The Hindu Business Line : For investor-friendly annual reports — Govt may ease disclosure norms for subsidiary cos

COMPANIES having subsidiaries may get some breather with the Ministry of Company Affairs (MCA) proposing to ease the existing provisions for holding companies to make accounts of their subsidiaries available to the public along with the annual report. This would be in keeping with the MCA's decision to make the corporate annual reports more investor friendly.

The Government had earlier made it mandatory for companies to disclose accounts of their subsidiaries. India Inc has been drawing attention of MCA towards the problems faced by them, particularly to foreign subsidiaries with regard to the applicability of the Section 212 of the Companies Act.

As per the Section, the balance sheet, profit and loss account and reports of directors and auditors of subsidiary companies has to be attached to the balance sheet of the holding company. Further, it has to be prepared in accordance with the requirements of the Companies Act.

According to MCA sources, "The Government is willing to look into the demand of the corporate sector. The intent is to make the entire process less burdensome for the companies. In fact, the Government has been granting exemptions to holding companies which have been submitting a consolidated balance-sheet on the conditions that when directed the companies would submit details of the subsidiaries."

According to industry sources, however, in practice, barring a few cases, by and large foreign subsidiaries are not preparing their accounts as per the requirements prescribed under the Act or disclosing figures in Indian rupee. Besides, the Union Government, on the basis of applications made by different companies, has granted exemption from publishing results in accordance with the provisions of the Indian Company Law, they argued.

Talking to Business Line, a Federation of Indian Chambers of Commerce and Industry (FICCI) official said, "The exemption order states that the accounts for the foreign subsidiaries would be prepared as per the law of the country in which the companies are incorporated and attached to the accounts. The accounts would also represent INR equivalent of figures in foreign currency in the accounts of the foreign subsidiaries so attached."

In fact, corporates have been facing difficulties while preparing the accounts and reports of the foreign subsidiary as per the requirements of Indian Company law, FICCI official said, adding that "besides entailing additional costs and time in preparing the accounts as overseas auditors in certain countries may not be well equipped with Indian audit systems as per our GAAP and converting accounts into Indian GAAP would not add any significant value."

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For investor-friendly annual reports — Govt may ease disclosure norms for subsidiary cos