[FAQs] on Overview of Reporting in Accounting
- Account & Audit|Blog|
- 19 Min Read
- By Taxmann
- Last Updated on 20 March, 2023
Table of Contents
- Financial Reporting
- Non-financial reporting
- Corporate Sustainability Reporting
- Challenges in Main Streaming Sustainability Reporting
- Key Drivers of Sustainability Reporting
- Global Reporting Initiative – Sustainability Reporting Framework
- Sustainability Reporting Framework in India
- Integrated Reporting
- Corporate social responsibility report
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1. Financial Reporting
FAQ 1. What is financial reporting and what are its primary components?
Financial reporting is the process of producing statements that disclose an organisation’s financial status to management, investors and the government. Financial Reporting involves the disclosure of financial information to the various stakeholders about the financial performance and financial position of the organisation over a specified period of time. These stakeholders include – investors, creditors, public, debt providers, governments & government agencies. In case of listed companies the frequency of financial reporting is quarterly & annual.
The main components of financial reporting are:
- The financial statements – Balance Sheet, Statement of Profit & Loss, Cash flow statement & Statement of changes in stock holder’s equity.
- The notes to financial statements.
- Quarterly & Annual reports (In case of listed companies).
- Prospectus (In case of companies going for IPOs).
- Management Discussion & Analysis (In case of public companies).
FAQ 2. What are the purposes and limitations of financial reporting?
Financial reporting is the process of producing statements that disclose an organisation’s financial status to management, investors and the government.
- Purpose of Financial Reporting: Financial reporting serves two primary purposes.
- It helps management to engage in effective decision-making concerning the company’s objectives and overall strategies. The data disclosed in the reports can help management discern the strengths and weaknesses of the company, as well as its overall financial health.
- Financial reporting provides vital information about the financial health and activities of the company to its stakeholders including its shareholders, potential investors, consumers, and government regulators. It’s a means of ensuring that the company is running appropriately.
- Limitations of Financial Reporting: Financial Reporting involves the disclosure of financial information to the various stakeholders about the financial performance and financial position of the organisation over a specified period of time. These stakeholders include-investors, creditors, public, debt providers, governments & government agencies.
- In case of listed companies the frequency of financial reporting is quarterly & annual. However, the current financial reporting model was developed in the 1930’s for an industrial world.
- In general, the model provides a backwards-looking review of performance and does not provide enough relevant information for decision- making today.
- The financial reporting model is like “looking in the rear-view mirror,” when in fact the road ahead is very turbulent and there are huge impacts on the company, both societal and environmental.
- It is not necessarily the volume of information, but the lack of a comprehensive story, which is where improvements in corporate reporting are needed.
- In today’s world Investors expect information about Business model and strategy, intangible factors and sustainability (i.e. economic, environmental, social) commitments, impacts and performance that affect a company’s value today and its ability to create value in the future, etc.
FAQ 3. What is the information to be disclosed in the board’s report?
A board’s report should typically include information under following heads:
- Company Specific Information
- General Information
- Capital and Debt Structure
- Credit Rating of Securities
- Investor Education and Protection Fund (IEPF)
- Disclosures Relating to Subsidiaries, Associates and Joint Ventures
- Details of Deposits, Particulars of Loans, Guarantees and Investments
- Particulars of Contracts or Arrangements with Related Parties
- Corporate Social Responsibility (CSR)
2. Non-financial Reporting
FAQ 4. Why Non-Financial Reporting is important for companies?
Non-financial reporting is an opportunity to communicate in an open and transparent way with stakeholders. In their non-financial reports, firms volunteer an overview of their environmental and social impact during the previous year. The information in non-financial reports contributes to building up a company’s risk-return profile. Non-financial reporting includes
a. Board’s Report
b. Corporate Social Responsibility Report
c. Corporate Sustainability Reporting
Many opine that from the time of Industrial Revolution, economic development has come at the cost of environment and has brought about large scale destruction of nature. Due to the negative externalities of economic development, the practice of non-financial reporting started largely in response to pressure from non-governmental organisations (NGOs) and civic society, which claimed that many firms lacked social and environmental responsibility. It epitomises that a company’s financial health is dependent on much more than the assets on its balance sheet and the movements on its profit and loss account.
