Background:
ICAI has noted in numerous instances that financial reporting disclosures does not align with statutory requirements or fails to provide stakeholders with a clear depiction. Below are some identified shortcomings in reporting practices with respect to Disclosure Requirements, with the intention of aiding preparers and presenters in recognizing and enhancing commonly observed pitfalls:
Shortcomings: Shareholder Pattern and Disclosure Requirement”
| S. No. | Observation(s) | Remarks |
| 1 | It was observed that in case of some company’s promoters are holding shares in the company but the disclosure about shareholding pattern is missing | As per general instructions for preparation of balance sheet given in Schedule III of the Companies Act, 2013 A company is required to disclose the shareholding pattern of the promoters with the following information. Refer Table Below: Share held by promoter at year end % change Sr. No Name No of share % total shares Total |
| 2 | It was observed that in some companies, stakeholder information is missing. Further Shareholding of the shareholders holding more than 5% of share were not found. | As per Schedule III of Companies Act 2013, Number of shares held by each shareholder holding more than 5 percent shares in the company needs to be disclosed. Also, such shareholding pattern need to be disclosed on the website of the company as per Regulation 46 of SEBI Listing (Obligations and Disclosure Requirements) Regulations 2015 |
| 3 | It was observed that in many cases following ratios were not disclosed like Gross Profit ratio, Price earnings ratio, Trade payable ratio, trade receivable ratio, Debt equity ratio, return on capital employed | Ratio Analysis reveal insights regarding profitability, liquidity, operational efficiency and solvency. An entity must disclose mandatory ratio of Schedule III and CARO 2020 along with other ratios like Gross profit ratio, Price Earnings Ratio, EBIDTA, Debt Equity Ratio, Return on Capital Employed. |
| 4 | It was observed in some companies did not provide the formulae of ratios or the formulas given are incorrect. | The entity should disclose the following along with ratios: 1-Description of formulae, and 2-Reasons for variations in comparative analysis should be provided wherever change is more than 25%. |
| SW Remarks: Companies must adhere to the statutory requirements mentioned above and use the correct terminologies and disclosure requirements. |
Umang Mittal, Audit Associate, SW
