Key Amendments by Ministry of Corporate Affairs
About The Author
CA. Akhil Bajaj
akhilbajaj.ca@gmail.com
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Mandatory use of Accounting Software having Audit Trail from April 01, 2021
Audit Trail is defined as a step-by-step sequential record that provides evidence of the documented history of financial transactions to its source
MCA vide Notification dated March 24, 2021 announced that from financial year commencing on or after April 01,2021 every company which uses accounting software for maintaining its books of account, shall use only such accounting software which has a feature of recording audit trail of each and every transaction, creating an edit log of each change made in books of account along with the date when such changes were made and ensuring that the audit trail cannot be disabled.
The changes were earlier proposed to be implemented from April 1, 2021. But after receiving several representations from various stakeholders expressing their inability to make quick changes in accounting software, the government decided to give one more year to businesses to prepare for new accounting system that aims to check manipulation and ensure utmost transparency in recording transactions.
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MCA broadens the Scope of Reporting by Auditors in Audit Report
MCA vide Notification dated March 24, 2021 broadens the scope of reporting by inserting clause E in Rule 11 which defines ‘Other Matters to be included in the Audit Report’
As per the amendment following Additional Disclosures are also required:
- Reporting regarding advances loans & Investment other than disclosed in notes to accounts.
- Receiving of funds for further lending or investing other than disclosed in notes to accounts.
- Comment upon above 2 points whether representation made contains any material misstatement.
- Dividend declared or paid is in compliance of Section 123 of Companies Act, 2013.
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MCA amended Schedule III to the Companies Act 2013
MCA vide Notification dated March 24, 2021 amended the Schedule III to the Companies Act,2013 to incorporate the general instructions for preparation of the balance sheet and the profit and loss account of an IND AS compliant company along with additional disclosure requirements.
As per the amendment following Additional Disclosures are also required
(a) Disclosure of Shareholding Pattern of the Promoters with their Name, No of shares held and percentage of total shares along with any change in percentage during the year needs to be disclosed.
(b) Trade Payables ageing schedule with age Less than 1 year, 1-2 years, 2-3 year & More than 3 years due for payment shall be disclosed.
(C) Trade Receivables ageing schedule with age less than 6 months,6 months – 1 year, 1-2 year, 2-3 year & More than 3 years outstanding from due date of payment. Unbilled dues shall be disclosed separately. A reconciliation of the gross and net carrying amounts of each class of assets(For Tangible and Intangible Assets Separately) at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations, amount of change due to revaluation (if change is 10% or more in the aggregate of the net carrying value of each class asset) and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately.
(d) Detailed disclosure regarding title deeds of Immovable Property not held in name of the Company and where such immovable property is jointly held with others, details are required to be given to the extent of the company’s share.
(e) Where the Company has revalued its Property, Plant and Equipment, the company shall disclose as to whether the revaluation is based on the valuation by a registered valuer as defined under Rule 2 of the Companies (Registered Valuers and Valuation) Rules, 2017
(f) Loans or Advances granted to promoters, directors, KMPs and the related parties either severally or jointly with any other person, that are
(a) repayable on demand or
(b) without specifying any terms or period of repayment
(g) All the Details of Benami Property held where any proceedings have been initiated or pending against the company and the companies view on the sale
(h) Where a company is a declared willful defaulter by any bank or financial Institution or other lender, following details shall be given:
- Date of declaration as willful defaulter,
- Details of defaults (amount and nature of defaults)
(i)Relationship with Struck off Companies – Name , nature of Transactions and Balance Outstanding
(j) Where any charges or satisfaction yet to be registered with Registrar of Companies beyond the statutory period, details and reasons thereof shall be
(k) Compliance with number of layers of companies prescribed under clause (87) of section2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017
(l) The company shall explain the items included in numerator and denominator for computing the above ratios. Further explanation shall be provided for any change in the ratio by more than 25% as compared to the preceding year.
(m) Where the Company has borrowings from banks or financial institutions on the basis of security of current assets, it shall disclose the following: –
- i)Whether quarterly returns or statements of current assets filed by the Company with banks or financial institutions are in agreement with the books of accounts
- (ii) if not, summary of reconciliation and reasons of material discrepancies, if any to be adequately disclosed.
(n) Compliance with approved Scheme(s) of Arrangements approved by the Competent Authority in terms of Section 230 to 237 of the Companies Act, 2013.
(o) Utilization of Borrowed funds and share premium. Where the company has not used the borrowings from banks and financial institutions for the specific purpose for which it was taken at the balance sheet date, the company shall disclose the details of where theyhave been used.
(p) Where a company has received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall :
- i) Directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or
- ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries, the company shall disclose the following:-a) Date and amount of fund received from Funding parties with complete details of each Funding Party;
b) Date and amount of fund further advanced or loaned or invested other intermediaries or Ultimate Beneficiaries along with complete details of the other intermediaries’ or ultimate beneficiaries;
c) Date and amount of guarantee, security or the like provided to or on behalf of the Ultimate Beneficiaries ;
d) Declaration that relevant provisions of the Foreign Exchange Management Act, 1999 (42 of 1999) and Companies Act has been complied with for such transactions and the transactions are not violation of the Prevention of Money-Laundering act, 2002(15 of 2003);
(q)The Company shall give details of any transaction not recorded in the books of accounts that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961), unless there is immunity for disclosure under any scheme and shall also state whether the previously unrecorded income and related assets have been properly recorded in the books of account during the year.
(r) Disclosure regarding Corporate Social Responsibility where the company is covered under Section 135 of the Companies Act 2013
(s) Where the Company has traded or invested in Crypto currency or Virtual Currency during the financial year, the following shall be disclosed:-
a)Profit or loss on transactions involving Crypto currency or Virtual Currency
b)Amount of currency held as at the reporting date,
c)Deposits or advances from any person for the purpose of trading or investing in CryptoCurrency/ virtual currency
For detailed information, refer to the official notification.
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