Therefore non-financial reporting plays an important role as is a structured way of presenting information about ones performance. It is the practice of measuring, disclosing and being accountable to internal and external stakeholders for organisational performance towards the goal of sustainable and inclusive development.
3. Corporate Sustainability Reporting
FAQ 5. What is the role of Government in sustainability reporting?
‘Sustainability reporting’ is a process for publicly disclosing an organization’s economic, environmental and social performance. Global Reporting Initiative (GRI) has developed a generally accepted framework to simplify report preparation and assessment, helping both reporters and report users gain greater value from sustainability reporting.
Sustainability Reporting Framework in India
In India, the Ministry of Corporate Affairs (MCA) recommends sustainability reporting. Considering the importance of sustainability in businesses, MCA had launched Corporate Social Responsibility Voluntary Guidelines in 2009.
To take this further, in 2011 MCA issued ‘National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business’ which encouraged reporting on environment, social and governance issues.
SEBI in its (Listing Obligations and Disclosure Requirements) Regulations, 2015 has mandated the requirement of submission of BRR for top 1000 listed entities describing initiative taken by them from an environmental, social and governance perspective in the prescribed format.
Regulation 34(2)(f) of SEBI (LODR) Regulations, 2015
The annual report shall contain the following:
For the top one thousand listed entities based on market capitalization, business responsibility report describing the initiatives taken by them from an environmental, social and governance perspective, in the format as specified by the Board from time to time:
Provided that the requirement of submitting a business responsibility report shall be discontinued after the financial year 2021-22 and thereafter, with effect from the financial year 2022-23, the top one thousand listed entities based on market capitalization shall submit a business responsibility and sustainability report in the format as specified by the Board from time to time:
Provided further that even during the financial year 2021-22, the top one thousand listed entities may voluntarily submit a business responsibility and sustainability report in place of the mandatory business responsibility report:
Provided further that the remaining listed entities including the entities which have listed their specified securities on the SME Exchange, may voluntarily submit such reports.
Explanation: For the purpose of this clause, market capitalization shall be calculated as on the 31st day of March of every financial year.
[Substituted by the SEBI (Listing Obligations and Disclosure Requirements)(Second Amendment) Regulations, 2021 w.e.f. 5.5.2021].
FAQ 6. What are the five sections of the Business Responsibility Report (BRR) framework, as prescribed by SEBI Circular No. CIR/CFD/CMD/10/2015 dated 4th November, 2015, and what are the contents of each section?
Annexure I of SEBI’s circular dated 4th November, 2015 prescribes the format given below for “Business Responsibility Report”:
|SECTION A||GENERAL INFORMATION ABOUT THE COMPANY||1. Corporate Identity Number (CIN) of the Company
2. Name of the Company
3. Registered address
5. E-mail id
6. Financial Year reported
7. Sector(s) that the Company is engaged in.
8. List three key products/services that the Company manufactures/provides.
9. Total number of locations where business activity is undertaken by the Company including national and international locations.
10. Markets served by the Company.
|SECTION B||FINANCIAL DETAILS OF THE COMPANY||1. Paid up Capital (INR)
2. Total Turnover (INR)
3. Total profit after taxes (INR)
4. Total Spending on Corporate Social Res-ponsibility (CSR) as percentage of profit after tax (%).
5. List of activities in which expenditure in 4 above has been incurred.
|SECTION C||OTHER DETAILS||1. Does the Company have any Subsidiary Company/Companies?
2. Do the Subsidiary Company/Companies participate in the BR Initiatives of the parent company? If yes, then indicate the number of such subsidiary company(s).
