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Deviations from Accounting Standards [Section 129 (5)]
If the financial statements of a company do not comply with the accounting standards, the company shall disclose in its financial statements the following namely:
Exemptions [Section 129 (6)]
(a) The Central Government may, on its own or on an application by a class or classes of companies, by notification, exempt any class or classes of companies from complying with any of the requirements of this Section or the rules made thereunder, if it is considered necessary to grant such exemption in the public interest.
(b) Any such exemption may be granted either unconditionally or subject to such conditions as may be specified in the notification.
This notification shall be applicable in respect of financial statement prepared in respect of the financial years ending on or after the 31st March, 2016.
Contravention [Section 129 (7)]
If a company contravenes the provisions of this Section, the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person charged by the Board with the duty of complying with the requirements of this Section and in the absence of any of the officers mentioned above, all the directors shall be punishable with
Central Government to prescribe Accounting Standards (Section 133)
Section 133 of the Companies Act, 2013 deals with the power of the Central Government to prescribe the accounting standards. Accounting Standards means the standards of accounting or any addendum thereto as recommended by the Institute of Chartered Accountants of India (ICAI) constituted under Section 3 of the Chartered Accountants Act, 1949, as may be prescribed by the Central Government in consultation with and after examination of the recommendations made by the National Financial Reporting Authority constituted under Section 132 of the Companies Act, 2013.
In respect of accounting standards, the role of National Financial Reporting Authority is limited to advise the Central Government on the accounting standards recommended by ICAI for adoption by companies.
Financial Reporting Authority, the existing Accounting Standards notified under the Companies Act, 1956 shall continue to apply.
Financial Statement, Board’s report, etc (Section 134)
Section 134 of the Companies Act, 2013 came into force from 1st April, 2014 which provides for financial statement, Board’s report, etc. According to this Section:
(a) Authentication of Financial statements [Sections 134 (1), (2) & (7)]
(1) The financial statements, including consolidated financial statement, if any, shall be approved by the Board of Directors before they are signed on behalf of the Board at least by the following
(2) In the case of a One Person Company, the financial statement shall be signed by only one director, for submission to the auditor for his report thereon.
(3) The auditors’ report shall be attached to every financial statement [Section 134(2)].
(4) A signed copy of every financial statement, including consolidated financial statement, if any, shall be issued, circulated or published along with a copy each of
(b) Board’s report [Sections 134 (3) & (4)]
(1) According to Companies (Accounts) Rules, 2014, the Board‘s Report shall be prepared based on the stand alone financial statements of the company and vide notification G.S.R. 742(E) dated 27th July, 2016, Board report shall report on 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.
(2) There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include:
(a) The extract of the annual return as provided under Sub-Section (3) of Section 92 in Form MGT-9;
(b) number of meetings of the Board;
(c) Directors’ Responsibility Statement;
(d) Details in respect of frauds reported by auditors under Section 143 (12) other than those which are reportable to the Central Government. [inserted by the Companies [Amendment) Act, 2015 notified on 29th May, 2015]
(e) a statement on declaration given by independent directors under Sub-Section (6) of Section 149.
(f) in case of a company covered under Sub-Section (1) of Section 178, company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under Sub-Section (3) of Section 178.
However, it is provided vide notification no. G.S.R. 463 (E ) dated 5th June, 2015, this clause shall not apply to Government Company.
(g) explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made:
(h) particulars of loans, guarantees or investments under Section 186.
(i) particulars of contracts or arrangements with related parties referred to in Sub- Section (1) of Section 188 in Form AOC-2.
(j) the state of the company‘s affairs.
(k) the amounts, if any, which it proposes to carry to any reserves.
(l) the amount, if any, which it recommends should be paid by way of dividend.
(m) material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report. n) the conservation of energy, technology absorption, foreign exchange earnings and outgo, in such manner as prescribed under the Rule 8(3) of the Companies (Accounts) Rules, 2014 which provides for.
(o) A statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company.
(p) the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year.
(q) Every listed company and every other public company having a paid up share capital of ` 25 crore or more calculated at the end of the preceding financial year shall include (as prescribed under the Companies (Accounts) Rules, 2014), in the report by its Board of directors, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors.
(r) Such other matters as contain as prescribed under the Companies (Accounts) Rules, 2014. According to which the report of the Board shall also contain:
(1). The financial summary or highlights.
(2). The change in the nature of business, if any.
(3). The details of directors or key managerial personnel who were appointed or have resigned during the year.
(4). The names of companies which have become or ceased to be its subsidiaries, joint ventures or associate companies during the year.
(5). The details relating to deposits like:
a. Accepted during the year.
b. Remained unpaid or unclaimed as at the end of the year.
c. Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved:
(6). The details of deposits which are not in compliance with the requirements of Chapter V of the Act.
(7). The details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company‘s operations in future.
(8). The details in respect of adequacy of internal financial controls with reference to the Financial Statements.
(c) Board‘s Report in case of OPC [Section 134 (4)]
In case of a One Person Company, the report of the Board of Directors to be attached to the financial statement under this Section shall, mean a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.
(d) Directors’ Responsibility Statement [Section 134 (5)
The Directors’ Responsibility Statement referred to in 134 (3) (c) shall state that:
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.
(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period.
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.
(d) the directors had prepared the annual accounts on a going concern basis, and
(e) the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
Here, the term “internal financial controls” means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
(e) Signing of Board’s Report [Section 134(6)]
The Board‘s report and any annexures thereto shall be signed by its chairperson of the company if he is authorised by the Board and where he is not so authorised, shall be signed by at least two directors, one of whom shall be a managing director, or by the director where there is one director.
(f) Contravention [Section 134(8)]
(a) If a company contravenes any provisions of this Section, the company shall be punishable with fine which shall not be less than Rs 50,000 but which may extend to Rs 25 lacs.
(b) Every officer of the company who is in default shall be punishable with: