The provisions pertaining to company accounting are covered in Chapter IX of the Companies Act, 2013 (CA 2013), which is comprised of Sections 128 through 128. According to Section 133 of CA 2013, the Central Government may specify accounting standards.
The Ministry of Corporate Affairs (MCA) has announced Section 133 of the Companies Act, 2013 in Notification No. S.O. 2754(E), which was published on September 12, 2013, among other dates. The start date of section 133 is September 12, 2013; hence this notification will be effective as of that date.
According to section 2(2), “accounting standards” refers to the accounting standards or any addenda thereto for the types of businesses mentioned in section 133. Previously, section 211(3C) of the Companies Act of 1956 defined “accounting standards,” but this section has since been repealed by the Ministry of Corporate Affairs (MCA) by Circular No. 16/2013, dated September 18, 2013. In accordance with Notification No. S.O. 2754(E) dated September 12, 2013, a new section 133 of the Companies Act, 2013, which contains provisions for the Central Government to impose accounting standards, entered into force.
The Institute of Chartered Accountants of India (ICAI), in consultation with and after examination of the recommendations made by the National Financial Reporting Authority (NFRA), may recommend the standards of accounting or any addendum thereto, as per the provisions of section 133, to the Central Government (CG).
The CG must use the authority granted to it by Section 132 to create the NFRA. However, the commencement of this Section has not yet been announced. In accordance with Rule 7(2) of the Companies (Accounts) Rules 2014, the CG may prescribe the accounting standards as recommended by the CA Institute in consultation with and after examination of the recommendations made by the National Advisory Committee on Accounting Standards (NACAS), which was established under Section 210A of the Companies Act, 1956, until the NFRA is established under Section 132.
Furthermore, the Companies (Accounts) Second Amendment Rules, 2015, as published in G.S.R. 680 (E), dated September 7, 2015, have added a new clause (da). This additional section states that “Indian Accounting Standards” refers to the Indian Accounting Standards mentioned in Rule 3 and Annexure to the Companies (Indian Accounting Standards) Rules, 2015.
As a result, the CG, in collaboration with NACAS, created the Companies (Indian Accounting Standards) Rules, 2015 in order to carry out the authority granted by Section 133 read with Section 469 of the Companies Act, 2013, and Subsection (1) of Section 210A of the Companies Act, 1956.
On April 1st, 2015, the Companies (Ind AS) Rules, 2015 went into effect. Now, the Accounting Standards are defined as the standards of accounting or any addenda thereto for firms or classes of companies as indicated in rule 3 in clause (a) of sub-rule (1) of Rule 2 of the Companies (Ind AS) Rules, 2015. You must read the accounting standards that are included in the Firms (Ind AS) Rules, 2015 Annexure. These standards are referred to as Indian Accounting Standards (Ind AS), and they are relevant to the classes of companies that are listed there.
Section 133 of the Companies Act of 2013 states that the central government shall establish accounting standards.
According to Notification No. S.O. 2754(E) dated September 12, 2013, Section 133 will go into effect.
In consultation with and following examination of the recommendations made by the National Financial Reporting Authority, the Central Government may prescribe the standards of accounting or any addendum thereto as recommended by the Institute of Chartered Accountants of India, established under section 3 of the Chartered Accountants Act, 1949.
Case laws-
· In Bharat Sanchar Nigam Ltd. vs Pawan Kumar Gupta, civil appeal no(s). 1085 of 2008, supreme court states that Reliance is placed upon the Accounting Standards and Corporate Accounting, referred to supra, and the clarification given in the said extracts, to contend that the actionable claim/ current assets includes the inventories and trade receivables and the said principle is applicable to the appellant-company, being a registered company under the provisions of the Companies Act. Section 133 of the Companies Act, 2013 which provides that the Central Government would prescribe accounting standards and Section 3(8) of the General Clauses Act, which relevant provision is extracted hereinabove, have been relied upon to substantiate the contention that the appellant-company is an agency or instrumentality of the Central Government as it is being financed and controlled by the Central Government, and therefore, the benefit accrued in favour of the DoT of the Central Government under Article 112 of the Limitation Act would stand extended to the appellant-company, it being an instrumentality of the Central Government for the reason that 100% share capital of the company is owned in the name of the President of India, and therefore, it partakes the character of Central Government. It is urged that this aspect of the matter has not been properly examined and considered by the courts below while rendering the impugned judgments and decrees.
References-
- https://www.aubsp.com/section-133-cg-prescribed-accounting-standards/
- Companies act 2013
- Dr. Avtar Singh, “Company Law”, 7 th Edition (2016), Eastern Book Company Publications.
- N. D. Kapoor, “Elements of Company Law”, 30 th Edition (2016), Sultan Chand & Sons. Publications.
Aishwarya Says:
Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.
IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.
We do conduct several Courses, Quizs and Webinars, Click here to register
Do follow me on Facebook, Twitter Youtube and Instagram.
The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.
If you would also like to contribute to my website, then do share your articles or poems at secondinnings.hr@gmail.com
In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories
Join our Whatsapp group for Legal Job Openings