1.19     Query

Whether a Company can adopt different accounting year for it newly

established plant from the one followed by the company.

1.A Company has established several plants at different places in India. The company’s accounting year ends on 31^st march every year. At present, the annual accounts of each of its units are also closed on 31^st March every year irrespective of the fact that some of the units did not start commercial production from the 1^st April of the previous year.

2.The company recently established another plant, which went into commercial production on 1^st December. The querist has sought the opinion of the Expert Advisory Committee on the following:

(i)         Is it necessary for the company to close the accounts of its newly established unit on 31^st March? Or can that unit have a separate accounting year from 1^st December to 30^th November, next year?

(ii)        If the company can adopt a separate accounting year for the newly established plant, in what manner the accounting transactions of that plant should be reflected in the consolidated profit and loss account and balance sheet as on 31^st March.

                                               Opinion                                                               September 27, 1983

1. The Committee notes that under Sections 210 and 211 of the Companies Act, 1956, a company cannot have more than one profit and loss and balance sheet for a particular ‘financial year’ adopted by the company as per the provisions of the Act. Consequently, the profit and loss account and the balance sheet must reflect the result of the transactions during that period. The Committee is therefore of the view that a company cannot have different accounting years for its different units from the point of view of the Companies Act, even though adoption of different accounting years may be permissible, e.g., for Income-tax purposes.

2.On the basis of the above, the Committee’s opinion on the issues raised by the querist is as below:

(i)         The company should close the accounts of its newly established unit on 31^st March to bring it in line with the financial year of the company.

(ii)        In view of the reply to the first issue given in (i) above, the question of replying to the second issue does not arise.

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