Financial Statements and Companies Act, 2013

Financial Statements and Companies Act, 2013

Financial Year

Financial Year was not defined in the Companies Act, 1956 (hereinafter “1956 Act”).

Financial Year as defined in Clause 2(41) of the Companies Act, 2013 (hereinafter “2013 Act”) says

·         Company or body corporate required to adopt uniform financial year of 1st April to 31st March every year,

·         Companies incorporated on or after first day of January of a year, the period ending on 31^st day of March of following year will be considered as financial year,

A company or body corporate existing on the commencement of the 2013 Actshall, within a period of two years from such commencement,align its financial year as per the above mentioned provision.

Exception

A company which is a holding or subsidiary of a company incorporated outside India and is required to follow the different financial year for consolidation outside Indiacan make an application to the Tribunal. The Tribunal can allow any period as its financial year after being satisfied.

Financial Statements

As per Sec 2(40) of the 2013 Act, financial statements of a company includes:-

·         Balance Sheet as at the end of financial year.

·         Statement of Profit & Lossor Income & Expenditure Account for the financial year.

·         Cash Flow Statement for the financial year

·         Statement of Changes in Equity, if applicable

·         Any explanatory note annexed to, forming part of the documents mentioned above.

Exceptions

One Man Company, Dormant Company, Small Company are not required to prepare Cash Flow Statement.

Consolidation of Financial Statements

Section 212 of the 1956 Act providedfor attachment ofaccounts ofsubsidiaries alongwith the holding company accounts.No provision forconsolidation.

Section 129 of the 2013 Act provides that where a company has one or more subsidiaries, it shall prepare a consolidated financial statement of thecompany and of all the subsidiaries in the same form and manner as that of its own whichshall also be laid before the annual general meeting of the company.

A separate statement containing the salient features of the financial statement of its subsidiary orsubsidiaries is to be attached with the holding company’s financial statements.

Signing of Financial Statements

Financial Statements to be signed at least by:-

·         Chairperson of the company, if authorised

·         2 directors including MD

·         CEO, if he is a director

·         CFO and CS wherever they are appointed

Exceptions

In case of OPC, Balance Sheet and Statement of Profit & Loss are to be signed by one director only.

Voluntary Revision of Books of Accounts

Board of Directors may prepare revised financial statement and board report in respect of any of the 3 preceding financial years after obtaining the approval from NCLT, if they believe that financial statements or report does not comply with the relevant provisions.

Mandatory Reopening / Recasting of books of accounts

A company can reopen its books of accounts or recast its financial statements on an application made by CG, IT authorities, SEBI or any other statutory regulatory authority and on an order being made by a Court or NCLT, on the below grounds:

·         relevant earlier accounts were prepared in a fraudulent manner, or

·         affairs of the company are mismanaged during the relevant year giving a doubt on the reliability of the financial statements.

Audited Accounts

Audited Accounts of all the subsidiaries are required to be provided to the shareholders on request.

Maintenance of Books of Accounts

·         According to Section 128 of 2013 Act, books of accounts are required to be maintained in electronic mode as prescribed.

·         Books of Accounts are required to be kept for 8 years.

Exception

CG may direct to keep the books of accounts for the longer period, where any investigation has been ordered.