Key Non-compliances Observed by FRRB in Reporting of Equity in the Financial Statements

The Financial Reporting Review Board (FRRB) of ICAI performs an assessment of general-purpose financial statements of different entities to ensure adherence to generally accepted accounting principles (GAAP), compliance with auditor’s reporting obligations, and compliance with disclosure requirements set by regulatory bodies, laws, and applicable regulations. The FRRB was established as a proactive mechanism to enhance financial reporting and auditing practices. These findings will serve as a benchmark to verify whether entities have followed disclosures required under schedule III and principles prescribed under Ind AS have been followed while preparing financial statements.

a) Inappropriate Reporting

A company has disclosed separately shown two different notes, (a) Note on Equity Share Capital and (b) Note on Other Equity.

b) Relevant Provisions

Guidance Note on Division II – Ind AS Schedule III to the Companies Act, 2013

(i) Para 4.2 requires Financial Statements to include Balance Sheet, Statement of Changes in Equity for the period, Statement of Profit and Loss for the period and Notes.

(ii) Para 8.2 requires following line items are to be disclosed on the face of the Balance Sheet: Equity Share Capital; and Other Equity;

(iii) It also require that a Statement of Changes in Equity should be drawn comprising (a) Equity Share Capital and (b) Other Equity

c) FRRB Observation

The company failed to disclose (a) Note on Equity Share Capital and (b) Note on Other Equity under one sub-head “Statement of Changes in Equity”. Thereby violating requirements of Division II – Ind AS Schedule III to the Companies Act, 2013

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