Financial Statement (Section 129 of the Companies Act, 2013)

Financial Statement (Section 129 of the Companies Act, 2013) :

Section 129 of the Companies Act, 2013 came into force from 1st April, 2014 which provides for financial statement. This section deals with the following:

(i) Form of Financial statements [Section 129(1)]:

(a) The financial statements shall-

(1) give a true and fair view of the state of affairs of the company or companies,

(2) comply with the accounting standards notified under section 133 and

(3) shall be in the form or forms as may be provided for different class or classes of companies in Schedule III.

(4) However, the items contained in such financial statements shall be in accordance with the accounting standards.

Ministry vide Notification dated 4th September, 2015 by the Companies (Accounts) Second Amendment Rules, 2015 incorporated the meaning of the Indian Accounting Standards under Rule 2(1) after clause (d), in the clause (da) as “Indian Accounting Standards means the Indian Accounting Standards referred to in rule 3 and Annexure to the Companies (Indian Accounting Standards) Rules, 2015”.

Vide Notification dated 4th September, 2015 by the Companies( Accounts) Second Amendment Rules, 2015, rule 4A has been inserted in the Companies(Accounts) Rules, 2014. This rule deals with the forms and items contained in the financial statements. According to it the financial statements shall be in the form specified in Schedule III to the Act and comply with Accounting Standards or Indian Accounting Standards as applicable. Provided that the items contained in the financial statements shall be prepared in accordance with the definitions and other requirements specified in the Accounting Standards or the Indian Accounting Standards as the case may be.

(b) The above provisions relating to nature and content of financial statement shall not apply to following companies:

(1) Insurance Companies

(2) Banking companies

(3) Company engaged in the generation or supply of electricity

(4) Any other class of company for which a form of financial statement has been specified in or under the Act governing such class of company.

(c) If the following disclosures are not made, the financial statements shall not be treated as not disclosing a true and fair view of the state of affairs of the company –

Type of Company	Matters
Insurance Company	Matters which are not required to be disclosed by the Insurance Act, 1938, or the Insurance Regulatory and Development Authority Act, 1999
Banking company	Matters which are not required to be disclosed by the Banking Regulation Act, 1949
Company engaged in the generation or supply of electricity	Matters which are not required to be disclosed by the Electricity Act, 2003
Company governed by any other law	Matters which are not required to be disclosed by that law

(d) Here, any reference to the financial statement shall include any notes annexed to or forming part of such financial statement, giving information required to be given and allowed to be given in the form of such notes under this Act.

(ii) Laying of financial statements [Section 129(2)]:

At every annual general meeting of a company, the Board of directors of the company shall lay before the company the financial statements for the financial year .

(iii) Consolidated Financial Statements [Section 129(3) & (4)]:

(a) Where a company has one or more subsidiaries, it shall, in addition to its own financial statements prepare a consolidated financial statement of the company and of all the subsidiaries in the same form and manner as that of its own.

(b) The Consolidated financial statements shall also be laid before the annual general meeting of the company along with the laying of its own financial statement.

(c) The company shall also attach along with its financial statement, a separate statement containing the salient features of the financial statement of its subsidiary or subsidiaries in Form AOC-1.

(d) For the purposes of consolidated financial statements, “subsidiary” shall include associate company and joint venture.

(e) According to Rule 6 of the Companies (Accounts) Rules, 2014, the consolidation of financial statements of the company shall be made in accordance with the provisions of Schedule III to the Act and the applicable accounting standards. However, a company which is not required to prepare consolidated financial statements under the Accounting Standards, it shall be sufficient if the company complies with provisions on consolidated financial statements provided in Schedule III of the Act. (Proviso to Rule 6)

Clarification has been issued by MCA vide General Circular No, 39/2014, dated 14th October, 2014 , on the manner of presentation of notes in Consolidated Financial Statement (CFS) to be prepared. Circular clarified that Schedule III to the Act read with the applicable Accounting Standards does not envisage that a company while preparing its CFS merely repeats the disclosures made by it under stand-alone accounts being consolidated. In the CFS, the company would need to give all disclosures relevant for CFS only.

