Analysis of SEBI / MCA Circular on Financial Results & Ind-AS

Key highlights of MCA  notification no. G.S.R. 111(E) dated  February 16, 2015 and Securities Exchange Board of India (‘SEBI’) Circular No. CIR/CFD/FAC/62/2016 dated July 05, 2016.

Ministry of Corporate Affairs (MCA) vide notification no. G.S.R. 111(E) dated  February 16, 2015 had issued the Companies (Indian Accounting Standards) Rules, 2015. Pursuant to this Rules, the Company and their Statutory Auditor(s)  shall comply with the  Indian Accounting Standards (Ind AS) in preparation of their Financial Statements and the Audit respectively, in the following manner, namely:-

1. for the accounting periods beginning on or after 1st April, 2016:

(a) companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of rupees five hundred crore or more;

(b) companies other than those above and having net worth of rupees five hundred crore or more;

(c) holding, subsidiary, joint venture or associate companies of companies covered by sub-clause (a) and (b) above;

2. for the accounting periods beginning on or after 1st April, 2017:

(a) companies whose equity or debt securities are listed or are in the process of being listed on any stock exchange in India or outside India and having net worth of less than rupees five hundred crore;

(b) unlisted companies having net worth of rupees two hundred and fifty crore or more but less than rupees five hundred crore.

(c) holding, subsidiary, joint venture or associate companies of companies covered by sub-clause (a) and (b) above.

Provided that nothing in this sub-rule, except clause (i), shall apply to companies whose securities are listed or are in the process of being listed on SME exchange as referred to in Chapter XB or on the Institutional Trading Platform without initial public offering in accordance with the provisions of Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Exemptions.– The insurance companies, banking companies and non -banking finance companies shall not be required to apply Indian Accounting Standards (Ind AS) for preparation of their financial statements either voluntarily or mandatorily.

Note 1. – SME Exchange shall have the same meaning as assigned to it in Chapter XB of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Note 2. – “Comparatives” shall mean comparative figures for the preceding accounting period.

Further, Securities and Exchange Board of India (SEBI) vide circular no.CIR/CFD/CMD/15/2015 dated November 30, 2015 had prescribed the format for publishing financial results and stated that Companies adopting the Ind AS in terms of Companies (Indian Accounting Standards) Rules, 2015 notified by the Ministry of Corporate Affairs on February 16, 2015 while publishing quarterly/annual financial results under Regulation 33 of the Listing Regulations, 2015, shall ensure that the comparatives filed along with such quarterly/annual financial results are also Ind AS compliant.

Securities Exchange Board of India (‘SEBI’) had issued Circular No. CIR/CFD/FAC/62/2016 dated July 05, 2016.

The key highlights of the circular are tabulated below:

A. The existing format prescribed under SEBI Circular dated November 30, 2015 for Unaudited/Audited quarterly financial results i.e. Statement of Profit and Loss and the Unaudited/Audited Half-Yearly Balance Sheet, shall continue till the period ending December 31, 2016;

B. For the period ending on or after March 31, 2017, the formats for Unaudited/Audited quarterly financial results i.e. Statement of Profit and Loss and the Unaudited/Audited Half-Yearly Balance Sheet , shall be as per the formats for Balance Sheet and Statement of Profit and Loss (excluding notes and detailed sub-classification) as prescribed in Schedule III to the Companies Act, 2013;

However, Banking Companies and Insurance Companies shall follow the formats as prescribed under the respective Acts/Regulations as specified by their Regulators.

C. The financial results published in the newspapers, in terms of Regulation 47 (1) (b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’),shall be in the format as prescribed in Annexure I.

Implementation of Ind-AS during the first year:

In order to facilitate smooth transition during the first year of Ind-AS implementation, the following relaxations are being given to the listed entities to which Ind-AS Rules are applicable from the accounting period beginning on or after April, 1, 2016.

⇒ For the quarter ending June 30, 2016 and September 30, 2016:

1. The Listed entities may submit the results for the quarter ending June 30, 2016 and September 30, 2016 may be submitted by September 14, 2016 and December 14, 2016 respectively;

2. For the quarter ending June 30, 2016, Ind-AS compliant financial results for the corresponding quarter ended June 30, 2015 shall be provided. However,  submission of Ind-AS compliant financial results for the preceding quarter and previous year ended March 31, 2016 is not mandatory.

However, in such case, limited review or audit of the same is not mandatory.

3. For the quarter ending September 30, 2016, Ind-AS compliant financial results for the corresponding year to date / quarter ended September 30, 2015 shall be provided. However, submission of Ind-AS compliant financial results and Balance Sheet for the previous year ended March 31, 2016 is not mandatory. However, in case the entities intend to submit these results, the same may be without limited review or audit.

Note: In such cases, the listed entities shall disclose with due prominence that the Ind-AS compliant financial results, pertaining to the relevant periods of the previous year as mentioned in (2) and (3) above, as applicable, have not been subjected to limited review or audit.

4. The format of Balance Sheet for the Half-Yearly ended September 30, 2016 shall be as per the format for Balance Sheet (excluding notes and detailed sub-classifications) as prescribed in Schedule III to the Companies Act, 2013.

⇒ For the quarter ending December 31, 2016:

1. The submission of Ind-AS compliant financial results for the previous year ended March 31, 2016 is not mandatory. In case a listed entity chooses to provide Ind-AS comparatives for the period mentioned above to facilitate comparison, the same shall be subjected to limited review or audit;

2. In case the listed entity has subsidiaries / Joint Ventures / Associates, the entity may exercise the option under Regulation 33(3)(b)(i) of the Listing Regulations, 2015 to submit quarterly/year-to-date consolidated financial results in the second quarter instead of the first quarter of the financial year and this option shall not be changed during the remaining part of the financial year;

3. For listed entities to which Ind AS Rules are applicable in subsequent phases (beginning from the Financial Year 2017-18, 2018-19 and 2019-20), the relaxations shall mutatis-mutandis apply during their corresponding first year of Ind-AS implementation;

Annexure-I

Format for Newspaper Publishing Purpose (Standalone / Consolidated)

[Regulation 47(1) (b) of the SEBI (LODR) Regulations, 2015]

a) The above is an extract of the detailed format of Quarterly/Annual Financial Results filed with the Stock Exchanges under Regulation 33 of the SEBI (Listing and Other Disclosure Requirements) Regulations, 2015. The full format of the Quarterly/Annual Financial Results are available on the websites of the Stock Exchange(s) and the listed entity. (URL of the filings).

b) The impact on net profit / loss, total comprehensive income or any other relevant financial item(s) due to change(s) in accounting policies shall be disclosed by means of a footnote.

c) # – Exceptional and/or Extraordinary items adjusted in the Statement of Profit and Loss in accordance with Ind-AS Rules /AS Rules, whichever is applicable.

(Author: CS Manohar Mishra-Associate Member of the ICSI,  a Commerce Graduate from Calcutta University & Post Graduated from Vidyasagar University, he can be contacted at csmanoharmishra@gmail.com)