CA Deepak Rathore
Before Companies Act 2013
The Company act 1956 didn’t include cash flow statement in the Definition of Financial statement. The Applicability of Cash Flow Statements governed by the Companies (Accounting Standards) Rules, 2006.
Enterprises which fall in any one or more of the following categories, at any time during the accounting period, are classified as Level I enterprises:
i. Enterprises whose equity or debt securities are listed whether in India or outside India.
ii. Enterprises which are in the process of listing their equity or debt securities as evidenced by the board of directors’ resolution in this regard.
iii. Banks including co-operative banks.
iv. Financial institutions.
v. Enterprises carrying on insurance business.
vi. All commercial, industrial and business reporting enterprises, whose turnover for the immediately preceding accounting period on the basis of audited financial statements exceeds Rs. 50 crore. Turnover does not include ‘other income’.
vii. All commercial, industrial and business reporting enterprises having borrowings, including public deposits, in excess of Rs. 10 crore at any time during the accounting period.
viii. Holding and subsidiary enterprises of any one of the above at any time during the accounting period.
Therefore earlier companies have to satisfied aforesaid limits to check the applicability of cash flow statement.
After Companies Act 2013
As per Section 2(40) of the CA, 2013 “financial statement” in relation to a company, includes—
(i) a balance sheet as at the end of the financial year;
(ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;
(iii) cash flow statement for the financial year;
(iv) a statement of changes in equity, if applicable; and
(v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv)
Provided that the financial statement, with respect to One Person Company, small company and dormant company, may not include the cash flow statement;
It means all the companies whether private or public needs to include cash flow statement in its financial statement except the One Person Company, small company and dormant company. Now we have to check the definition of One Person Company, small company and dormant company
One Person Company: As per sec 2(62) of The CA, 2013 -One Person Company” means a company which has only one person as a member;
Sec 2(85) ‘small company’’ means a company, other than a public company,—
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; and
(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees: Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act;
As per sec 455 of The CA, 2013 “Dormant Company” means a company
(i) Where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.
Explanation.—For the purposes of this section,—
(i) “inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;
(ii) “significant accounting transaction” means any transaction other than—
(a) payment of fees by a company to the Registrar;
(b) payments made by it to fulfil the requirements of this Act or any other law;
(c) allotment of shares to fulfil the requirements of this Act; and
(d) payments for maintenance of its office and records.
Crux and comparison analysis:
A public company will never be a small company, therefore incase of private companies , the limit has been decreased as far as turnover is concerned earlier it was exceeds 50 crores. Now it has been decreased to 2 crores resulted in increase in the compliance of the companies. In nutshell , it is applicable to almost all the private companies as 2 crores turnover is very nominal amount. Also there is no limits of borrowing as specified in accounting standards.MCA has also put a check on paid-up share capital for the applicability of CFS( Which is 50Lacs)
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