1.6 Query
Disclosure of the corresponding figures for the immediately preceding financial year in the current year’s annual accounts
1.A Company changes the corresponding figures related to the previous year in the current year’s financial statements to make them comparable, wherever there is a change in the accounting policy or in the manner of presentation of any item.
2.A general note is included in the ‘Explanatory Notes to the Balance Sheet and Profit and Loss Account’ that previous year’s figures have been regrouped to make them comparable with the current year’s figures wherever necessary. This has been objected to by the auditors of the company on the ground that the previous year’s figures were duly approved by the Board of Directors and audited.
3.In this context, the querist has drawn the attention of the Expert Advisory Committee to a circular issued by the Company Law Board the relevant extract of which is reproduced below:
“As far as possible, in every balance sheet prepared in accordance with the Schedule VI of the Companies Act, the corresponding figures for the immediately preceding financial year for all the items in the balance sheet and the profit and loss account shall be given. However, if the company finds it difficult to give the corresponding figures for the immediately preceding year for each of the items shown in the balance sheet and profit and loss account, Government would deem it sufficient compliance of the provision of section 211(1) and (2) if the corresponding figure is given for each ‘Group Lead’ as a whole (with a suitable explanatory note) instead of for each item, as indicated in the illustration contained in the specified table.
……………………………….. While displaying the figures for the previous year care should, however, be taken to ensure that all the items in the audited balance sheet and the profit and loss account are fully incorporated in the current year’s balance sheet and profit and loss account as corresponding figures for the previous year.
The intention of displaying the figures relating to the previous year is to facilitate the comparative study of the items in the balance sheet and the profit and loss account, so that the significance of the figures for the current year can be more readily appreciated and understood…….”
4.The opinion of the Expert Advisory Committee has been sought as to whether the company can change the previous year’s figures in the current year’s annual accounts to make them comparable.
Opinion December 27,1983
1.The Committee notes that Note (n) to Part I of Schedule VI to the Companies Act, 1956 requires that “ except in the case of the first balance sheet laid before the company after the commencement of the Act, the corresponding amounts for the immediately preceding financial year for all items shown in the balance sheet shall also be given in the balance sheet….”
2.The Committee is of the opinion that it is permissible to change the previous year’s figures in the current year’s annual accounts where such a change is due to regrouping of various items to facilitate comparison, provided, an appropriate disclosure thereof is made in the accounts. However, where a change in the accounting policy affects the very basis of computation of the amount of the concerned item (e.g. a change in the basis of valuation of inventories) then, recomputation and disclosure of the previous year’s figures in accordance with the new accounting policy would not be permissible. A change in the accounting policy should be disclosed as suggested in the following para of Accounting Standard 1 ‘Disclosure of Accounting Policies’, issued by the Institute of Chartered Accountants of India.
“26. Any change in the accounting policies which has a material effect in the current period or which is reasonably expected to have a material effect in later periods should be disclosed. In the case of a change in accounting policies which has a material effect in the current period, the amount by which any item in the financial statements is affected by such change should also be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact should be indicated”.
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