income’ (OCI) concept
97
COMPONENTS OF OCI
99
FORMAT OF FINANCIAL STATEMENT AS PER Ind AS
ENCLOSED