A new rule introduced by the Ministry of Corporate Affairs (MCA) is forcing companies to reconcile their financial statements, creating challenges for many in filing the fiscal year 2022 accounts before the October 31 deadline.
Under this rule, companies must file their financial statements for fiscal 2022 onwards with rounded-off values. Since the previous year’s numbers weren’t rounded off, auditors have to now prepare two sets of reports for like-for-like comparison, said compliance experts.
The increased complexity, along with a few other factors, has prompted the professional governing body of company secretaries to write to the ministry, seeking a two-month extension to the deadline to file the statements.
According to experts, one of the key issues is filling of the AOC4 form, which must be filed with annual financial statements. The form still allows auditors to file statements with absolute numbers.
“When the professional tries to file the AOC 4 for FY21-22, which will include the financial statements for FY20-21 as well, there will be a mismatch between financial statement values for the same year due to difference between rounded and absolute values,” said Rishi Agarwal chief executive officer, Teamlease Regtech, which assists companies with compliance. “This can potentially be construed as misleading information by the RoC (Registrar of Companies) and leads to the requirement of two sets of financial statements for every company; one that is on a rounded-off basis and the other on an absolute-number basis.”
The Institute of Company Secretaries (ICSI) on October 11 wrote to the MCA requesting that the October 31 deadline be extended to December 31.
“With the MCA notification…made effective from April 1, 2021, mandating round-off of the figures appearing in the financial statements but absolute figures required to be filed in Form AOC-4, it is taking extra time for preparation of two different sets of audited forms,” the ICSI said in its representation.
It said also that the October 31 deadline was coinciding with the income tax deadlines and the festival season, and hence auditors were facing manpower challenges as well.
Compliance experts said this might be a one-time issue, since in their FY22 filings, companies would disclose the rounded-off values which would be directly comparable with the FY23 numbers. Hence, companies needn’t file two sets of financials from next time onwards.