The Companies Act 1956 comprised no provisions with respect to revision of company's accounts. While the Department of Corporate Affairs had issued circulars regarding reopening and revising annual accounts on technical grounds to meet the requirements of other laws, provided that the revised accounts were adopted at a general meeting and filed with the registrar of companies, although there was no authority that mandated a specific revision procedure.
The Companies Act 2013, however, introduced sections 130 and 131 to cover revising and reopening accounts after the Satyam Computer Service case, in which the court ordered the company to recast its accounts. The committee report on the Act provided that where accounts are revised for specific purposes, companies may revise their financial statements subject to the National Company Law Tribunal's (the Tribunal's) approval. The sections are relevant in order to deal with cases related to mismanagement or fraud, or where the financial statements do not reflect a true and fair view of a company's affairs.
Section 130 provides for compulsory revision of a financial statement by order of a court or the Tribunal, which is based on an application made by a statutory or regulatory authority, such as
- the Income Tax Department of the Central Board for Direct Taxes;
- the Securities and Exchange Board; or
- any other concerned person.
Reopening accounts for up to eight financial years immediately preceding the relevant financial year is permitted unless the company is under investigation.
Section 131 of the Act provides that a company can voluntary revise its financial statements for up to three financial years, where this immediately precedes the financial year in which the application was filed. The directors of a company can revise the financial statement if it appears that the company's financial statement or the board of directors' report does not comply with the provisions of section 129 or section 134. In order to obtain approval, a company must prepare an application for revision of its financial statement in accordance with the requirements set out by the court or the Tribunal. Such a revision can be made only once per financial year. Following the revisions, a disclosure with detailed reasons for revising the financial statement or report must also be provided in the board's report of the relevant financial year (ie, the financial year in which the revision was made).
Prior to passing any order for the revision under the relevant sections, the court or the Tribunal may consider the statements made by the statutory or regulatory authority, or any other concerned person.
While in the past many companies were ordered to reopen and recast their financial statements in cases of oppression, mismanagement and fraud, they may suo moto apply to revise financial statement if there are mistakes in financial statements due to clerical errors or the non-application of appropriate accounting standards.
For further information on this topic please contact Neetika Ahuja or Jatin Oberoi at Clasis Law by telephone (+91 11 4213 0000) or email ([emailprotected] or [emailprotected]). The Clasis Law website can be accessed at www.clasislaw.com.
FAQs
Such a revision can be made only once per financial year. Following the revisions, a disclosure with detailed reasons for revising the financial statement or report must also be provided in the board's report of the relevant financial year (ie, the financial year in which the revision was made).
Can we revise an audited balance sheet? ›
A revision of the audit report may be warranted in several instances involving reasons such as apparent mistakes, wrong information about facts, subsequent discovery of facts existing at the date of the audit report, etc.
What is the difference between a restatement and a revision? ›
A revision is the correction of a reported amount in subsequent financial statements. 2 However, the previously reported financial statement need not be reissued. With a restatement, on the other hand, the error must be material, prompting a revision and the issuance of a corrected financial statement.
How to prepare financial statements as per the Companies Act, 2013? ›
Requirements of Financial Statement (Sec. 129)
- The FS shall be laid in the AGM within six months form the end of the financial year.
- The holding company shall in addition, prepare a Consolidated Financial Statement of the Company along with its all subsidiaries, associates & joint ventures and lay before the AGM.
If you discover an error or omission in a previously submitted Financial Disclosure Statement, you need to file an amendment to correct the issue.
How do I file revised financial statements? ›
The company, after the receipt of an order of Tribunal, can file a revised statement along with the copy of such order to Registrar of Companies, provided that the Company can revise the financial statements of any of the preceding three financial years.
What are the three types of revision? ›
Revision includes three major categories: content, organization, and style. During this stage, ignore grammar and usage mistakes. Make major changes; it is a waste of time to correct grammar and usage before revision. Be willing to admit when a section needs to be rewritten.
Is a revision a correction? ›
To correct something is to change an error and make it right. To revise something is to change or amend it, but not necessarily to correct it.
What counts as revision? ›
Many people think that revision just means reading over your paper and changing a few commas or catching typos, but revision is much bigger than that: it's a way of looking at the “big picture” of your paper and determining how to give it a stronger framework, a more coherent argument, or to reorganize the structure of ...
What is the revised Schedule III of Companies Act, 2013? ›
Latest Amendment in Schedule III of the Companies Act, 2013
- Rounding off figures appears in the financial statements:
- A Company shall disclose the shareholding of the promoters* as below:
- Trade payables due for payment- Ageing is required to be given:
- Trade receivables aging schedule:
In India, Section 129 of the Companies Act, 2013 states that companies must prepare and present their financial statements which provide a 'true and fair view' of the state of affairs of the company.
What is section 143 of the Companies Act, 2013? ›
Section 143(1) of the Act empowers an auditor of a company with the right to access books of accounts and vouchers of the company at all times, whether kept at the registered place of the company or any other place.
Are accounting changes permitted in financial statements? ›
The process of revising previously issued financial statements to reflect the correction of an error in those financial statements. ASC 250 requires entities to report a change in accounting principle through retrospective application of the new principle to all prior periods unless it is impracticable to do so.
How do you correct financial statements? ›
Error Corrections
- Step 1 – Identify an Error. Accounting changes should be distinguished from error corrections. ...
- Step 2 – Assess Materiality of Error. ...
- Step 3 – Report Correction of Error.
Investors and other stakeholders use financial reports to better understand a company's financial position and business performance. When companies have inaccurate financial reports, they are likely to make business decisions that are unfavorable and even detrimental to the company's survival.
Can you change audited financial statements? ›
If the auditors disagree with management's assessment that the going concern assumption is appropriate for the company's financial statements or if adequate disclosure of material uncertainties is not made, then their audit opinion will be modified.
