REVISION OF FINANCIAL STATEMENTS UNDER NEW COMPANIES ACT, 2013

Section 2(40) of Companies Act, 2013 (‘Act’ for short) defines the term ‘financial statement’ in relation to a company which includes the following-

• A balance sheet as at the end of the financial year;
• A profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;
• Cash flow statement for the financial year;
• A statement of changes in equity, if applicable, and
• Any explanatory note annexed to, or forming part of, any document referred to above.

The financial statement with respect to One Person Company, small company and dormant company, may not include the cash flow statement.

Section 2(41) defines term ‘financial year’ which has been used in Section 2(40) of the Act. The financial year in relation to anybody corporate, means the period ending on the 31^st day of March every year and where it has been incorporated on or after the 1^st day of January of a year, the period ending on the 31^st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up.   On an application made a by a company or body corporate which is holding company of a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year.  A company or a body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause.

Section 129 of the Act provides that the financial statements shall give a true and fair view of the affairs of the company or companies. The items contained in such financial statements shall be in accordance with the accounting standards. This section is not applicable to any banking or insurance company or any other company engaged in the generation and supply of electricity, or to any other class of company or which a form of financial statement has been specified in or under the Act governing such class of company.

At every Annual General Meeting of a company the Board of Directors of the company shall lay before such meeting financial statements for the financial year.  If a company has one or more subsidiaries shall in addition to the financial statements prepare a consolidated financial statement of the company, in the manner as prescribed by the Central Government. The company is further required to attach along with financial statements a separate statement containing the salient feature of the financial statement of its subsidiary or subsidiaries in such form as may be prescribed.

If the company does not comply with the requirements it shall disclose in its financial statement, the deviation from the accounting standards, the reasons for such deviation and the financial effects, if any, arising out of such deviation. The Central Government is given power to give exemption to any class or classes of companies by means of Notification from complying with any of the requirement of this section or rules made there under, if it is considered necessary to grant either unconditionally or subject to such conditions as may be specified in the notification.

If a company contravenes the provisions of this section,  the officer in charge who is required to comply with these requirements and in the absence of any such officer, all the directors shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than Rs.50,000/- but which may extend to Rs.5,00,000/- or with both.

The new section provides for the re-opening of the financial accounts. Section 130 deals with the re-opening of accounts on court’s or Tribunal’s orders. Section 131 deals with the voluntary revision of financial statements or Board’s reports.

Section 130 provides that a company shall not re-open its books of accounts and shall not recast its financial statements, unless an application is made to the Central Government, the Income Tax Department, the Securities and Exchange Board of India and any other statutory regulatory body or authority concerned.  An order is made by a court of competent jurisdiction or Tribunal to the effect that-

• The relevant earlier accounts were prepared in a fraudulent manner; or
• The affairs of the company were mismanaged during the relevant period, casting a doubt on the reliability of financial statements.

While passing the order the Court or Tribunal shall issue notice to the authority/authorities concerned and shall take into consideration of the representation, if any. The accounts so revised or re-cast shall be final.

Section 131 provides for voluntary revision but actually it is not actual.  Under this section the order of the Tribunal is required. Section 131 provides that if it appears to the directors of a company that-

• The financial statement of the company; or
• The report of the Board

do not comply with the provisions of Section 129 or Section 134  the company may prepare revised financial statement in respect of any of the three preceding financial years after obtaining approval from the Tribunal on an application made by the company in such form and manner as may be prescribed. The Tribunal shall given notice to the Central Government and such authorities. It shall take into consideration the representation, if any, made by such authorities before passing the order under this Section.  A copy of the order passed by the Tribunal shall be filed with the Registrar. Such revised financial statement shall not be prepared more than once in a financial year. The detailed reason for such financial statement shall be disclosed in the Board’s report in the relevant financial year in which such revision is being made.