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Analysis on Discussion paper on Revision of Clause 41 of Equity Listing Agreement

Nirmal Shah 
on 20 September 2013


The SCODA committee (SEBI Committee on Disclosures and Accounting Standards) reviewed Clause-41 of the Equity Listing Agreement and given some recommendations. These recommendations were open for public comments till September 13, 2013.

Following are the comments on this discussion paper which are put here for general public reference only which may be useful.

1) Accounting Standards (ASs) are notified in Companies Act 1956 and Section 133 is notified in Companies act, 2013 but Accounting Standards (ASs) are yet to be notified, the company should prepare financial statements as per notified AS. Proposed Para 41- I (a) is requires some modification and the same is suggest to read as “The Financial Results filed and published in compliance with this clause shall be prepared in conformity with Indian GAAP and notified Accounting Standards instead of only “ shall be prepared on the basis of accrual accounting policy and in accordance with uniform accounting practices adopted for all the periods”

2) Clarification is required under Proposed Para 41- I c(i) & (ii), that in case a company desires to submit unaudited results for the last quarter, then the same should be submitted within 45 days of the end of the last quarter.

3) Under Proposed Para 41-I (d), the fourth quarter is called as “fourth quarter (balancing figures). It would be more appropriate to term as “unaudited “ since it is a balancing figure between the Audited results for the entire year reduced by the published figures upto the third quarter.

4) More clarity is required in the proposed Para 41-I (e) (i) & (ii)

a) Whether the suggested comparison should be made between six monthly results with last annual audited financial statements which will normally be for 12 months or 50% of last annual audited financial statements.

b) What should be done for the 2nd Six month (in cases where the thresh hold is met in the 2nd Six month) where a company extends its accounts beyond 12 months and the threshold limit of 20% is not met in first 6 months and since YTD figures is also required to be given as per the format prescribed and both the figures (SIX months and YTD) have to undergo limited review/Audit. Further, the earlier six months will not be available since the same was not required to be published in the above situation.

c) It is also suggested that SEBI may clarify / consider prescribing separate formats for consolidation since quarterly results publishing is not mandatory.

5) In proposed Clause 41 I (e) iv, more clarification is required to arrive at the figures of 80%. As the company requires the financials of all the subsidiaries / joint ventures to be consolidated and if all the financials are available, the company would automatically consolidate the same. Hence the 80% threshold may be restricted to only Turnover and that too based on management accounts as per the respective GAAPs. If no financials are available for consolidation, the same should be disclosed with a suitable note. In the same note, the last audited / unaudited figures for fixed Assets, Net Worth, Profit (loss), Current / Non current Assets / Liabilities may be given. The format for the same must be prescribed for standardisation.

6) In proposed Clause 41(IV) (h), if there are any changes in the accounting policies during the year, the impact of the same on the prior quarters of the year, included in the current quarter results, should be disclosed separately by way of a note to the financial results of the current quarter without restating the previously published figures. It is suggested that disclosures under this clause should be made only when the quantum is material.

7) Under proposed Para Clause 41 (V) (g), it is suggested that and the results are published in crores only without any decimals when Sales/ Revenue is above Rs 100 crores. Further, it is suggested that all other data which is uploaded / submitted after board meeting should be in same format.

8) Comments to proposed Result Format Annexure 1:

a. Other income should be shown after Total income from operations. After other income one more total can be inserted to disclose the total revenue generated.

b. Depreciation and amortisation line items should be removed from total expenses and should be shown separately similar to finance cost to arrive at the EBIDTA.

c. The format requires Book value per share to be disclosed. It is suggested that if at all companies are required to disclose the book value, SEBI should provide the definition of “Book Value” in the listing agreement to maintain uniformity.

9) Comments to proposed Result Format Annexure III :

a. These are a requirement to show segment finance cost as a separate line item. Similarly, provision should be made to show Interest / finance income as separate line items.

b. In statement of assets and liabilities, “Cash and Cash equivalent “should read as “Cash and bank balances” as clarified in Guidance note on Revised Schedule VI.

10) Comments to proposed Result Format Annexure IX :

a. The cash flow format has to specify whether the cash flow details for the second six months should be prepared on a cumulative basis i.e. for the year or only for second half. The format will require modification accordingly.

11) General Suggestions: Where consolidated results are being published, standalone results need not be published.

By: Nirmal Shah -

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