24 March 2021
The MCA had notified amendments on 24 March 2021 which will impact the way Companies are required to maintain their books of accounts and present new disclosures in their financial statements. The amendments are applicable from FY 2021–22, i.e. starting from 01 April 2021.
We highlight the changes below:
1. Mandatory use of accounting software having Audit Trail for Companies
From FY commencing on 01 April 2021, every Company shall use an accounting software (ERP accounting systems) which have the following features:
- record audit trail of each and every transaction
- creating an edit log of each change made in the books of accounts along with date when such changes were made
- ensuring that audit trail cannot be disabled
2. Amendments in Schedule III
Additional disclosures in Schedule III, i.e. the schedule which prescribes the format of a Company’s financial statements, were also notified. It includes presentation of ageing schedule for receivables and payables, additional CSR disclosures and more interestingly, Details of Crypto Currency or Virtual Currency too!
The broad list is given below:
- Disclosure of Shareholding of Promoters
- Trade Payables ageing schedule with age 1 year, 1–2 year, 2–3 year & More than 3 years
- Reconciliation of the gross and net carrying amounts of each class of assets
- Trade Receivables ageing schedule with age 1 year, 1–2 year, 2–3 year & More than 3 years
- Detailed disclosure regarding title deeds of Immovable Property not held in name of the Company.
- Disclosure regarding revaluation & CWIP ageing.
- Loans or Advances granted to promoters, directors, KMPs and the related parties
- Details of Benami Property held
- Reconciliation and reasons of material discrepancies, in quarterly statements submitted to bank and books of accounts.
- Disclosure where a company is a declared wilful defaulter by any bank or financial Institution
- Relationship with Struck off Companies
- Pending registration of charges or satisfaction with Registrar of Companies
- Compliance with number of layers of companies
- Disclosure of 11 Ratios
- Compliance with approved Scheme(s) of Arrangements
- Utilisation of Borrowed funds and share premium
- Details of transaction not recorded in the books that has been surrendered or disclosed as income in the tax assessments
- Disclosure regarding Corporate Social Responsibility
- Details of Crypto Currency or Virtual Currency
3. Other matters to be included in the Audit Report
Once again, in an attempt to increase responsibility of the statutory auditors, the following additional matters are to be included in the audit report
- 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.
- Dividend declared or paid is in compliance of section 123 of CA, 2013.
- Comment of use of Accounting Software having Audit Trail & other rules therein.