Ministry of Corporate Affairs vide its notification dated 27th July, 2016 has amended the Companies (Accounts) Rules, 2014 and brought out the Companies (Accounts) Amendment Rules, 2016. The following amendments have been made:
- Rule 6 - Manner of consolidation of accounts
Rule 6 deals with the manner of consolidation of accounts of companies.
Second Proviso to Rule 6 deals with exemption from this Rule. It states that nothing in this rule shall apply in respect of preparation of consolidated financial statement by an intermediate wholly-owned subsidiary, other than a wholly-owned subsidiary whose immediate parent is a company incorporated outside India.
Such second proviso has been substituted as under:-
"Provided further that nothing in this rule shall apply in respect of preparation of consolidated financial statements by a company if it meets the following conditions:-
(i) it is a wholly-owned subsidiary, or is a partially-owned subsidiary of another company and all its other members, including those not otherwise entitled to vote, having been intimated in writing and for which the proof of delivery of such intimation is available with the company, do not object to the company not presenting consolidated financial statements;
(ii) it is a company whose securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India; and
(iii) its ultimate or any intermediate holding company files consolidated financial statements with the Registrar which are in compliance with the applicable Accounting Standards."
The amended proviso provides that the exemption from preparation of consolidated financial statements by a company is subject to certain conditions as stated in the substituted proviso.
- Rule 8 - Matters to be included in Board’s report
Rule 8 provides the matters to be included in the Board’s report.
Rule 8(1) that provides the Board’s Report shall be prepared based on the stand alone financial statements of the company and the report shall contain a separate section wherein a report on the performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement is presented.
Rule 8(1) has been amended as follows:
The Board’s Report shall be prepared based on the stand alone financial statements of the company and the report shall disclose the highlights of performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company during the period under report.
Amended Rule requires the company to state the highlights of performance and their contribution to the overall performance of the company.
- Rule 13 - Companies required to appoint Internal auditor
Rule 13 (1) provides the class of companies which shall be required to appoint an internal auditor.
- Opening portion of Rule 13(1) states that ‘the following class of companies shall be required to appoint an internal auditor or a firm of internal auditors, namely’
Opening portion of Rule 13(1) is amended as under:
13(1) The following class of companies shall be required to appoint an internal auditor which may be either an individual or a partnership firm or a body corporate.
Amended rules empower ‘body corporate’ also to act as internal auditor. Earlier only individuals or firm of internal auditors could be appointed as internal auditors.
- Item (ii) of explanation to Rule 13(1) provides that
(ii) the term “Chartered Accountant” shall mean a “Chartered Accountant” whether engaged in practice or not.
Item (ii) of explanation to Rule 13(1) amended as under:
(ii) the term “Chartered Accountant” or “Cost Accountant” shall mean a “Chartered Accountant” or a “Cost Accountant”, as the case may be whether engaged in practice or not.
Section 138 recognises Cost accountant also to be appointed as internal auditor. The amended Rule inserts such term also in the explanation.
- AOC- 1 is Form of Statement containing salient features of the financial statements of subsidiaries or associate companies or Joint ventures.
Form AOC-1 has been substituted with the new form. The main contents of the revised AOC-1 are as under:
Part A relates to information in respect of each subsidiary. The contents are-
Name of the subsidiary; the date since when subsidiary was acquired, Reporting period for the subsidiary concerned, if different from the holding company's reporting period; Reporting currency and Exchange rate as on the last date of the relevant financial year in the case of foreign subsidiaries; Share capital; Reserves and surplus; Total assets; Total Liabilities; Investments; Turnover; Profit before taxation; Provision for taxation; Profit after taxation; Proposed Dividend; Extent of shareholding (in percentage); names of subsidiaries which are yet to commence operations; names of subsidiaries which have been liquidated or sold during the year.
Part B relates to the information in respect of Associates and Joint Ventures. The contents are-
Name of Associates or Joint Ventures; Latest audited Balance Sheet Date; Date on which the Associate or Joint Venture was associated or acquired; Shares of Associate or Joint Ventures held by the company on the year end; Amount of Investment in Associates or Joint Venture; Extent of Holding (in percentage); Description of how there is significant influence; Reason why the associate/Joint venture is not consolidated; Net worth attributable to shareholding as per latest audited Balance Sheet; Profit or Loss for the year; Considered in Consolidation; Not Considered in Consolidation; Names of associates or joint ventures which are yet to commence operations; Names of associates or joint ventures which have been liquidated or sold during the year;
Form AOC-1 is to be certified in the same manner in which the Balance Sheet is to be certified.
- Every company is required to file the financial statements with Registrar in Form AOC-4.
Form AOC-4 has been substituted with the new form.
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