Common Errors in Ind AS Financial Statements: FRRB Observations related to Certain specific P&L items

The ICAI’s Financial Reporting Review Board (FRRB) was constituted as a proactive mechanism to improve financial reporting practices. The FRRB reviews general purpose financial statements of various enterprises for compliances with generally accepted accounting principles, compliance with the reporting obligations of the auditor and compliance with disclosure requirements prescribed by regulatory bodies, statutes and rules and regulations relevant to the enterprise.

Given the increasing importance of transparent financial reporting and compliance with the disclosures under Ind AS, we have started a column series of articles, in which we would take a closer look at some of the key non-compliances and errors observed by the FRRB in the study. In this article of the series, we look into the FRRB observations relating to Certain specific P&L items in Ind AS based financial statements. One of such observation in respect of ‘Presentation of Certain specific P&L items’ by FRRB is mentioned below:-

(i) Disclosure/ Scenario in the Financial Statements selected by the FRRB:

No disclosure was made about the CSR expenditure in the books of accounts.

(ii) Relevant Schedule III/ Ind AS/ Companies Act requirements:

According to Note 11.5 of Division II of ICAI’s GN on Schedule III to the Companies Act, 2013, entity should disclose the expenditure incurred on corporate social responsibility activities [Clause (j) of Note 7].

(iii) FRRB Observation:

Since there is no CSR related disclosures, there is a non-compliance with the requirements of Schedule III.

(iv) Author’s Remarks:

CSR related disclosures have gained importance. In the revised Schedule III and CARO 2020, there are specific disclosures/ reporting clauses on CSR.

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