3. Do any other entity/entities (e.g. suppliers, distributors etc.) that the Company does business with, participate in the BR initiatives of the Company? If yes, then indicate the percentage of such entity/entities? [Less than 30%, 30%-60%, More than 60%].
|SECTION D||BR INFORMATION||1. Details of Director/Directors responsible for BR
(a) Details of the Director/Director responsible for implementation of the BR policy/policies
(b) Details of the BR head
2. Principle-wise (as per NVGs) BR Policy/policies
3. Governance related to BR
|SECTION E||PRINCIPLE-WISE PERFORMANCE||This sections provides for 9 principle wise performance|
FAQ 7. What are five distinctive elements of the Global Reporting Initiative (GRI) Sustainability Reporting Standards (GRI Standards) that help organizations understand and communicate the impact of their business on critical sustainability issues?
The distinctive elements of the GRI Standards – and the activity that creates them – include:
- Multi-stakeholder input: The approach is based on multi-stakeholder engagement, representing the best combination of technical expertise and diversity of experience to address the needs of all report makers and users. This approach enables to produce universally-applicable reporting guidance.
- A record of use and endorsement: New audiences for sustainability information, like investors and regulators, are now calling for more and better performance data. Annual growth in the number of reporters is expected to continue, as we work towards a key area of our strategy; more reporters and better reporting.
- Governmental references and activities: Enabling policy is a key aspect of overall strategy and GRI work with governments, international organizations and capital markets to further this agenda. As a result, 35 countries use GRI in their sustainability policies and look for guidance as the world’s most widely used sustainability reporting standards. In addition GRI have long-standing collaborations with over 20 international organizations such as the UNGC, OECD and the UN Working Group on Business & Human Rights.
- Independence: The creation of the Global Sustainability Standards Board in 2014, and related governance structure changes, have strengthened the independence of the standards aspect funding approach also ensures independence. It aims for a degree of self-sufficiency. Funding is secured from diverse sources; governments, companies, foundations, partner organizations and supporters.
- Shared development costs: The expense of developing GRI’s reporting guidance is shared among many users and contributors. For companies and organizations, this negates the cost of developing in-house or sector based reporting frameworks.
FAQ 8. What is the importance of corporate reporting in communicating with investors as part of a company’s accountability and stewardship obligations, and what are the expected information requirements of investors in such reports?
Investors expect the following information:
- Business model and strategy.
- Intangible factors and sustainability (i.e. economic, environmental, social) commitments.
- Impacts and performance that affect a company’s value today and its ability to create value in the future.
- Key aspects of corporate governance.
- Internal controls.
- Human rights/diversity practices and policies.
- Key financial ratios
4. Challenges in Main Streaming Sustainability Reporting
FAQ 9. What challenges may arise in mainstreaming sustainability reporting, given that it is a relatively new concept?
(i) Importance of sustainability reporting
Internal benefits of sustainability reporting for companies and organizations can include:
- Increased understanding of risks and opportunities.
- Emphasizing the link between financial and non-financial performance.
- Influencing long-term management strategy and policy, and business plans.
External benefits of sustainability reporting can include:
- Mitigating – or reversing – negative environmental, social and governance impacts.
- Improving reputation and brand loyalty.
- Enabling external stakeholders to understand the organization’s true value, and tangible and intangible assets.
(ii) Sustainability report
A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities. A sustainability report presents the organization’s values and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy. A sustainability report is the key platform for communicating sustainability performance and impacts – whether positive or negative.
Sustainability Reporting Framework in India
In India, considering the importance of sustainability in businesses, MCA had launched Corporate Social Responsibility Voluntary Guidelines in 2009.
To take this further, in 2011 MCA issued ‘National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business’ which encouraged reporting on environment, social and governance issues.
SEBI in its (Listing Obligations and Disclosure Requirements) Regulations, 2015 vide Regulation 34 has mandated the requirement of submission of BRR for top 1000 listed entities describing initiative taken by them from an environmental, social and governance perspective in the prescribed format.
