The Ministry of Corporate Affairs (MCA) vide Notification dated 30th January, 2020 has amended Companies (Accounts) Rules, 2014 whereby sub-rule 1A has been inserted to the existing Rule 12.

RULE 12(1A)* (yet to be published in the Official Gazette):

Every Non-Banking Financial Company (NBFC) that is required to comply with Indian Accounting Standards (Ind AS) shall file the financial statements with Registrar (ROC) together with Form AOC-4 NBFC (Ind AS) and the consolidated financial statement, if any, with Form AOC-4 CFS NBFC (Ind AS).

MCA GENERAL CIRCULAR NO. 02/2020 DATED 30TH JANUARY, 2020:

The MCA further informed that the two new e-forms namely AOC-4 NBFC (Ind AS) & AOC-4 CFS NBFC (Ind AS) are likely to be deployed on 31st January, 2020 & 17th February, 2020 respectively. Accordingly, the last date for filing of said e-forms with ROC has been extended till 31st March, 2020.

Now, the important question which arises in our mind is regarding the class of NBFCs which are required to comply with Ind AS. In order to understand this, it should be noted that the applicability of Ind AS is governed by the provisions of the Companies (Indian Accounting Standards) Rules, 2015 (hereinafter referred as “Ind AS Rules”).

Rule 4(1)(iv) of Ind AS Rules provides for the NBFCs which are required to comply with Ind AS Rules while preparing their Financial Statements & Audit. As per this, the NBFCs which fall under any of the below-mentioned criteria are required to comply with Ind AS:

TABLE S-1

COMPANIES COVERED

NET WORTH (NW)*

(INR)

MANDATORY FOR ACCOUNTING PERIOD

(a) All NBFCs

500 Crore or more

on or after the 1st April, 2018

(b) Holding, Subsidiary, Joint Venture or Associate Companies of Companies covered under (a) above

N.A.

on or after the 1st April, 2018

(c) Listed NBFCs

Less than 500 Crore

on or after the 1st April, 2019

(d) Unlisted NBFCs

250 Crore or more but less than 500 Crore

on or after the 1st April, 2019

(e) Holding, Subsidiary, Joint Venture or Associate Companies of Companies covered under (c) or (d) above

N.A.

on or after the 1st April, 2019

From the above it can be conferred that the applicability or otherwise, of Ind AS is based on Net Worth. So, it is important to understand the basis for calculation of Net Worth which has been given below in tabular form. The period for compulsory applicability of Ind AS has also been mentioned for better understanding & easy reference:

TABLE S-2

TYPE OF NBFC

BASIS FOR CALCULATION OF NET WORTH (NW)

APPLICABILITY OF IND AS

(a) NBFCs existing as on 31st March, 2016 & covered under any clause of Table S-1

NW as on 31st March, 2016

from immediate next Accounting Year

(b) NBFCs existing as on 31st March, 2016 but not covered under any clause of Table S-1

NW as per first Audited Standalone Financial Statements after such date

from immediate next Accounting Year

(c) NBFCs not existing as on 31st March, 2016

NW as per first Audited Standalone Financial Statements after such date

from immediate next Accounting Year

ILLUSTRATION:

(i) The NBFCs meeting threshold for the first time as on 31st March, 2019 shall apply Ind AS for the financial year 2019-20 onwards.

(ii) The NBFCs meeting threshold for the first time as on 31st March, 2020 shall apply Ind AS for the financial year 2020-21 onwards and so on.

The readers should note that the topic being somehow technical, the better understanding is difficult without understanding the meaning of terms “NBFC” & “Net Worth.” Both the terms have been defined in simple manner below:

MEANING OF NBFC

(pursuant to Rule 2(1)(g) of Ind AS Rules read with Section 45-I of RBI Act, 1934)

The term “NBFC” inter alia includes:

  • a financial institution which is a company;
  • a non-banking institution which is a company, and having lending & acceptance of deposits as its principal business activity;
  • Housing Finance Companies;
  • Merchant Banking companies;
  • Nidhi Companies;
  • Chit Companies etc.

MEANING OF NET WORTH

(pursuant to Rule 2(1)(f) of Ind AS Rules read with Section 2(57) of the Companies Act, 2013)

The “NET WORTH”, for the purpose of these rules, shall be calculated as under:

PARTICULARS

AMOUNT

a) Paid-Up Share Capital

XX

b) Reserves created out of the profits

XX

c) Securities Premium Account

XX

d) Debit or Credit Balance of Profit and Loss Account

XX

TOTAL (P)

XXX

e) Accumulated Losses

XX

f) Deferred Expenditure

XX

g) Miscellaneous Expenditure Not Written Off

XX

TOTAL (Q)

XXX

NET WORTH (P – Q)

XXXX

SOME IMPORTANT POINTS TO BE REMEMBERED

  • Ind As applies to BOTH Stand-Alone as well as Consolidated Financial Statements;
  • Ind AS to be complied with CONTINUOUSLY even if adopted VOLUNTARILY by a company;
  • Ind AS once adopted (even voluntarily) shall be IRREVOCABLE;
  • If a company falls under ANY of the criteria mentioned in TABLE S-1, then it has to comply with Ind AS CONTINUOUSLY even if not falling under any of the criteria mentioned in TABLE S-1 in subsequent years.

CONCLUSION

The readers should note that the attempt has been made to present all the provisions in simple manner for better & easy understanding however in case of any confusion/ doubt, the provisions of law mentioned along with should be referred.

* Please note that amendment shall be effective from the date of publication in the Official Gazette of India.

(Author- CS Zaid Sofi is a Company Secretary in Practice in Gurugram, Haryana & can be reached at cszaid19@gmail.com/ +91-9149959883).

Author Bio

Qualification: CS
Company: Z S & Associates (Company Secretaries)
Location: Gurugram, Haryana, IN
Member Since: 02 Feb 2020 | Total Posts: 4

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One Comment

  1. Anil Maloo says:

    What is the status for the NBFCs (Falling under IND-AS) which filed AOC-4 post its AGM for the year 2018-19? Do they once again file in New Form?

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