COMMENTS INVITED ON THE PROPOSED AMENDMENTS TO THE DRAFT COMPANIES (COST RECORDS AND AUDIT) RULES, 2014
Pursuant to the implementation of Indian Accounting Standards (IndAS), the MCA vide its public notice dated 11 August 2017 has invited comments/suggestions on the amendment in Companies (Cost Records and Audit) Rules, 2014 in order to bring uniformity between financial records and cost records.
The comments/suggestions on the said Draft Rules shall be provided on or before 26 August 2017.
Public Notice: http://www.mca.gov.in/Ministry/pdf/notice_11082017.pdf
Draft Rules: http://www.mca.gov.in/Ministry/pdf/draftRules_11082017.pdf
The Ministry of Corporate Affairs (‘MCA’) has notified the mandatory adoption of Indian Accounting Standards (Ind-AS) by all companies other than Insurance Companies, Banking companies and Non-Banking Finance companies.
The roadmap of this pilot project is launched by the MCA is to ensure the applicability of The Companies (Indian Accounting Standards) Rules, 2015. The concept is to converge the Ind-AS with International Financial Reporting Standards (IFRS) with an aim to bring an analogical view of the financial statements aligning with global reporting standards prepared by Indian companies which do not require to comply with IFRS.
Vide press release dated 2 January, 2015, MCA notified the threshold and commencement of reporting periods which is as below :
||First year of reporting
|All Companies having net worth of Rs. 500 Cr
||Financial year beginning on or after 01 April 2016. (FY 2016-17)
|Other companies whose equity and/or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India*
||Financial year beginning on or after 01 April 2017. (FY 2017 – 18)
|Unlisted companies having net worth of Rs. 250 crores or more but less than Rs. 500 crores.*
||Financial year beginning on or after 1 April 2017
|* Including holding, subsidiary, joint venture or associate companies of such companies
The Roadmap for adopting the Ind-AS has some salient features as below :
- Companies are also permitted to adopt Ind-AS voluntarily before the prescribed timelines;
- The definition of “Net Worth” shall be read with as defined under the Companies Act, 2013. [i.e. aggregate of Paid up share capital (Both equity and preference) and all reserves excluding asset revaluation reserves, if any plus Balance in Profit and Loss Account and Securities premium Account less accumulated losses, deferred expenditure and Miscellaneous expenses to the expenses not written off; (Income Tax permits a company to write off 1/5th of the entire Preliminary expenses every year for the first five years)].
- The applicable threshold of Net Worth shall be as at 31 March 2014 as per the audited Balance Sheet of the Company. However, if any company is crossing the threshold limit as on the given cut-off date then from the succeeding financial year the company has to mandatorily adopt the Ind-AS.
- The adoption is irrevocable, ie. in any year if any company’s net-worth (both standalone or cumulative) goes below the prescribed limit, still the company has to prepare its financial statements applying with Ind-AS.
- The adoption shall apply to both standalone and consolidation of financial statements for the companies. Companies having domestic subsidiaries, associates and JVs also need to mandatorily adopt the same irrespective of their nature and capital ownership. However subsidiaries, associates and JVs incorporated outside India are outside the ambit to adopt the Ind-AS as they have to prepare their books based on the requirements of their origin state.
- Companies falling within the net worth thresholds as mentioned above (including their holding, subsidiary, joint venture or associate companies) shall not be required to prepare financial statements as per the Companies (Accounting Standards) Rules, 2006.
- Companies applying Ind-AS to prepare Financial statements on 01 April, 2016 has to apply the requirements of Ind-AS for closure of Financial Year ending on 31 March 2017.
- Indian companies having financial instruments abroad and revenue from contracts outside India has to apply the respective Ind-AS 109 & 115 ahead of the Global reporting period of those contracting states, i.e. beginning 01 January 2017 and 2018 for corresponding IFRS adoption of the respective states.
- The adoption guidelines for Banking, Insurance and other Finance companies shall be published separately.