Corporate reporitng requirements


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Corporate reporitng requirements

  1. 1. CORPORATE REPORITNG REQUIREMENTS AND CURRENT ISSUES BY: Gayatri Malik Class: M.Com(P) 2nd Semester Section: B
  2. 2. WHAT IS CORPORATE REPORTING ? The exact definition of corporate reporting differs depending on who you speak to.  the term ‘corporate reporting’ to refer to the presentation and disclosure aspects ― as distinct from accounting/measurement ― of the following areas of reporting: •Integrated reporting: is about connecting information about an organisation’s current decisions with its future prospects; connecting information about strategy, risk, remuneration and performance; and recognising that the economy, environment and society are inseparable and therefore information provided to understand an organisation’s performance in each of these areas needs to be viewed as part of a whole. Integrated reporting helps boards of directors to see the issues they face more clearly, and enables them to explain their business rationale to stakeholders with greater clarity and authority. • Financial Reporting: At the core of the corporate reporting model is the financial reporting model, consisting of financial statements and accompanying notes that comply with generally accepted accounting principles (GAAP). • Corporate Governance: The processes by which companies are directed and controlled. Levels of disclosure differ worldwide but might include information on board composition and development, accountability and audit and relations with shareholders.
  3. 3. WHAT IS CORPORATE REPORTING? CONTD… •Executive Remuneration: How executives are rewarded, both in the short and longer-term, for delivering their company’s strategic objectives. • Corporate Responsibility: Corporate responsibility includes the communication about how companies understand and manage their impact on people, clients, suppliers, society, and the environment in order to deliver increased value to all their stakeholders. • Narrative Reporting: Narrative reporting is shorthand for the critical contextual and non-financial information that is reported alongside financial information to provide a broader, more meaningful understanding of a company's business, its market position, strategy, performance and future prospects. It includes quantified metrics for these areas.  Corporate financial reporting is a series of activities that allow companies to record operating data and report accurate accounting statements at the end of each month , quarter and year.
  4. 4. FINANCIAL REPORTING STEPS 1. PERCEPTION OF SIGNIFICANT ACTIVITY: of the accounting entity or in the environment in which the entity performs. 2. SYMBOLISING THE PERCEIVED ACTIVITIES: in such fashion that a database of the activities is available that can be analyzed to grasp an understanding of the interrelationship of the mass of perceived activities. Conventionally, this symbolization has taken form of recording in accounts , journals, and ledgers using well established bookkeeping and measurement procedures. 3. ANALYSIS OF THE MODEL OF ACTIVITIES: in order to summarize the interrelationships among activities and to provide a status picture or map of the entity. Traditionally, this analysis process has been viewed as one of developing accounting reports to provide insights into the nature or entity activities. 4. COMMUNICATION OF ANALYSIS: to users of the accounting products, to guide decisions makers in directing future of the entity or in changing their relationship with the entity.
  5. 5. FINANCIAL STATEMENT OF COMPANY As per section 2(40) of the companies Act, 2013, the financial statements of the company includes:  a balance sheet at the end of financial year,  a profit and loss account, or in case of NPO an income and expenditure account for the financial year  cash flow statements for the financial year  a statement of change in equity, if applicable,  any explanatory note annexed to, or forming part of, any document referred to in sub clause(1) to sub clause(4)
  6. 6. USERS OF FINANCIAL STATEMENTS Different classes of users use financial information for different purpose. According to the framework for the preparation and presentation of financial statements issued by the ICAI in 2000 (ICAI CONCEPTUAL FRAMEWORK) the users of financial statements include :  Present and potential investors , Employees, Lenders, Suppliers, Other trade creditors, Customers, Government and their agencies  Public
  7. 7. OBJECTIVES OF CORPORATE FINANCIAL REPORTING In USA, the FASB has identified the following major objectives of financial reporting: 1. financial reporting should provide information that is useful to present the potential investors and creditors and other users in making rational investment , credit and similar decision. 2. financial reporting should provide information to investors, creditors and other to assess the amount, timing and uncertainty of prospective net cash inflows related enterprise 3. financial reporting should provide information about economic resources of an enterprise, the claims to those resources (obligations of the enterprise to transfer resources to other entities and owner’s equity), and the effect of transactions, events and circumstances that change resource and claims to those resource. 4. financial reporting should provide information about an enterprise’s financial performance during a period
  8. 8. OBJECTIVES OF CORPORATE FINANCIAL REPORTING 5. the primary focus of financial reporting is information about an enterprise performance provided by measure of earnings and its components 6. Financial reporting should provide information about how an enterprise obtains and spends cash, about its borrowings and repayment of borrowing, about its capital transactions , including cash dividends and other disbursements of enterprise’s resources to owners and about other factors that may affect an enterprise liquidity or solvency 7. financial reporting should provide information about how management of an enterprise has discharged its stewardship responsibility to owners (stockholders) for the use of enterprise resource entrusted to it 8. Financial reporting should provide information that it useful to managers and directors in making decisions in the interest of owners. 9. Apart from investment decisions making another objective of financial reporting is to provide information on management accountability
