{"id":909,"date":"2022-04-05T09:30:22","date_gmt":"2022-04-05T09:30:22","guid":{"rendered":"http:\/\/www.rnm.in\/blog\/?p=909"},"modified":"2025-01-30T10:55:42","modified_gmt":"2025-01-30T10:55:42","slug":"a-summary-accounting-standards","status":"publish","type":"post","link":"https:\/\/www.rnm.in\/blog\/a-summary-accounting-standards\/","title":{"rendered":"A summary of a few clauses in CARO, 2020 and consequential amendment in Schedule III, issued by ICAI \ufeff"},"content":{"rendered":"\r\n

In February 2020, MCA notified the new CARO 2020, thereby, replacing the erstwhile CARO 2016. The new CARO 2020 has introduced a number of new or modified reporting requirements to be fulfilled by the auditors such as revaluation of property, plant, and equipment (including the right of use assets) or intangible assets, Benami property, working capital limits on basis of security of current assets, granting loans or advances in the nature of loans which are either repayable on demand or without specifying any terms or period of repayment, undisclosed income, company declared as wilful defaulter, material uncertainty in meeting liabilities, CSR activities.<\/p>\r\n\r\n\r\n\r\n

Further, the Ministry of Corporate Affairs (MCA) has amended Schedule III of the Companies Act 2013 on 24th\u00a0March 2021 with an objective to increase transparency, provide additional disclosures to users of financial statements, and assist the management of companies to provide various disclosures pertaining to new clauses of CARO 2020.<\/p>\r\n\r\n\r\n\r\n

In order to fulfill the requirements and expectations, as sought via such amendments, it is suggested to read CARO 2020 in conjunction with the corresponding amendments made in Schedule III to the Companies Act, 2013 for presentation and disclosure requirements stated therein and perform the audit procedures accordingly.<\/p>\r\n\r\n\r\n\r\n

Keeping in view the above requirement on part of the auditor, Guidance Note on the Companies (Auditor’s Report) Order, 2020 had already been issued by ICAI providing detailed guidance on various clauses of CARO 2020 and various issues and intricacies involved therein. However, pursuant to the amendment in Schedule III, a comprehensive revision of the Guidance Note on CARO 2020 is being initiated by ICAI.<\/p>\r\n\r\n\r\n\r\n

Whereas, a summary related to some of the clauses in CARO 2020 and consequential amendments to Schedule III to the Companies Act, 2013 has been provided by way of Annexure.<\/p>\r\n\r\n\r\n\r\n