(iii) Following are the challenges in main streaming sustainability reporting:
1. Government Encouragement: In many jurisdictions, there are no guidelines on sustainability reporting to encourage the corporate sector. While on the other hand, there are voluntary as well as mandatory guidelines from regulators for reporting on sustainability aspects like in India we have SEBI framework of Business Responsibility Report.
2. Awareness: Lack of awareness about the emerging concept of sustainability reporting is also a major challenge which the government and corporate governance bodies need to address by arranging the sustainability awareness programme for the Professionals, Board of Directors and Management in the corporate sector.
3. Expertise Knowledge: Sustainability Reporting is relatively a new concept in many jurisdictions and organization found it very difficult to prepare a sustainability report in the absence of expert guidance on the subject. The professional bodies in various jurisdictions should impart the expert knowledge of sustainability reporting to their members to develop a good cadre of experts in this emerging area of sustainability reporting.
4. Investor Behaviour: It is a recognized principle that investors should consider the Environmental, Social and Governance (ESG) issues while making investment decisions. There are specific regulators guidelines for the institutional investor to be vigilant on voting aspects and be concerned about the governance practices of the companies in which they invest.
5. Key Drivers of Sustainability Reporting
FAQ 10. What is meant by Corporate Sustainability Reporting and what are the benefits and key drivers of sustainability reporting?
Sustainability reporting is a process for publicly disclosing an organization’s economic, environmental and social performance. Global Reporting Initiative (GRI) has developed a generally accepted framework to simplify report preparation and assessment, helping both reporters and report users gain greater value from sustainability reporting.
Benefits of sustainability reporting
- Emphasizing the link between financial and non-financial performance.
- Influencing long term management strategy and policy and business plans.
- Streamlining processes, reducing costs and improving efficiency.
- Benchmarking and assessing sustainability performance with respect to laws, norms, codes, performance standards and voluntary initiatives.
- Avoiding being implicated in publicized environmental, social and governance failures.
Key drivers of sustainability reporting
- Regulations: Governments, at most levels have stepped up the pressure on corporations to measure the impact of their operations on the environment. Legislation is becoming more innovative and is covering an ever wider range of activities. The most notable shift has been from voluntary to mandatory sustainability, monitoring and reporting.
- Customers: Public opinion and consumer preferences are a more abstract but powerful factor that exerts considerable influence on companies, particularly those that are consumer oriented. Customers significantly influence a company’s reputation through their purchasing choices and brand.
- Loyalty: This factor has led the firms to provide much more information about the products they produce, the suppliers who produce them, and the product’s environmental impact starting from creation to disposal.
- NGO’s and the media: Public reaction comes not just from customers but from advocates and the media, who shape public opinion. Advocacy organisations, if ignored or slighted, can damage brand value.
- Employees: Those who work for a company bring particular pressure to bear on how their employers behave; they, too, are concerned citizens beyond their corporate roles.
6. Global Reporting Initiative – Sustainability Reporting Framework
FAQ 11. What is a Global reporting initiative (GRI)?
The GRI Standards represent global best practice for reporting publicly on a range of economic, environmental and social impacts. Sustainability reporting based on the Standards provides information about an organization’s positive or negative contributions to sustainable development.
The modular, interrelated GRI Standards are designed primarily to be used as a set, to prepare a sustainability report focused on material topics.
Preparing a report in accordance with the GRI Standards provides an inclusive picture of an organization’s material topics, their related impacts, and how they are managed. An organization can also use all or part of selected GRI Standards to report specific information.
GRI Sustainability Reporting Standards (GRI Standards) help businesses, governments and other organizations understand and communicate the impact of business on critical sustainability issues.
FAQ 12. What steps are involved in using the GRI Reporting Framework to ensure a balanced and reasonable presentation of an organization’s performance in sustainability reporting?
