Applicability of CARO 2016, IFC Reporting and Ind AS

CARO 2016 applicable to every company including a foreign company as defined in clause (42) of Section 2 of the Companies Act 2013. 

CARO 2016 is not applicable on following companies:

(a) Banking company as defined under Section 5 (c) of the Banking Regulation Act, 1949.

(b) Insurance company as defined under the Insurance Act 1938.

(c) Company licensed to operate under Section 8 of the Companies Act 2013 (companies registered with charitable object).

(d) A one person company (OPC) as defined under clause (62) of Section 2 of Companies Act 2013 (OPC means a company which has only one person as a member).

(e) A small company under Section 2 (85) of the Companies Act, 2013.

(1) As per sec 2(85) of Companies Act 2013 small company means a company, other than a public company:

a) Paid up share capital of which does not exceed Rs. 50 lacs or such higher amount as may be prescribed which shall not be more than Rs. 5 crore, and

b) Turnover of which as per its last profit and loss account does not exceed Rs. 2 crore or such higher amount as may be prescribed which shall not be more than Rs. 20 crore.

(2) The following company shall not qualify as a small company: 

a) A holding company or a subsidiary company.

b) A company registered under Section 8 of the Act.

c) A company or body corporate governed by any special act

 

(f) The auditor of following type of Private Companies are not required to comment on the matter prescribed under CARO 2016:

(1) A private company which is not holding or subsidiary company of a public company, and

(2) A private company having a paid up capital and reserve and surplus not more than Rs. 1 crore as on the balance sheet date, and

(3) A private company which does not have total borrowing exceeding Rs. 1 crore from any bank and financial institution at any point of time during the financial year, and

(4) A private company which does not have total revenue exceeding Rs. 10 crore during the financial year.

B. Reporting on Internal Financial Control (IFC)

As per Sec 143(3)(i) of Companies Act 2013, the report of auditor should state as to whether the company has adequate Internal Financial Control System in place and the operating effectiveness of such controls.

Further, Rule 10A of Companies (Audit & Auditors) Rules 2014 states that:

a) For the financial years commencing on or after 1st April 2015, the report of the auditor should state about existence of adequate Internal financial controls and its operating effectiveness.

b) The auditor of a company may voluntarily include the statement referred to in this rule for the financial year commencing on or after 1st April 2014 and ending on or before 31st March 2015.

As per Notification No. GSR 464 (E) dated 5th June 2015 as amended by Notification No. GSR 583(E) dated 13th June 2016, this requirement shall not apply  to a Private company-

a) which is one person company or a small company

b) which has turnover less than Rs. 50 crores as per latest audited financial statements and which has aggregate borrowings from banks or financial institutions or any body corporate at any point of time during the financial year less than Rs. 25 crores.

C. Applicability of Indian Accounting Standards (Ind AS)

Date of Applicability	Entities covered	Criteria	Comparative Information
1st April 2015	Voluntary application of Ind AS from 1st April 2015 (Not allowed by NBFC, Banking & Insurance companies)	–	31 March 2015 or thereafter
Phase I- 1st April 2016	Any Company (along with its holding, subsidiary , associate & Joint Venture) (excluding NBFC, Insurance Companies and Banking Companies )	If Net Worth is Rs. 500 Crores or above, (whether listed or unlisted). (Net worth is to be checked on 31st March 2014 & onwards).	31 March 2016 or thereafter
Phase II – 1st April 2017	Any Company (along with its holding, subsidiary , associate & Joint Venture) (excluding NBFC, Insurance Companies and Banking Companies )	1. Listed Companies (Requirement of listing is to be checked on 31st March 2017) (Net worth is to be checked on 31st March 2014 & onwards) 2. An unlisted company with net worth of Rs. 250 crores or more.	31 March 2017 or thereafter
1st April 2018	Non Banking Finance Company (NBFC), its subsidiary, associate, Joint venture	Net worth Is Rs. 500 Crores or more (Net worth is to be checked on 31st March 2016 & onwards)	31 March 2018 or thereafter
1st April 2018	Banks (excluding Urban Cooperative banks and Regional Rural Banks) & Insurance Companies	–	31 March 2018 or thereafter
1st April 2019	Non Banking Finance Company (NBFC), its subsidiary, associate, Joint venture	1. Listed NBFCs 2. Unlisted NBFCs, whose Net worth Is less than Rs. 500 Crores, but Rs. 250 Crores or more (Net worth is to be checked on 31st March 2016 & onwards)	31 March 2019 or thereafter

• Any overseas subsidiary, associate, or Joint venture is not required to apply Ind AS.

• If any Indian company is subsidiary of foreign company, then Indian company will apply Ind AS (if applicable). Its foreign parent is not required to apply Ind AS.

• IRDA shall notify the separate set of IND AS for Banks & Insurance Companies with effect from 1st April 2018.

• NBFC includes core investment companies, stock brokers, venture capitalists, etc.

• Listed means – Listed in India or outside India