ANNEXURE<\/strong><\/p>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Sr. No<\/strong><\/td>\r\nSummary of reporting requirements under CARO 2020<\/strong><\/td>\r\nSummary of disclosures requirements under Schedule III to the Companies Act, 2013<\/strong><\/td>\r\nRemarks<\/strong><\/td>\r\n<\/tr>\r\n
1<\/td>\r\nWhether the title deeds of all the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in the financial statements are held in the name of the company. If not, provide prescribed details [Clause 3(i)(c)]<\/td>\r\nDisclosure of details of title deeds of immovable properties (excluding leased properties) not held in the name of the company in the prescribed format.Disclose the company\u2019s share – if jointly held<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
2<\/td>\r\nWhether the company has revalued its property, plant and equipment (PPE) (including the right of use assets) or intangible assets or both during the year, If so, whether the revaluation is based on the valuation by a registered valuer; specify the amount of change, if the change is 10% or more in the aggregate of the net carrying value of each class of PPE or intangible assets [Clause 3(i)(d)]<\/td>\r\nDisclosure\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 regarding revaluation of PPE\/ intangible assets: Amount of change due to revaluation (if a change is 10% or more in the aggregate of the net carrying value of each class of PPE\/ intangible assets)Whether revaluation is based on a valuation by a registered\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 valuer defined under the Companies Act, 2013<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Sr. No<\/strong><\/td>\r\nSummary of reporting requirements under CARO 2020<\/strong><\/td>\r\nSummary of disclosures requirements under Schedule III to the Companies Act, 2013<\/strong><\/td>\r\nRemarks<\/strong><\/td>\r\n<\/tr>\r\n
3<\/td>\r\nWhether any proceedings have been initiated\/ pending against the company for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 and rules made thereunder, If so, whether the company has appropriately disclosed the details in its financial statements. [Clause 3(i)(e)]<\/td>\r\nDisclosure prescribed for proceeding\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 initiated\/ pending for holding any Benami property e.g.: Details of such property and the amount thereof entails of beneficiaries property is in the books, then reference to the item in balance sheet property is not in the books, then the fact with reasons details of proceedings nature of proceedings, the status of same and Company\u2019s view<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
4<\/td>\r\nWhether during any point time of the year, the company has been sanctioned working capital limits in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security of current assets; whether the quarterly returns or statements filed by the company with such banks or financial institutions are in<\/td>\r\nIn case of borrowings from banks or financial institutions on the basis of security of current assets, disclose whether quarterly returns\/ statements of current assets filed with banks or financial institutions agree with books of accounts, If not, adequately disclose<\/td>\r\nCARO\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2020 prescribes reporting relating to sanctioned working capital limits in excess of five crore rupees, in aggregate. However, disclosure requirements<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Sr. No<\/strong><\/td>\r\nSummary of reporting requirements under CARO 2020<\/strong><\/td>\r\nSummary of disclosures requirements under Schedule III to the Companies Act, 2013<\/strong><\/td>\r\nRemarks<\/strong><\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nagreement with the books of account of the Company, if not, give details; [Clause 3(ii)(b)]<\/td>\r\nsummary of reconciliation and reasons of material discrepancies<\/td>\r\nunder Schedule III to the Companies Act, 2013 are not limited to working capital\u00a0\u00a0 but\u00a0\u00a0 cover all\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 borrowings. Further,\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 no monetary threshold\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 has been\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 prescribed under Schedule III to the Companies Act,\u00a0\u00a0\u00a0 2013\u00a0\u00a0\u00a0 while making this disclosure.<\/td>\r\n<\/tr>\r\n
5<\/td>\r\nWhether the company has granted any loans or advances in the nature of loans either repayable on demand or without specifying any terms or period of repayment, if so, specify the aggregate amount, percentage thereof to the total loans granted, the aggregate amount of loans granted to Promoters, related parties as defined in section 2(76) of the Companies Act, 2013 [Clause 3(iii)(f)]<\/td>\r\nDisclosure to be provided in a prescribed format where loans\/ advances in the nature of loans are granted to promoters, directors, key managerial personnel and related parties, either severally or jointly with any other person, that is: Repayable on demand or without specifying any terms or repayment period<\/td>\r\nCARO \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2020 additionally requires a percentage of loans granted. Further, in Schedule III to the Companies\u00a0 \u00a0Act, 2013, loans and advances given to promoters, directors, KMP and other related parties are considered, whereas in CARO 2020, if loans and advances are given to other than related parties,<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Sr. No<\/strong><\/td>\r\nSummary of reporting requirements under CARO 2020<\/strong><\/td>\r\nSummary of disclosures requirements under Schedule III to the Companies Act, 2013<\/strong><\/td>\r\nRemarks<\/strong><\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\n\u00a0<\/td>\r\n\u00a0<\/td>\r\nthese are also to be included.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 So, reporting requirements in CARO\u00a0\u00a0\u00a0\u00a0\u00a0 2020\u00a0\u00a0\u00a0\u00a0 are wider as compared to Schedule III to the Companies\u00a0 \u00a0Act, 2013.<\/td>\r\n<\/tr>\r\n
6<\/td>\r\nWhether any transactions not recorded in the books of account have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961, if so, whether the previously unrecorded income has been properly recorded in the books of account during the year [Clause 3(viii)]<\/td>\r\nDetails of transaction not recorded in the books of accounts that have been surrendered\/ disclosed as income during the year in the tax assessments (e.g. search), unless there is immunity for disclosure under the schemeDisclose whether the previously unrecorded income and related assets have been properly recorded in the books of account during the year<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
