Financial Statement,Board Report under Cos Act,2013

Section 134 of the Companies Act,2013 and Rule 8 & 9 of the Companies (Accounts)Rules,2014 deals with the Financial Statement and Board Report.

Signing of the Financial Statement:

The financial statement, including consolidated financial statement, if any, shall be approved by the Board of Directors and shall be signed by

a. the chairperson of the company where he is authorised by the Board or by two directors out of which one shall be managing director and

b. the Chief Executive Officer, if he is a director in the company,

c. the Chief Financial Officer, if any  and

d. the company secretary of the Company, if any

.

Contents of the Board Report:

The Board’s Report shall be prepared based on the stand alone financial statements of the company and the report shall contain a separate section wherein a report on the performance and financial position of each of the subsidiaries, associates and joint venture companies included in the consolidated financial statement is presented.

There shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include—

(1) the extract of the annual return as provided under section 92(3) in Form MGT-9

(2) number of meetings of the Board;

(3) Directors’ Responsibility Statement;

The Directors’ Responsibility Statement shall state that –

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

“internal financial controls” means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively

(4) a statement on declaration given by independent directors  section 149(6);

(5) in case of a company covered under section 178(1), company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under section 178(3)
 

(6) explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made—

(i) by the auditor in his report; and

(ii) by the company secretary in practice in his secretarial audit report;

(7) particulars of loans, guarantees or investments under section 186;

(8) particulars of contracts or arrangements with related parties referred to in section 188(1) in  Form AOC-2;

(9) the state of the company’s affairs;

(10) the amounts, if any, which it proposes to carry to any reserves;

(11) the amount, if any, which it recommends should be paid by way of dividend;

(l2) material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report;

(13) the conservation of energy, technology absorption, foreign exchange earnings and outgo

(A) Conservation of energy-

(i) the steps taken or impact on conservation of energy;

(ii) the steps taken by the company for utilising alternate sources of energy;

(iii) the capital investment on energy conservation equipments

(B) Technology absorption-

(i) the efforts made towards technology absorption;

(ii) the benefits derived like product improvement, cost reduction, product development or import substitution;

(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year)-

 (iv) the expenditure incurred on Research and Development.

(C) Foreign exchange earnings and Outgo-

a. The Foreign Exchange earned in terms of actual inflows during the year.

b. The Foreign Exchange outgo in terms of actual outflows during the year.

(14) a statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company;

(15) the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year;

The disclosure of contents of Corporate Social Responsibility Policy in the Board’s report and on the company’s website, if any, shall be as per annexure attached to the Companies (Corporate Social Responsibility Policy) Rules, 2014

(16) in case of a listed company and every other public company having  paid-up share capital of Rs.25 Crores or more calculated at the end of the preceding financial year shall include, in the report by its Board of directors, a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors;

(17) Other Details:

The Report of the Board shall also contain-

(i) the financial summary or highlights;

(ii) the change in the nature of business, if any;

(iii) the details of directors or KMP who were appointed or have resigned during the year;

(iv) the names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year;

(v) the details relating to deposits, covered under Chapter V of the Act,-

(a) accepted during the year;

(b) remained unpaid or unclaimed as at the end of the year;

(c) whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved-

(i) at the beginning of the year;

(ii) maximum during the year;

(iii) at the end of the year;

(vi) the details of deposits which are not in compliance with the requirements of Chapter V of the Act;

(vii) the details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future;

(viii) the details in respect of adequacy of internal financial controls with reference to the Financial Statements.

Signing of the Board Report:

The Board’s report and any annexures thereto shall be signed by its chairperson of the company if he is authorised by the Board and where he is not so authorised, shall be signed by at least two directors, one of whom shall be a managing director, or by the director where there is one director.

Issuing, Circulating or Publishing of the Financial Statement;

A signed copy of every financial statement, including consolidated financial statement, if any, shall be issued, circulated or published along with a copy each of—

(a) any notes annexed to or forming part of such financial statement;

(b) the auditor’s report; and

(c) the Board’s report

Attachment to financial statement:

a. The auditors’ report shall be attached to every financial statement

b. The report of the Board of Directors to be attached to the financial statement

In case of One Person Company:

a. The financial statement shall be signed  by one director, for submission to the auditor for his report thereon.

b. The report of Board of directors, mean a report containing explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the auditor in his report.

c. The Report of Board of directors shall be signed by 2 directors or 1 director, if there is one

Penalty:

Changes in Companies Act,2013:

a. A lot of additional/new disclosures highlighted (in Bold Italics) above are included in report of board of Directors by the new act.

b. The Directors’ Responsibility statement in case of listed company shall also include additional declarations related to internal financial controls and compliance systems.