  9. 9. LEGAL FRAMEWORK OF CORPORATE REPORTING IN INDIA The companies act and the SEBI requirements together provide the legal framework of corporate reporting in India: (A)ROLE OF SEBI: the securities and exchange board of India is the regulatory authority in India established under section 3 of SEBI act, 1992 provide for establishment of SEBI with statutory powers for:  protecting the interest of investors in securities  promoting the development of the securities market and  Regulating the securities market. (B) POWERS OF SEBI:  Regulating the business in stock exchanges and other securities markets  Registering and regulating the working of stock brokers , sub brokers etc  Promoting and regulating self regulatory organization’s  Prohibiting fraudulent and unfair trade practices  Calling for information, undertaking inspection, conducting inquires and audits of the stock exchanges, intermediaries, self regulatory organization’s, mutual funds and other persons associated with the securities market
  10. 10. LEGAL FRAMEWORK OF CORPORATE REPORTING IN INDIA SEBI has imposed a number of disclosure and other requirements, some important one are: (C) DISCLOSURE REQUIREMENTS:  Dispatch of a copy of the complete and full annual report to the shareholders (clause 32)  Disclosure of cash flow statements (clause 32)  Disclosure of material developments and price sensitive information (clause 36)  Compliance with takeover code (clause 40 B)  Disclosure on interim unaudited financial result (clause 41)  disclosure regarding listing fee payment status and the name and address of each stock exchange where the company securities are listed(clause 48 B)  Corporate governance report (clause 49)  Compliance with accounting standards issued by ICAI (Clause 50)
  11. 11. COMPANIES ACT, 2013 The companies act , 2013 lays down the detailed provisions regarding the maintenance of books of accounts and the preparation and presentation of annual accounts. A. STATUTORY RECOGNITION :  BOOKS OF ACCOUNTS: the companies act requires every company to maintain at its registered office proper books of accounts with respect to the following: • Al l receipts and disbursement of money and the matter in respect of which the receipts and disbursements take place, • All sale and purchases of goods of the company • The assets and liabilities of the company  STATUTUORY RECOGNITION OF ACCOUNTING STANDARDS: • The financial statements of the company should comply with the accounting standards section 211 • Where profit and loss and the balance sheet of the company do not comply with the accounting standards such companies should disclose in its profit and loss account and balance sheet, the following namely, 1. the deviation from accounting standards 2. the reason for such deviation 3. the financial effect if any, arising due to such deviation
  12. 12. COMPANIES ACT, 2013 CONTD..  CONCEPT OF TRUE AND FAIR: the financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 of the companies act, 2013 and shall be in the form or forms as may be prescribed for different class or classes of companies in schedule III  DISCLOUSURE REQUIREMENTS: the act requires that at every annual general meeting , the board of directors of the company should place before the company- • A balance sheet as at the end of the financial year and • A profit and loss account for the financial year section 210(1) of the Companies Act, 1956 • Cash Flow Statement AS 3  DISCLOSURE BY LISTED COMPANIES: • Balance sheet , profit and loss account and directors report (clause 32) • Cash Flow Statement • Related party disclosure • Holding companies and subsidiary companies in respect of loans, advances and investment • Corporate Governance
  13. 13. COMPANIES ACT, 2013 CONTD..  CORPORATE GOVERNANCE: in India the first attempt was made by the confederation of indian industries (CII) to codify corporate governance. But the genies of the provision on corporate governance contained in clause 49 of the listing agreement in the report of Kumar managalam Birla committee. The clause addresses different aspects of corporate governance. The disclosure requirements contained under this clause are as under: • MANAGEMENT DISCUSSION AND ANALYSIS REPORT: is a very important document through which management of company can express its view and opinions on various aspects of a company like: performance, success, or failure, future plans, of the company , forward looking information etc. • MANAGEMENT REPORT ON CORPORATE GOVERANCE: the listed companies are required to give a detailed compliance report on corporate governance in the separate section on “corporate governance” in their annual reports. The report must specifically highlight non-compliance of any mandatory requirements with reasons thereof and also the extent to which the non mandatory requirements have been adopted. • AUDITORS REPORT: the company should obtain a certificate from the auditor of the company.
  14. 14. PUBLISHED FINANCIAL STATEMENTSAnnual report is major vehicle through which Indian companies are publishing their financial statements .  ELEMENTSOF ANNUAL REPORT  Notice of annual general meeting Chairman's report Summary of financial result The financial highlights for a number of years Directors report Management discussion and analysis Corporate governance report Auditor’s report on financial statements Balance sheet Profit and loss account Business responsibility report Schedule and notes accounts Cash flow statements  environment report C & AG’s comment on accounts Audited consolidated financial statements Information on human resource Value added statements  corporate social report
  15. 15. REFERENCES 1. 2. 3. questions/publications/what-is-corporate-reporting.jhtml
  16. 16. THANK YOU