7<\/td>\r\nWhether\u00a0\u00a0 the\u00a0\u00a0 company\u00a0\u00a0 is\u00a0\u00a0 a declared wilful defaulter by any<\/td>\r\nDisclose the following\u00a0\u00a0 if\u00a0\u00a0 the company\u00a0\u00a0 is declared<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Sr. No<\/strong><\/td>\r\nSummary of reporting requirements under CARO 2020<\/strong><\/td>\r\nSummary of disclosures requirements under Schedule III to the Companies Act, 2013<\/strong><\/td>\r\nRemarks<\/strong><\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nbank or financial institution or other lenders [Clause 3(ix)(b)]<\/td>\r\nwilful defaulter by any bank\/ financial institution \/ other lenders: Date of declaration as wilful defaulterDetails of defaults (amount and nature of defaults)<\/td>\r\n\u00a0<\/td>\r\n<\/tr>\r\n
8<\/td>\r\nWhether term loans were applied for the purpose for which the loans were obtained; if not, the amount of loan so diverted and the purpose for which it is used may be reported [Clause 3(ix)(c)]<\/td>\r\nWhere borrowings from banks and financial institutions are not used for the specific purpose for which it was taken at the balance sheet date \u2013 the company to disclose details of where they have been used<\/td>\r\nCARO\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2020 prescribes reporting on term loans from any party.\u00a0\u00a0\u00a0\u00a0 However, disclosures under Schedule III to the Companies\u00a0\u00a0\u00a0\u00a0\u00a0 Act, 2013\u00a0\u00a0\u00a0\u00a0 are not limited to term loans but cover all borrowings. Further, disclosures under Schedule III to the Companies\u00a0\u00a0\u00a0\u00a0\u00a0 Act, 2013\u00a0\u00a0 have been prescribed only for borrowings from banks and financial institutions.<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Sr. No<\/strong><\/td>\r\nSummary of reporting requirements under CARO 2020<\/strong><\/td>\r\nSummary of disclosures requirements under Schedule III to the Companies Act, 2013<\/strong><\/td>\r\nRemarks<\/strong><\/td>\r\n<\/tr>\r\n
9<\/td>\r\nOn the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financial statements, the auditor\u2019s knowledge of the Board of Directors and management plans, whether the auditor is of the opinion that no material uncertainty exists as on the date of the audit report that company is capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date [Clause 3(xix)]<\/td>\r\nDisclosure of certain ratios including current ratio, debt-equity ratio, debt service coverage ratio, capital to risk-weighted assets ratio Explain items included in numerator and denominatorExplain any change in the ratio by more than 25% as compared to previous year<\/td>\r\nCARO\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2020 requires\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 the auditor\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 to comment\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 on material uncertainty\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 in payment\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of liabilities on basis of\u00a0\u00a0\u00a0\u00a0\u00a0 the\u00a0\u00a0\u00a0 financial ratios\u00a0\u00a0 and\u00a0\u00a0 other prescribed matters. However, Schedule III to the Companies\u00a0\u00a0\u00a0\u00a0\u00a0 Act, 2013\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 requires disclosure\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 of certain ratios.<\/td>\r\n<\/tr>\r\n
10<\/td>\r\nWhether, in respect of other than ongoing projects, the company has transferred unspent amount to a Fund specified in Schedule VII to the Companies Act, 2013 within a period of six months<\/td>\r\nDetails of CSR activities including amount required to be spent, amount of expenditure incurred, shortfall, total of previous years shortfall, reason for shortfall, nature of CSR<\/td>\r\nCARO\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2020 requires\u00a0\u00a0 reporting of\u00a0\u00a0 unspent\u00a0\u00a0 CSR amount. However, disclosures prescribed\u00a0\u00a0\u00a0 under Schedule III to the<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
Sr. No<\/strong><\/td>\r\nSummary of reporting requirements under CARO 2020<\/strong><\/td>\r\nSummary of disclosures requirements under Schedule III to the Companies Act, 2013<\/strong><\/td>\r\nRemarks<\/strong><\/td>\r\n<\/tr>\r\n
\u00a0<\/td>\r\nof the expiry of the financial year in compliance with second proviso to section 135(5) of the Companies Act, 2013 [Clause 3(xx)(a)] Whether any amount remaining unspent under section 135(5) of the Companies Act, 2013, pursuant to any ongoing project, has been transferred to special account in compliance with the provision of section 135(6) of the Companies Act, 2013 [Clause 3(xx)(b)]<\/td>\r\nactivities, details of related party\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 transactions, movements in provision made with respect to liability incurred by entering into a contractual obligation<\/td>\r\nCompanies\u00a0\u00a0\u00a0\u00a0\u00a0 Act, 2013 are wider as compared\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 to reporting requirements under\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 CARO 2020.<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n","protected":false},"excerpt":{"rendered":"

In February 2020, MCA notified the new CARO 2020, thereby, replacing the erstwhile CARO 2016. The new CARO 2020 has introduced a number of new or modified reporting requirements to be fulfilled by the auditors such as revaluation of property, plant, and equipment (including the right of use assets) or intangible assets, Benami property, working capital limits on basis of […]<\/p>\n","protected":false},"author":3,"featured_media":910,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[14,4],"tags":[81,88],"class_list":["post-909","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","category-industry","tag-accounting-standard","tag-indian-accounting-standards"],"yoast_head":"\nCARO 2020: Enhanced Reporting Requirements<\/title>\n<meta name=\"description\" content=\"Stay updated: MCA's CARO 2020 replaces 2016 version. Auditors face new reporting obligations on revaluation, loans, CSR, undisclosed income, and more.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.rnm.in\/blog\/a-summary-accounting-standards\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CARO 2020: Enhanced Reporting Requirements\" \/>\n<meta property=\"og:description\" content=\"Stay updated: MCA's CARO 2020 replaces 2016 version. 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