3. DEFINITION
“ A company’s obligation to all of
its stakeholders across all of its
activities with the aim of achieving
sustainable development in the
economic , social and
environment dimensions.”
4. WHICH COMPANY NEED TO
CONSTITUTE A CSR COMMITTEE ?
If a company satisfied any of the following condition
during any financial year shall constitute a CSR
committee of the board consisting of three or more
directors, out of which at least one director shall be
an independent director.
The conditions are as follows:
1) Net worth of Rs.500crore or more;
2) Turnover of Rs.1000crore or more;
3) Net profit of Rs.5crore or more.
5. MINIMUM AMOUNT OF EXPENDITURE ON
CORPORATE SOCIAL RESPONSIBILITY
The board shall ensure that the
company spends ,in every financial
year at least 2% of the average net
profits of the company made during
the three immediately preceding
financial years, in pursuance of its
corporate social responsibility policy
6. ACTIVITIES PERMITTED UNDER CORPORATE
SOCIAL RESPONSIBILITY
Eradicating extreme hunger and poverty
Promotion of education
Promoting gender equality and empowering
women
Reducing child mortality
Ensuring environmental sustainability
Employment enhancing vocational skills,
social business projects,
Contribution to the prime minister’s national
relief fund etc,..
7. GENERAL RECOGNITION & MEASUREMENT
CRITERIA
The CSR Activities are carried out by companies
in any of the following three ways:
-By making contribution to funds specified in
Schedule VII of the Companies Act 2013;
-Through a registered society/ trust/ section 8
company (erstwhile section 25);
-On their own account
8. TREATMENT OF CSR EXPENSES
option a and b= statement of profit and loss account
option c= revenue or capital expenditure
Revenue - statement of profit and loss
Capital- control
Control transferred - statement of profit and loss
Control not transferred - check future economic benefit -
statement of profit and loss but not as business profit.
CSR Expenses are measured at aggregate of amount
actually spent/paid and amount for which contractual
liability has been incurred (benefits received but
payment not made as on date).
9. TREATMENT OF UNSPENT CSR
No provision is required to be made for
unspent amount of CSR and only a
disclosure is required to be made. However,
provision needs to be made when a liability
has been incurred by entering into contract
for CSR spend.
The amount of provision will be equal to the
amount representing the extent to which
CSR activity was completed during the year.
10. TREATMENT OF EXCESS CSR
AMOUNT
If the company spends amount on CSR in
excess of the 2% of average profits of past
3 years then it is free to do so as 2% is
minimum amount and there is no maximum
limit prescribed in law.
However, no set-off will be allowed in
subsequent years for excess amount spend
in previous years and accordingly no asset
should be recognized in books for such
amount
11. MEASUREMENT OF CSR SPEND MADE IN KIND
This includes activities such as free distribution of
goods produced by the entity. These should be
measured in accordance with the AS-2/ Ind AS 2 at
cost or net realisable value, whichever is lower.
Treatment of Surplus arising out of CSR Activities
Any surplus arising out of CSR Projects shall not form part of
business profits of a company. It is an income of the company which
has to be recognised in Statement of Profit & Loss. So,
corresponding to income a liability will also be recognised for CSR
expense which will be expensed off in future period.
12. PRESENTATION AND DISCLOSURE
REQUIREMENTS
As per General Instructions for Preparation
of Financial Statements in accordance with
Schedule III of the Companies Act 2013, the
amount of CSR expenditure should be
disclosed by way of note to the Statement of
Profit & Loss. For better financial reporting
practices create a separate line item for
CSR Expenditure in Statement of Profit &
Loss.
A disclosure would be made in Board’s
Report.
13. Following disclosure are required in notes to
account of CSR expenditure:
1. Gross Amount required to be spent.
2. Amount approved by the Board.
3. Amount spent during the year on Construction/
acquisition of asset Other purposes
4. Details of Related Party Transactions (Trust/
society/ section 8 company which is controlled by
company for making CSR spend).