The Ministry of Corporate Affairs (MCA) has published a circular on 24 March 2021, under companies (Accounts) Amendment rule 2021. According to this circular companies that use accounting software to maintain the books of accounts must have the feature to record “audit trail” of each and every transaction effective from 1 April 2021.

Also, it has made mandatory to maintain the edit log of each change made in the accounting software with the proper dates of the edit. As per the circular the companies must make sure that the audit trail feature is not disabled.

This change will bring more transparency in the accounting transactions, and will be helpful with the tax collections. This will boost the economy and reduce black money.

New additional reporting requirements have been inserted in Rule 11 which are to be disclosed in the audit report. The list is given below.

1. Reporting regarding camouflaged lending or investment, that is, where outbound or inbound loans, advances and investments are intended to be routed through a conduit entity, masking the identity of the ultimate beneficiary.
2. Receiving of funds for further lending or investing other than disclosed in notes to accounts.
3. Dividend declared or paid is in compliance of section 123 of CA, 2013.
4. The need for accounting software to maintain an audit trail, that is, edit log, of the primary entries, possibly with a view to enable the detection of any changes in primary entries

The Ministry of Corporate Affairs (MCA) has amended Schedule III of the Companies Act, 2013

The notification incorporates various additional disclosure requirements while preparing the financial statements of an entity which are covered under the three divisions of Schedule III - Division I (Indian GAAP) and Division II & III (Ind AS).

A) In Division I:

• A company shall disclose Shareholding of Promoters
• Short-term borrowing and current maturities of Long-term borrowings shall be disclosed separately
• Trade Payables ageing schedule with age 1 year, 1–2-year, 2-3 year and more than 3 years
• A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations, amount of change due to revaluation and other adjustments and the related depreciation and impairment losses/reversals shall be disclosed separately.
• Long term loans or advances granted to promoters, directors, KMPs (Key Managerial Personnel) and the related parties shall be omitted.
• Trade Receivables ageing schedule with age less than 6 months, 6 months to 1 year, 1–2-year, 2-3 year and more than 3 years
• 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 they have been used.
• The company shall provide the details of all the immovable property.
• Disclosure regarding revaluation & CWIP ageing shall be disclosed separately.
• Details of Benami Property held shall be disclosed separately.
• Reconciliation and reasons of material discrepancies, in quarterly statements submitted to bank and books of accounts.
• Disclosure where a company is a declared willful defaulter by any bank or financial Institution.
• Relationship with Struck off Companies shall be disclosed separately.
• Pending registration of charges or satisfaction with Registrar of Companies shall be disclosed separately.
• Compliance with number of layers of companies shall be disclosed separately.
• Compliance with approved Scheme(s) of Arrangements shall be disclosed separately.
• Utilisation of Borrowed funds and share premium shall be disclosed separately.
• 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 needs to disclosed.
• Details of Crypto Currency or Virtual Currency needs to be disclosed.
  
  

B) In Division II

• Remeasurement of defined benefit plans and fair value changes relating to own credit risk of financial liabilities designated at fair value through profit or loss shall be recognised as a part of retained earnings with separate disclosure of such items along with the relevant amounts in the Notes or shall be shown as a separate column under Reserves and Surplus.
• A reconciliation of the gross and net carrying amounts of each class of assets at the beginning and end of the reporting period showing additions, disposals, acquisitions through business combinations, amount of change due to revaluation and other adjustments and the related amortization and impairment losses or reversals shall be disclosed separately
• 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 they have been used.
• The company shall provide the details of all the immovable properties.
• The Company shall disclose as to whether the fair value of investment property is based on the valuation by a registered valuer as defined under rule 2 of Companies Rules, 2017.
• 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 Companies Rules, 2017.

Also read: Compliance calendar for the month of June 2021

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