Comp Act, 2013 – Ind AS & Sch Flashcards
As an auditor of a company registered u/s 8 of the Companies Act, 2013, you find that as per the notification of the MCA regarding applicability of Ind-AS, the company has to prepare its FS for the YE 31st March, 2019 under Ind-AS.
The management of the company is, however, of the strong view that being a section 8 company having charitable objects, Ind-AS cannot apply to the company. The FS are, therefore, prepared by the management under the earlier GAAP and a note for the same is given in the FS.
How would you report on these FS?
Applicability of IND AS: Section 129(1) of the Companies Act, 2013, governs the
requirements to be satisfied by financial statements. The provisions thereunder which
should be complied with are:
• financial statements shall, give a true and fair view of the state of affairs of the
company or companies as at the end of financial year, comply with the notified
accounting standards under section 133 and be in such form or forms specified in
Schedule Ill to the Companies Act, 2013 and
• the items contained in such financial statements shall be in accordance with the
accounting standards.
Further, as per section 133 of the Companies Act, 2013, the Central Government has
notified Companies (Indian Accounting Standards) Rules, 2015 dated 16.02.2015 in
exercise of the powers conferred by section 133. The said rules list the Indian Accounting
Standards (Ind AS) and the class of companies required to comply with the Ind AS while
preparation of their financial statements.
Here, it may be noted that the companies covered under Section 8 are required lo comply
the provisions of the Companies Act, 2013, unless and until any exemption is provided.
Therefore, companies registered under Section 8 are not exempted from the
requirements of section 133 and section 129 of the Companies Act, 2013.
In the given case, only contention of management that being a section 8 company having
charitable object, Ind-AS cannot apply lo the company, therefore financial statements
prepared under the earlier GAAP and a note for the same is given, is not tenable.
However, the auditor is required to ensure the applicable monetary limits w.r.t IndAS
and need to advise the management lo prepare the financial statements as per Ind-AS
accordingly. In case of non-compliance the auditor should report accordingly.
Mr. G. has been appointed as an auditor of LMP Ltd., a NBFC company registered with
RBI. Mr. G is concerned about whether the format of financial statements prepared by LMP
Ltd. is as per notification issued by the Ministry of Corporate Affairs (MCA) dated October
11, 2018. The notification prescribed the· format in Division Ill under Schedule Ill of the
Companies Act, 2013 applicable to NBFCs complying with Ind-AS. Mr. G wants to know
the differences in the presentation requirements between Division II and Division Ill of
Schedule Ill of the Companies Act, 2013. Help Mr. G.
Further, as per section 133 of the Companies Act, 2013, the Central Government has
notified Companies (Indian Accounting Standards) Rules, 2015 dated 16.02.2015 in
exercise of the powers conferred by section 133. The said rules list the Indian Accounting
Standards (Ind AS) and the class of companies required to comply with the Ind AS while
preparation of their financial statements.
Here, it may be noted that the companies covered under Section 8 are required lo comply
the provisions of the Companies Act, 2013, unless and until any exemption is provided.
Therefore, companies registered under Section 8 are not exempted from the
requirements of section 133 and section 129 of the Companies Act, 2013.
In the given case, only contention of management that being a section 8 company having
charitable object, Ind-AS cannot apply lo the company, therefore financial statements
prepared under the earlier GAAP and a note for the same is given, is not tenable.
However, the auditor is required to ensure the applicable monetary limits w.r.t IndAS
and need to advise the management lo prepare the financial statements as per Ind-AS
accordingly. In case of non-compliance the auditor should report accordingly.
The BS Extract of S Limited, required to prepare FS under Ind-AS, as at 31st March, 2022 is as under. Comment on the presentation in terms of Division II of Schedule Ill to the Companies Act, 2013.
Particulars As at 31st March, 2022 As at 31st March, 2021
Property Plant and Equipment
Trademark xxxx xxxx
Other Non-current Assets
Bank deposit with more than 12 xxxx xxxx
months maturity
Equity
Share Options Outstanding Account xxxx xxxx
Other Current Liabilities
Application money received for xxxx xxxx
allotment of securities to the extent
refundable and interest accrued
thereon.
Following Errors have been noticed in presentation, as per Division II of Schedule Ill:
(i) “Trademark” is not to be classified under “PPE” since they are specifically to be disclosed under ‘Other Intangible Assets” as per Division II of Schedule Ill.
(ii) “Bank deposit with more than 12 months maturity” is not to be classified under “Other Non-current Assets” since they are specifically to be disclosed under “Other Financial Assets” as per Division II of Schedule Ill.
(iii) “Share Option Outstanding Accounts” is not to be classified under “Equity”, since it has to be disclosed under “Other Equity” as per Division II of Schedule Ill.
(iv) Interest accrued thereon” is not to be classified under “Other non-current assets”, since they are specifically to be disclosed under the head “Other Financial Liabilities” as per Division II of Schedule Ill.
