FAQ on Accounting for amounts to be incurred towards CSR pursuant to the Companies (CSR Policy) Amendment Rules, 2021

Last updated: 11 May 2021

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The Institute of Chartered Accountants of India has issued an FAQ to clarify accounting for Corporate Social Responsibility (CSR) expenses following the Companies (CSR Policy) Amendment Rules, 2021. These rules mandate companies to spend 2% of their average net profits on CSR activities or transfer unspent amounts to specific accounts within set deadlines. The FAQ explains how these amendments affect accounting practices, particularly concerning the recognition of CSR expenditure and liabilities for unspent amounts.

Frequently Asked Question on Accounting for amounts to be incurred towards Corporate Social Responsibility (CSR) pursuant to the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 This FAQ has been issued by the Accounting Standards Board of the Institute of Chartered Accountants of India. Question: On January 22, 2021, the Ministry of Corporate Affairs notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021. Pursuant to the amendment rul

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FAQ :

These rules, notified on January 22, 2021, require companies to spend a minimum of 2% of their average net profits on CSR activities or manage unspent amounts according to specific guidelines.

Companies are required to spend at least two percent of the average net profits made during the three immediately preceding financial years on CSR activities.

Unspent amounts for ongoing projects must be transferred to a special 'Unspent CSR Account' within 30 days of the financial year-end. These funds must be used within three financial years, after which any remaining balance is transferred to a Schedule VII Fund.

Unspent amounts not related to ongoing projects must be transferred to funds specified in Schedule VII, such as the Clean Ganga Fund or PMNRF, within six months of the financial year-end.

CSR expenditure is recognised as an expense when incurred on CSR activities. A liability is recognised for the 'unspent amount' at the end of the financial year, whether it relates to ongoing projects or not.

This FAQ has been issued by the Accounting Standards Board of the Institute of Chartered Accountants of India.

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