Amendment in Companies Accounts rules, 2016


Ministry of Corporate Affairs came with amendment to the Companies (Accounts) Rules, 2014, last month. These rules has been published in official gazette on 27th July 2016 and came into force on that date. In this post, we will discuss these amendments in this blog post.

Manner of consolidation of Accounts

We have discussed rules 6 earlier here. This is one of the most talked about rule on the Companies (Accounts) Rules, 2014. Original rules had only one proviso. Second and third proviso was inserted on 14th October 2014 while forth proviso on 16th January 2015. Present amendment substitute second proviso. Original second proviso was as under –

“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”

This proviso being substituted with following one –

“Provided further that nothing in this rule shall apply in respect of preparation of consolidated financial statements by a company if it meets the following conditions:-

(i) it is a wholly-owned subsidiary, or is a partially-owned subsidiary of another company and all its other members, including those not otherwise entitled to vote, having been intimated in writing and for which the proof of delivery of such intimation is available with the company, do not object to the company not presenting consolidated financial statements;

(ii) it is a company whose securities are not listed or are not in the process of listing on any stock exchange, whether in India or outside India; and

(iii) its ultimate or any intermediate holding company files consolidated financial statements with the Registrar which are in compliance with the applicable Accounting Standards.”

If a company is –

  • a subsidiary of another company
  • its holding company and all other members do not object for non – consolidation of accounts of its subsidiary with it
  • unlisted and not going to list anywhere
  • its ultimate or any intermediate holding company file consolidated financial statements

Such company shall not require consolidating its accounts.

Every listed company, even if it is a subsidiary of another company, shall require consolidating accounts. To get exemption, any of its holding companies must have consolidated accounts.

Report of performance of subsidiary, associates and joint – venture companies

We discussed original rules 8(1) earlier here. Present amendment amend sub – rule (1) of rule 8 as under –

“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 and shall report on the highlights of performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company during the period under report.”

This amendment tries to give feel of less compliance. Earlier holding companies are required to report in its boards’ report performance and financial position of each subsidiary, associates and joint – venture companies. Now, these holding companies shall report in their boards’ report highlights and their contribution to the overall performance of the company.  Now, holding companies may present relevant information in useful manner.

This rule shall apply to boards’ reports prepared and circulated on or after 27th July 2016.

Internal audit by individuals, firms or body corporate

We have discussed rule 13 earlier here. Sub – rule (1) of rule 13 prescribe that companies as mentioned in the sub – rules shall be audited by internal auditor or firm of auditor. Now this amendment permit internal audit by body corporate also.

After present amendment, sub – rule (1) of rule 13 read like this –

“The following class of companies shall be required to appoint an internal auditor or a firm of internal auditors which may be either an individual or a partnership firm or a body corporate … …”

New forms

By present amendment government replaced present AOC – 1 with new form AOC – 1 Statement containing salient features of the financial statement of subsidiaries or associate companies or joint ventures.

This amendment also brings a new form AoC – 4 Form for filing financial statement and other documents with the Registrar.

Please note: This blog invite readers to share their comments, suggestions, hardship, queries and everything in comment section. This blog post is not a professional advice but just a knowledge sharing initiative for mutual discussion.

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One response to “Amendment in Companies Accounts rules, 2016

  1. Pingback: Index of Companies Law Posts | AishMGhrana

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