MCA introduces lot of changes to ensure transparency
Mumbai, April 01 A host of changes has been brought in by Ministry of Company Affairs effective from April 01 to ensure more and more transparency.
Schedule III of the Companies Act 2013 contains the general instructions for preparation of Balance Sheet and Statement of Profit and Loss of a Company.
Now companies have to round off the figures appearing in the financial statements, hitherto it was optional. Further, the criteria for rounding off shall be based on 'total income' in place of 'turnover'.
Company shall disclose Shareholding of Promoters and current maturities of long-term borrowings shall be disclosed separately.
Trade Payables ageing schedule and trade receivables ageing schedule has to be given.
"These changes will lead to increased disclosure in the Financial Statements of the Companies and auditors will be required to be more vigilant on such disclosures now," says an I-T expert and CA, Abhishek Aneja.
The changes will be quite helpful to the users of Financial Statements such as Shareholders, Regulatory authorities, Banks, lenders, Vendors and customers as they will be able to get a clear position of Company in respect of its Assets, Liabilities, obligations, utilisation of funds, receivables and performance of the company by going through such disclosures, he said.
The Regulatory authorities such as Ministry of Corporate Affairs, Income tax and others will now be able to look out for the non-compliance of Corporate and taxation laws by going through these additional disclosures, he added.
There are several other changes which have been made by the government.
Security deposits shall not be disclosed under 'long-term loans and advances' but disclosed under 'Other non-current assets'.
Moreover, the company will have to disclose the reason of utilization of funds for the purposes other than for which they were borrowed and shall also disclose the purposes for which the funds were utilised.
Company needs to disclose if the books of accounts are tallied with the quarterly or monthly returns filed with banker in cases where company has borrowed funds from banks on the basis securities of current assets, or else a separate reco statement needs to be provided.
The story doesn't end here. The company will have to provide the details of all the immovable property (other than properties where the Company is the lessee and the lease agreements are duly executed in favour of the lessee) whose title deeds are not held and where such immovable property is jointly held with others, details are required to be given to the extent of the company's share.
In cases where revaluation has been done in case of Property Plant and Equipment, the company shall disclose if the valuation was done by registered valuer.
It has been mandated that disclosures to be made where Loans or Advances in the nature of loans are granted to promoters, directors, KMPs and related parties (loans given to promoters as a percentage of total loans).
In case of capital-work-in progress, ageing schedule shall be given. On the other, for intangible assets under development, aging schedule has to be given.
In a view to tighten its noose against benami transactions, the government has said that disclosure of any proceedings initiated or pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 to be made.
Whenever a company is a declared wilful defaulter by any bank or financial Institution or other lender, details to be given.
Where any charges or satisfaction yet to be registered with Registrar of Companies beyond the statutory period, details and reasons thereof shall be disclosed.
Following Ratios to be disclosed
|(a) Current Ratio,|
|(b) Debt-Equity Ratio,|
|(c) Debt Service Coverage Ratio,|
|(d) Return on Equity Ratio|
|(e) Inventory turnover ratio,|
|(f)Trade Receivables turnover ratio,|
|(g) Trade payables turnover ratio,|
|(h) Net capital turnover ratio,|
|(i) Net profit ratio,|
|(k) Return on investment|