The Firm

Show Timings:

Friday: 10.30 pm, Saturday: 11.30 am

Sunday: 9:30am & 11.00pm

CNBC TV18
Network18

Cos Act 2013:MCA Provides Transitional Relief To Corporates

Published on Thu, Oct 16,2014 | 08:14, Updated at Thu, Oct 16 at 08:14Source : Moneycontrol.com 

By: Sai Venkateshwaran, Partner – Advisory and India Head - Accounting Advisory Services

MCA continues to provide transitional relief to corporates – defers internal control reporting by one year and provides relief to intermediate holding companies

Continuing its efforts to provide necessary relief to companies and ease their implementation of the Companies Act, 2013, the Ministry of Corporate Affairs issued notifications on October 14, 2014 to amend Companies (Audit and Auditors) Rules, 2014 and Companies (Accounts) Rules, 2014.  The amendment to the Companies (Audit and Auditors) Rules, 2014  defers the auditors’ reporting requirements on a company’s internal financial controls system by a year, making it mandatory only for financial years beginning on or after April 1, 2015 and voluntary for the period(s) prior to that.  There are two amendments to Companies (Accounts) Rules, 2014 – the first one provides an exemption to intermediate wholly owned subsidiary companies from presenting consolidated financial statements, unless such an entity has an immediate parent company incorporated outside India, whereas the second one exempts  companies that do not have a subsidiary but only have associates or joint ventures from presenting consolidated financial statements for the year beginning on April 1, 2014 and ending on March 31, 2014.  These notifications will come into force on the date of their publication in the Official Gazette.  The Ministry has also issued a clarification that companies would be required to present only those disclosures that are relevant for the consolidated financial statements rather than repeat those included in the standalone financial statements.

The amendments are timely and would provide companies great relief as they plan their implementation efforts for the various aspects of the Companies Act, 2013.

Amendments to Companies (Audit and Auditors) Rules, 2014
Considering that both companies and auditors have not had much guidance on the implementation of the internal financial control requirements, the deferral by one year was warranted.  However, it should be noted that the amendment relating to internal financial controls has only dealt with the auditors’ reporting requirements and currently there is no corresponding relief provided on the Directors’ reporting requirements on the same matter.  Considering that the assessment and reporting by the Board of Directors and the auditors would go hand in hand, one would expect that the MCA would provide similar relief to the companies as well, by deferring the Directors’ reporting requirement by a year.  On a related note, the scope of the reporting on internal financial controls is expected to remain the same, ie, covering the policies, procedures and controls to ensure the orderly and efficient conduct of business.

Amendments to Companies (Accounts) Rules, 2014
The exemption to intermediate wholly owned subsidiary companies from presenting consolidated financial statements is also a welcome move, and in line with international practices.  Preparation of consolidated financial statements at multiple levels was proving to be cumbersome for several corporates, especially those that operate through multiple levels of entities and SPVs, while not providing any information of great significance or relevance from a user’s perspective, considering that the parent company presents consolidated financial information.  Therefore considering the costs versus benefits, this is a practically expedient move.  However, it may be noted that such relief is only available to wholly owned subsidiaries, and therefore entities where the equity or convertible preference capital is partly held other than by the parent would still need to comply with the consolidation requirements.

Disclaimer: The information/opinions expressed in this report/newsletter are those of the author. This website has not verified the accuracy of the claims made in the report/newsletter, nor does it agree or disagree with, or endorse any information/opinions contained therein.

Attachments : Accounts amendment rules.doc
Attachments : Audit and auditors Amendment rules.doc
 
Twitter


 
Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.