Vide Notification G.S.R. 723(E), dated 14th October, 2014, the Central Government amended the Companies (Accounts) Rules, 2014 by inserting provisos after the existing proviso by the passing of the Companies (Accounts) Amendment Rules, 2014.

“Provided further that nothing in this rule shall apply in respect of preparation of consolidated financial statement by an intermediate wholly-owned subsidiary, other than a wholly-owned subsidiary whose immediate parent is a company incorporated outside India.

Provided also that nothing contained in this rule shall, subject to any other law or regulation, apply for the financial year commencing from the 1st day of April, 2014 and ending on the 31st March, 2015, in case of a company which does not have a subsidiary or subsidiaries but has one or more associate companies or joint ventures or both, for the consolidation of financial statement in respect of associate companies or joint ventures or both, as the case may be. ”

Vide Notification G.S.R. 37(E) dated 16th January 2015 the Central Government amended the Companies (Accounts) Rules, 2014 and following fourth proviso has been inserted in Rule 6 –

“Provided also that nothing in this rule shall apply in respect of consolidation of financial statement by a company having subsidiary or subsidiaries incorporated outside India only for the financial year commencing on or after 1st April,2014.

(f) The provisions applicable to the preparation, adoption and audit of the financial statements of a holding company shall, mutatis mutandis, also apply to the consolidated financial statements.

(iv) Deviations from Accounting Standards [Section 129(5)]:

If the financial statements of a company do not comply with the accounting standards, the company shall disclose in its financial statements the following namely:

(a) the deviation from the accounting standards,

(b) the reasons for such deviation and

(v) Exemptions [Section 129(6)]:

(a) The Central Government may, on its own or on an application by a class or classes of companies, by notification, exempt any class or classes of companies from complying with any of the requirements of this section or the rules made thereunder, if it is considered necessary to grant such exemption in the public interest.

(b) Any such exemption may be granted either unconditionally or subject to such conditions as may be specified in the notification.

Vide Notification dated 4th September 2015,the Central Government in public interest, directs that Additional lnformation [under paras 5 (ii) (a) (1), 5 (ii) (a) (2),5(ii) (e),5 (iii),5 (viii) (a),5 (viii) (b), 5 (viii) (c) and 5 (viii) (e) ] of the General lnstructions for preparation of Statement of Profit and Loss in Schedule III of the Companies Act, 2013 shall not apply to government companies producing Defence Equipment including the Space Research subject to fulfilment of following conditions, namely:-

A. The Board of Directors of the Company has given consent with regard to non-disclosure of information relating to paras 5(ii)(a)(1), 5(ii)(a)(2), 5(ii)(e), 5(iii), 5(viii)(a), 5(viii)(b), 5(viii)(c) and 5(viii)(e), as may be applicable;

B. The Company shall disclose in the Notes forming part of the balance sheet and profit and loss account, the fact of grant of exemption under this notification;

C. The company shall comply with the prescribed Accounting Standards;

D. The company shall ensure that its financial statements represent a true and fair state of affairs of its finances; and

E. The company shall maintain and file such information as may be prescribed or called for or required by the Government or the Reserve Bank of India or any other regulator.

This notification shall be applicable in respect of financial statement prepared in respect of the financial years ending on or after the 31st March, 2016.

(vi) Contravention [Section 129(7)]:

If a company contravenes the provisions of this section, the managing director, the whole-time director in charge of finance, the Chief Financial Officer or any other person charged by the Board with the duty of complying with the requirements of this section and in the absence of any of the officers mentioned above, all the directors shall be punishable with

(1) Imprisonment for a term which may extend to 1 year; or

(2) Fine which shall not be less than ` 50,000 but which may extend to ` 5 Lakhs; or

(3) Both with imprisonment and fine.

Section 129 shall not apply to the Government Companies to the extent of application of Accounting Standard 17(Segment Reporting) to the companies engaged in defence production. (Inserted vide Notification dated 5th June 2015]

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