The Ministry of Corporate Affairs in its recent circular has notified the Companies (Indian Accounting Standards) Amendment law, 2021 to further amend the Companies (Indian Accounting Standards) Rules,2015. The highlights and key discussions of the notification are as follows:

Rule 3 amendment: A sub-section (1) shall be inserted in Rule 3 which states that the records of account and other relevant records and documents kept in electronic mode will be accessible in India so that the records could be used for subsequent reference. Also, each corporate that uses accounting software to maintain the record of account, should only use accounting software that has a feature of recording the audit trail of each transaction. It must also create an edit log of each move in records of account along with its date ensuring that the audit trail cannot be disabled. An audit log is a sequential record that gives evidence of the recorded history of financial transactions to its source. An auditor can investigate the financial data of a specific transaction right from the general ledger to its source record with the help of the audit log.

Rule 8[ii] Amendment: Two more clauses shall be inserted in sub-section(5) of rule 8. The sub-section(5) of rule 8 states that in addition to the information and details specified in sub-section(4), the report of the Board must also contain the details relating to deposits accepted or remained unpaid or unclaimed as at the end of the year. It also states that if there has been any default in payment of deposits or interest or the details of deposits are not in compliance with the requirements of Chapter V of the Act, which is discussed below

• The details of important orders passed by the regulators or courts impacting the status and operations of the company in the future.
• Details of fitness of internal financial controls regarding the Financial Statements.
• Disclosure of maintenance of cost records as defined by the Central Government.
• Disclosure stating that the company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The new clauses added in sub-section(5) are discussed below,

• The details of the application drafted or some proceedings pending under the Insolvency and Bankruptcy Code during the year. Also, their status as at the end of the financial year must be mentioned.
• The details of the difference between the amount of the valuation done at the time of settlement and while taking a loan from the Banks or other Financial Institutions along with the valid reasons.

The above-discussed amendments are directed at facilitating a higher level of corporate governance amongst companies with extra tools for the regulators to ensure closer diligence on the financial transaction of a Company. The amendments have also mandated meaningful disclosures in the financial statements of the Company which would have an impact on the documents and all the stakeholders of the Company. The reforms are expected to improve internal controls as each change would be logged as a fresh transaction, preventing manipulation of the original transaction at a later date.

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