The Global Reporting Initiative (GRI) had launched the fourth generation of its sustainability reporting guidelines: the GRI G4 Sustainability Guidelines (the Guidelines) in 2013. The aim of G4, is to help reporters prepare sustainability reports that contain valuable information about the organization’s most critical sustainability-related issues, and make such sustainability reporting standard practice.
G4 is applicable to all organizations, large and small, across the world. The Guidelines are now presented in two parts to facilitate the identification of reporting requirements and related guidance. It consist of following two parts—
Part 1 – Reporting Principles and Standard Disclosures: It contains the reporting principles and standard disclosures and also sets out the criteria to be applied by an organization to prepare its sustainability report in accordance with the Guidelines.
Part 2 – Implementation Manual: It contains reporting and interpretative guidance that an organization should consult when preparing its sustainability report.
Following are two different types of Standard Disclosures
|1. GENERAL STANDARD DISCLOSURES||2. SPECIFIC STANDARD DISCLOSURES|
FAQ13. What is stakeholder inclusiveness?
‘Stakeholder Inclusiveness’ is one of the four core principles in the GRI G4 Guidelines that help to define report content that is material to the reporting organization and its stakeholders.
Stakeholders are defined as entities or individuals:
- Who can reasonably be expected to be significantly affected by the organization’s activities, products, and/or services.
- Whose actions can reasonably be expected to affect the ability of the organization to successfully implement its strategies and achieve its objectives.
Need for stakeholders inclusiveness
Stakeholders are individuals or groups that have interests, rights, or ownership in an organization and its activities. Since the stakeholders for an organization are scattered and there may be variation in their expectation and interest, stakeholder engagement processes can serve as tools for understanding the reasonable expectations and interests of stakeholders.
The reasonable expectations and interests of stakeholders are a key reference point for many decisions in the preparation of the sustainability report. The organization should identify its stakeholders, and explain how it has responded to their reasonable expectations and interests.
7. Sustainability Reporting Framework in India
FAQ 14. What are the different sections of Business Responsibility Reporting Framework as per LODR Regulations?
As per Regulation 34 of SEBI (LODR) 2015, SEBI has mandated the requirement of submission of BRR for top 1000 listed entities describing initiative taken by them from an environmental, social and governance perspective in the prescribed format.
1. Section A: General Information about the Organisation – Industry Sector, Products & Services, Markets, other general information.
2. Section B: Financial Details of the Organisation – Paid up capital, Turnover, Profits, CSR (Corporate Social Responsibility) spend.
3. Section C: Other Details – BR initiatives at Subsidiaries and Supply- chain Partners.
4. Section D: BR Information – Structure, Governance & Policies for Business Responsibility.
5. Section E: Principle-wise Performance – Indicators to assess performance on the 9 Business Responsibility principles as envisaged by the National Voluntary Guidelines (NVGs).
8. Integrated Reporting
FAQ 15. What is integrated reporting?
An Integrated Report is:
“A concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long-term”.
The primary purpose of an integrated report is to explain to providers of financial capital how an organisation creates value over time.
Integrated reporting is founded on integrated thinking, which helps demonstrate inter connectivity of strategy, strategic objectives, performance, risk and incentives and helps to identify sources of value creation. Integrated Reporting is one step ahead of sustainability reporting and is set to become the way companies report their annual financial and sustainability information together in one report.
Aim of integrated report
The aim of an integrated report is to clearly and concisely tell the organization’s stakeholders about the company and its strategy and risks, linking its financial and sustainability performance in a way that gives stakeholders a holistic view of the organization and its future prospects.
FAQ 16. What are the five additional capitals, besides financial capital, that the Integrated Reporting framework examines as key drivers of an organization’s long-term success and decision-making?
Following are the five additional capitals which are in addition to financial capital that should guide an organisation’s decision-making and long-term success – its value creation in the broadest sense:
1. Manufactured capital: Manufactured capital is seen as human-created, production-oriented equipment and tools.
2. Intellectual capital: It is a key element in an organization’s future earning potential, investment in R&D, innovation, human resources and external relationships, which can determine the organization’s competitive advantage.
