The Ministry of Corporate Affairs (MCA) has made amendments to rules in the Companies Act, mandating firms to disclose their investments in cryptocurrencies, spend on corporate social responsibility (CSR), and benami property transactions, among others, in their financial statements from the next financial year.
The Ministry of Corporate Affairs (MCA) has made amendments to rules in the Companies Act, mandating firms to disclose their investments in cryptocurrencies, spend on corporate social responsibility (CSR), and benami property transactions, among others, in their financial statements from the next financial year.
Besides, by making changes to Schedule III of the Companies Act, 2013, there are increased disclosure requirements, including details about their dealings in cryptocurrencies, if any. Companies will also have to disclose their relationship with struck-off firms and the details of title deeds of immovable property not held in the name of the company.
A few other amendments focused on broadening the scope of audit reporting. Now, management representations on advances, loans, and investments, etc, will have to be reported. One of these changes requires companies to use that accounting software for maintaining its books that allow it to record the audit trail of every transaction.
Companies will also have to disclose insolvency and bankruptcy matters and information relating to the valuation of the company’s assets in the board’s report. The new rules come into effect from April 1, 2021.
Companies will also have to disclose the expenditure on CSR activities of the previous years as well, including reasons for any shortfall. Till now, CSR spend has been part of the directors’ report, but now companies will have to disclose it in their financial statements.
The report should also contain the details of the difference between the amount of valuation of related assets done at the time of one-time settlement and the valuation done while taking a loan from the banks or financial institutions, along with the reason thereof.
From next year, the audit report will have to disclose the information cited above if those were not revealed in notes to accounts. Also, it has to be disclosed whether the dividend declared or paid was in compliance with Section 123 of the Companies Act. The section mandates companies to declare dividend only out of profit or money was given by the governments in lieu of guarantees given by them.
