CS Kanika Kumar

Kanika Kumar

MCA through Notification dated 27/07/2016 Amended the Companies (Accounts) Rules, 2014 which now be called as Companies (Accounts) Amendment Rules, 2016.

Following below mentioned are the Provisions both earlier as well as amended along with the impact of amended provisions:

1. In Rule 6 for the Second Proviso of Companies (Accounts) Rules, 2014 following proviso has been substituted-

Earlier Provision:

Provided further that nothing in the above said 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.

What actually Rule 6 says??

Rule 6 of the Companies (Accounts) Rules, 2014 describes the manner of consolidation of accounts as it says that consolidation of financial statements shall be made in accordance with the provisions of schedule III of the Companies Act, 2013 and applicable accounting standards.

Amended Provision:

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

Impact of the Amended Provision :

A Company is not required to prepare consolidated financial statement as Per the provisions of schedule III of the Companies Act, 2013 and applicable accounting standards, if it fulfills the above mentioned all three conditions.

2. In Rule 8 sub rule 1 of Companies (Accounts) Rules, 2014 following substitution has been made:

Earlier Provision:

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.

What actually Rule 8 says??

Rule 8 of the Companies (Accounts) Rules, 2014 discuss about the matters to be included in the Board Report.

Amended Provision:

The Board’s Report shall be prepared based on the stand alone financial statements of the company and 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.

Impact of the Amended Provision:

Now, it is required to report on performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company during the period under Board’s Report.

3. In Rule 13 sub rule 1 of Companies (Accounts) Rules, 2014 following substitution has been made:

Earlier Provision:

The following class of companies shall be required to appoint an internal auditor or a firm of internal auditors, namely:-

a) Every listed company;

b) Every unlisted public company having:

i. paid up share capital of fifty crore rupees or more during the preceding financial year; or

ii. turnover of two hundred crore rupees or more during the preceding financial year; or

iii. outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year; or

iv. outstanding deposits of twenty five crore rupees or more at any point of time during the preceding financial year; and

c)  Every private company having-

(i)  Turnover of two hundred crore rupees or more during the preceding financial year; or

(ii) Outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year:

Provided that an existing company covered under any of the above criteria shall comply with the requirements of section 138.

Note:  As Per Section 138 of the Companies, Act, 2013, such class of companies are required to appoint internal auditor as defined in the abovementioned Rule 13 Companies (Accounts) Rules, 2014 who shall be Chartered Accountant or Cost Accountant or other Professional as decided by board.

Explanation: For the purpose of this rule –

the term “Chartered Accountant” shall mean a Chartered Accountant whether engaged in practice or not.

Amended Provision:

The following class of companies shall be required to appoint an internal auditor which may be either an individual or partnership firm or a body corporate , namely:-

a) Every listed company;

b) Every unlisted public company having:

v. paid up share capital of fifty crore rupees or more during the preceding financial year; or

vi. turnover of two hundred crore rupees or more during the preceding financial year; or

vii. outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year; or

viii. outstanding deposits of twenty five crore rupees or more at any point of time during the preceding financial year; and

c) Every private company having-

(i)  Turnover of two hundred crore rupees or more during the preceding financial year; or

(ii) Outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year:

Provided that an existing company covered under any of the above criteria shall comply with the requirements of section 138.

Note:  As Per Section 138 of the Companies, Act, 2013, such class of companies is required to appoint internal auditor as defined in the abovementioned Rule 13, of theCompanies (Accounts) Rules, 2014 who shall be Chartered Accountant or Cost Accountant or other Professional as decided by board.

Explanation: For the purpose of this rule, explanation ii has now been modified as mentioned below:

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.

Impact of the Amended Provision:

i) Internal auditor under Rule 13 of the Companies (Accounts) Rules, 2014, would also include an individual, partnership firm or body corporate.

ii) In explanation to the Rule 13 of the Companies (Accounts) Rules, 2014, now Cost Accountant is also added in addition to a Chartered Accountant.

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