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1 Companies Act 2013 Companies Act 2013 – Session Session II II COMPANIES ACT 2013 Chapter IX- Accounts of Companies
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Companies Act, 2013-Presentation on Accounts & Audit

Aug 23, 2014

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A detailed presentation prepared by SAS Partners Team, Chennai which gives an insight to the important provisions on Chapter IX - Accounts & Audit under Companies Act, 2013. This can be used by the Corporates, Professionals and Students as a ready reckoner for better understanding of the provisions and easy reference.
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Page 1: Companies Act, 2013-Presentation on Accounts & Audit

1

Companies Act 2013Companies Act 2013 –– Session Session IIIICOMPANIES ACT 2013

Chapter IX- Accounts of Companies

Page 2: Companies Act, 2013-Presentation on Accounts & Audit

2

Chapter IX- Index

� Associate Company

� Subsidiary Company

� Financial Year

� Financial Statement

� Books of Accounts

� Consolidated Financial Statement

� Financial Statement Authentication

� Board’s Report

� Rights of Member to Financial Statements

� Corporate Social Responsibility

� Depreciation

� Internal Audit

Page 3: Companies Act, 2013-Presentation on Accounts & Audit

3

Associate Company [Sec 2(6)] ) (w.e.f. 12-09-13)

Company A Company B

Significant Influence

Control of ≥ 20% Total Share Capital Control of Business Decisions under

AgreementOR

Associate Company is not a subsidiary but includes Joint Venture Company

Consolidated Financial Statements

Considered as Related Party

Auditor’s Disqualification

Imp

lica

tio

ns

Page 4: Companies Act, 2013-Presentation on Accounts & Audit

4

Subsidiary company [Sec 2(87)] (w.e.f.12-09-13)

Holding Company

Subsidiary Subsidiary

Subsidiary

20%

20%20%

51% 51%

Holding

Control the

Composition of

Board of Directors

Controls > 50%

Total Share Capital

either at

1. Its own

2. Together with 1

or more of its

subsidiary

Total Share Capital includes both equity

and Preference Share Capital

Restriction on number of layers of

subsidiaries

Page 5: Companies Act, 2013-Presentation on Accounts & Audit

5

Financial Year [Sec 2(41)] (w.e.f - 01-04-2014)

April to March

Incorporated

On or Before

31st December

Incorporated

On or after 1st

January

31st March of Current Year 31st March of Following Year

Transition Period

2 years

Adopt different Financial Year on Application to the Tribunal

Applicable to company having holding or subsidiary company outside India and Requires to

prepare consolidation financial statements outside India.

(No other reason for application)

Not necessary 12 months for those companies

Page 6: Companies Act, 2013-Presentation on Accounts & Audit

6

Financial Statement [Sec 2(40)]- ( w.e.f. 12-09-2013)

Financial Statement

Balance Sheet

Profit & Loss Account

Cash Flow Statement

Statement of Changes in

Equity

Explanatory Note One Person Company

Dormant Company

Small Company

N

O

T

A

P

P

L

I

C

A

B

L

E

Financial Statement includes CFS

Page 7: Companies Act, 2013-Presentation on Accounts & Audit

7

Books of Accounts (Sec 128) (w.e.f. 01-04-2014)

Electronic

Mode

Books of Accounts can be maintained in Electronic mode also

Accessible in India and usable for subsequent reference

Retained in same format as sent or received and shall remain unaltered and complete

Branch records sent must be kept unaltered and in a manner as received from branches

Should be legible

A proper system for storage, retrieval, display or printout of electronic records

Back up must be kept in servers physically located in India on a periodic basis

Should intimate to ROC at the time of filing- the name, internet address, location of service provider

Page 8: Companies Act, 2013-Presentation on Accounts & Audit

8

Consolidated Financial Statement (CFS) Sec 129(3) (w.e.f. 01-04-14)C

om

pa

nie

s A

ct 1

95

6

Clause 32 of the Listing

Agreement mandates Listed Companies to prepare CFS

Neither AS 21 nor Companies Act 1956

requires other company to prepare CFS C

om

pa

nie

s A

ct 2

01

3

Mandatory for all

Companies to prepare CFS in respect of the following entities:

Subsidiary Company

Associate

Joint Venture Company

CFS will have to be done in addition to SFS

CFS should be prepared in same form and manner as

Standalone Financial Statement (SFS) of holding company.

To be audited and laid before AGM

Imp

act

All companies including

private companies need to prepare CFS. They need to gear up their financial reporting process for the same.

CFS should comply with notified AS

Reopen and revision of accounts mandatory to CFS also

Page 9: Companies Act, 2013-Presentation on Accounts & Audit

9

Financial Statement Authentication [Sec 134] ) (w.e.f. 01-04-14)

Financial Statement

Part I Part II PART III

Chair person when

authorised by Board

OR

Two Directors, out of

which one shall be MD

and CEO, when he is a

director

CFO Company Secretary

Page 10: Companies Act, 2013-Presentation on Accounts & Audit

10

Board’s Report [Sec 134(b)] w.e.f. 01-04-2014

Board’s Report

SigningAdditional

InformationRule

Chair person when

authorised by Board

OR

Two Directors, out of

which one shall be MD

• Extract of Annual

Return as per Sec 92(3)

• Member of meeting of

Board

• Related Party

Disclosure

• CSR Policy &

Implementation Status

Performance &

Financial position of

Subsidiaries, Associates

and Joint Ventures

Page 11: Companies Act, 2013-Presentation on Accounts & Audit

11

Right of members to Financial statements (Sec 136) )(w.e.f. 01-04-14)

Includes Consolidated Financial

StatementSend at least 21 days before meeting

Manner of Circulation

Listed Company

Full Circulation +

Website

OR

Circulation of Salient

Features + Documents

available for inspection

at Regd Office + website

Networth >1 Cr

AND

Turnover > 10 Cr

Unlisted Public

Company

Page 12: Companies Act, 2013-Presentation on Accounts & Audit

12

Right of members to Financial statements (Sec 136)(w.e.f 01-04-2014)

1 Cr

Demat Shares

Turnover > 10 Cr

Unlisted Public

Company1 Cr

Physical Shares

Turnover > 10 Cr

Without

Registered

Email ID

with

Depository

With

Registered

Email ID

with

Depository

Consent in

writing for

Electronic

Mode

Others

Electronic Mode

Physical Mode

Page 13: Companies Act, 2013-Presentation on Accounts & Audit

13

Depreciation (w.e.f 01-04-2014)N

ow

Schedule XIV of the Companies Act 1956

Specifies minimum rates of depreciation to be provided on assets.

Two methods WDV and SLM

Different rates for multiple shifts

Co

mp

an

ies

Act

20

13

Imp

act

Schedule II of the

Companies Act 2013

Specifies systematic

allocation of

depreciable amount

over its useful life

Useful life of assets

are mentioned in

the Schedule

No other methods

Companies will be

divided into three

classes to decide the

application of

depreciation rates

1. Classes of

companies

prescribed and

who comply with

AS

2. Classes

prescribed by a

regulatory

authority

3. Other

Companies

Page 14: Companies Act, 2013-Presentation on Accounts & Audit

14

Depreciation

• ‘Useful Life’ instead of

standard mandated rates’

• Prescribed companies to

justify in case, ‘useful life’ is

different from ‘Schedule II’

• For other companies ‘ useful

life’ cannot > Schedule II

• Double shift rate raised by

50% and Triple shift : raised by

100%

• No specific provision for items

upto INR 5000

•Transitional provision

-Depreciate carrying value less

residual value over balance

life. Adjust networth if useful

life exhausted

Illustration (Useful life

reduced from 20 to 15 yr)

Case

A

Case

B

Useful Balance Life (Yrs) 1 0

WDV(INR) 100 100

Depreciation / Yr (INR) 100 100

Charged to P&L R&S

• Component accounting

- If cost of part of asset is

significant and has useful life

different from he remaining

asset, useful life for that part

could be determined

separately for depreciation

Key impact on change in useful

life would be on:

-Plant and machinery (life

reduced from 21 year to 15

years); Computers (life

reduced from 6 years to 3

years); furniture and fixtures

(life decreased from 21 years

to 5 years)

-Implementing component

accounting would be

burdensome especially for

capital intensive companies

-Depreciation on intangibles

not clearly specified

Applicability Requirement Implication

Page 15: Companies Act, 2013-Presentation on Accounts & Audit

15

Corporate Social Responsibility [Sec 135} (w.e.f 01-04-2014)

Net worth ≥ 500 crores Turnover ≥ 1000 crores Net Profit ≥ 5 crores

CSR Committee

Consists of

3 or more director

out of which

One director

independent

director

1. Formulate and

recommend

CSR Policy

2. Recommend

amount of

expenditure to

be incurred on

activities

3. Monitor CSR

Policy

Company need to

spend minimum

2% of its average

net profits made

during the 3

immediately

financial years

Co

mp

osi

tio

n

Fu

nct

ion

s

Co

ntr

ibu

tio

n

Page 16: Companies Act, 2013-Presentation on Accounts & Audit

16

Internal Audit [Sec 138] (w.e.f 01.04.2014)

Every Listed Company

Paid up Capital > = 50

crores

Outstanding Loan or

Borrowings >= 100

crores

Outstanding Deposits

>= 25 crore

Public Company

Turnover >=200 crore

Private Company

Turnover >=200 crore

Outstanding Loan or

Borrowings >= 100

crores

Internal Auditor:

Chartered

Accountant or

Cost Accountant or

such other

professional as

decided by Board.

Internal Auditor

may or may not be

employee of the

company.

Chartered

Accountant may be

in practice or not.

Page 17: Companies Act, 2013-Presentation on Accounts & Audit

17

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TN, India.

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Tel: +91 44 2815 2673/ 2815 2674,

Email: [email protected]

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