3. Human capital: It is generally understood to consist of individual’s capabilities and the knowledge, skills and experience of the company’s employees and managers as they are relevant to the task at hand as well as the capacity to add to the reservoir of knowledge, skills and experience.
4. Social and relationship capital: Social and relationship capital may include relationships within an organization, as well as those between an organization and its external stakeholders, depending on where social boundaries are drawn.
5. Natural capital: It may be defined as any stock of natural resources or environmental assets such as soil, water, and atmosphere, ecosystems which provide a flow of useful goods or services now and in the future.
FAQ 17. What are the Guiding Principles for the preparation of an integrated report?
- Purpose of Integrated Reporting
- The primary purpose of an integrated report is to explain to providers of financial capital how an organisation creates value over time. An integrated report benefits all stakeholders interested in an organisation’s ability to create value over time, including employees, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers.
- An integrated report aims to provide insight about the resources and relationships used and affected by an organisation – these are collectively referred to as “the capitals” in this Framework.
- It also seeks to explain how the organisation interacts with the external environment and the capitals to create value over the short, medium and long term. The capitals are stocks of value that are increased, decreased or transformed through the activities and outputs of the organisation. They are categorized in this Framework as financial, manufactured, intellectual, human, social and relationship, and natural capital, although organisations preparing an integrated report are not required to adopt this categorization or to structure their report along the lines of the capitals.
- Guiding Principles: The following Guiding Principles underpin the preparation and presentation of an integrated report, informing the content of the report and how information is presented. These Guiding Principles are applied individually and collectively for the purpose of preparing and presenting an integrated report; accordingly, judgment is needed in applying them, particularly when there is an apparent tension between them (e.g., between conciseness and completeness).
A. Strategic focus and future orientation: An integrated report should provide insight into the organisation’s strategy, and how it relates to the organisation’s ability to create value in the short, medium and long term and to its use of and effects on the capitals.
B. Connectivity of information: An integrated report should show a holistic picture of the combination, interrelatedness and dependencies between the factors that affect the organisation’s ability to create value over time.
C. Stakeholder relationships: An integrated report should provide insight into the nature and quality of the organisation’s relationships with its key stakeholders, including how and to what extent the organisation understands, takes into account and responds to their legitimate needs and interests.
D. Materiality: An integrated report should disclose information about matters that substantively affect the organisation’s ability to create value over the short, medium and long term.
E. An integrated report should be concise: An integrated report includes sufficient context to understand the organisation’s strategic governance, performance and prospects without being burdened with less relevant information.
F. Reliability and completeness: An integrated report should include all material matters, both positive and negative, in a balanced way and without material error.
G. Consistency and comparability: The information in an integrated report should be presented
- On a basis that is consistent over time.
- In a way that enables comparison with other organisations to the extent it is material to the organisation’s own ability to create value over time.
FAQ 18. How is sustainability reporting an intrinsic element of an integrated report?
‘Sustainability reporting’ considers the relevance of sustainability to an organization and also addresses sustainability priorities and key topics, focusing on the impact of sustainability trends, risks and opportunities on the long-term prospects and financial performance of the organization.
On the other hand Integrated reporting is an integrated representation of the key factors that are material to its present and future value creation. Integrated reporters build on sustainability reporting foundations and disclosures in preparing their integrated report.
‘Sustainability reporting’ vs. ‘Integrated reporting’
Although the objectives of sustainability reporting and integrated reporting may be different, sustainability reporting is an intrinsic element of integrated reporting.
Sustainability reporting is fundamental to an organization’s integrated thinking and reporting process in providing input into the organization’s identification of its material issues, its strategic objectives, and the assessment of its ability to achieve those objectives and create value over time.
9. Corporate social responsibility report
FAQ 19. What are the key elements of a CSR policy according to the Corporate Governance Social Responsibility Voluntary Guidelines 2009 issued by the Ministry of Corporate Affairs, which emphasizes that businesses should create a CSR policy to guide their strategic planning and roadmap for CSR initiatives?
