SEBI has decided to overhaul the way companies report their financial results and audit observation with a view to improve disclosure, reduce compliance cost and bring in consistency for listed companies.
The changes are proposed to be carried out through amendments in Clause-41 of the Equity Listing Agreement that deals with the framework for preparation, authentication and submission of financial results by listed companies.
The new proposals, which have been decided according to suggestions of SEBI’s Committee on Disclosures and Accounting Standards include mandatory disclosure of half-yearly consolidated results in case of 20 per cent or more variation in revenue, assets, liabilities, profits or losses.
Moreover, all listed companies will be required to submit their consolidated financial results in accordance with the notified accounting standard (Indian GAAP).
Companies would also have to mandatorily disclose the book value of their shares and provide cash flow statements every six months, while detailed disclosure needs to be made for discontinued operations along with the financial results.
To replace different reporting formats (such as lakh, millions, etc) that create confusion, SEBI has proposed mandatory reporting all figures in financial statements in ‘Rs crore’ till two decimal points. In the discussion paper, SEBI also said that the reporting format for all finance companies have been suitably modified so that both banking and non-banking finance companies can use the same format for their results.
According to J.N.Gupta, Founder, proxy advisory firm SES and former Executive Director SEBI, “Overall these proposals are going to bring in more transparency, standardisation and mark a step forward to plug loopholes while reminding the companies of their duty to their shareholders to give full disclosure in a timely and transparent manner.”