Core elements of a CSR Policy are as follows:
- Care for all stakeholders: The companies should respect the interests of, and be responsive towards all stakeholders, including shareholders, employees, customers, suppliers, project affected people, society at large etc. and create value for all of them.
- Ethical functioning: Their governance systems should be under pinned by Ethics, Transparency and Accountability. They should not engage in business practices that are abusive, unfair, corrupt or anti-competitive.
- Respect for workers’ rights and welfare: Companies should provide a work place environment that is safe, hygienic and humane and which upholds the dignity of employees. They should provide all employees with access to training and development of necessary skills for career advancement.
- Respect for Human Rights: Companies should respect human rights for all and avoid complicity with human rights abuses by them or by third party.
- Respect for Environment: Companies should take measures to check and prevent pollution; recycle, manage and reduce waste, should manage natural resources in a sustainable manner and ensure optimal use of resources like land and water etc.
- Activities for Social and Inclusive Development: Depending upon their core competency and business interest, companies should undertake activities for economic and social development of communities and geographical areas, particularly in the vicinity of their operations.
FAQ 20. What are the contents of a CSR report that eligible companies are required to file on an annual basis under the Corporate Social Responsibility (CSR) provisions mandated by the Companies Act, 2013?
Section 134(3)(o) of the Companies Act, 2013 provides that there shall be attached to statements laid before a company in general meeting, a report by its Board of Directors, which shall include the details about the policy developed and implemented by the company on corporate social responsibility initiatives taken during the year. Following :
- Brief outline on CSR Policy of the Company.
- Provide the web-link where Composition of CSR committee, CSR Policy and CSR projects approved by the board are disclosed on the website of the company.
- Provide the details of Impact assessment of CSR projects carried out in pursuance of sub-rule (3) of rule 8 of the Companies (Corporate Social responsibility Policy) Rules, 2014, if applicable (attach the report).
- Details of the amount available for set-off in pursuance of sub-rule (3) of rule 7 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and amount required for set-off for the financial year, if any.
- Average net profit of the company as per section 135(5).
- (a) Two per cent of average net profit of the company as per section 135(5).
(b) Surplus arising out of the CSR projects or programmes or activities of the previous financial years.
(c) Amount required to be set-off for the financial year, if any.
(d) Total CSR obligation for the financial year.
- CSR amount spent or unspent for the financial year.
- (a) Details of Unspent CSR amount for the preceding three financial years.
(b) Details of CSR amount spent in the financial year for ongoing projects of the preceding financial year(s).
- In case of creation or acquisition of capital asset, furnish the details relating to the asset so created or acquired through CSR spent in the financial year.
- Specify the reason(s), if the company has failed to spend two per cent of the average net profit as per section 135(5).
FAQ 21. What are the key details that should be included in the Annual Report to ensure appropriate disclosures on Corporate Social Responsibility (CSR) activities in accordance with the requirements of the Companies Act, 2013, if a company has incurred expenses on various CSR activities during the year and you are serving as its newly appointed Company Secretary?
As per Section 134 of the Companies Act, 2013, the Board of the Company is mandated to prepare a CSR Report.
The Companies (CSR Policy) Rules, 2014 provide for the format for reporting CSR activities annually. The format for the annual report on CSR activities is as follows:
- A brief outline of the company’s CSR policy, including overview of projects or programs proposed to be undertaken and a reference to the web-link to the CSR policy and projects or programs.
- The composition of the CSR Committee.
- Average net profit of the company for last three financial years.
- Prescribed CSR Expenditure.
- Details of expenditure incurred on CSR activities during the financial year.
a. Total amount to be spent for the financial year.
b. Amount unspent, if any.
- In case the company has failed to spend the two per cent of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board report.
- A responsibility statement of the CSR Committee that the implementation and monitoring of CSR Policy, is in compliance with CSR objectives and Policy of the company.
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