Listed companies consolidated account statements made mandatory

SEBI has proposed making it mandatory for listed companies with significant half- yearly variation in profit, revenue and assets to prepare consolidated accounts instead of standalone results. All companies irrespective of the extent of change will also be asked to publish cash flow statements along with balance sheet.

The regulator on Tuesday said the half-yearly disclosures will be made mandatory in case of over 20% variation in key parameters when compared with the previous annual audited accounts.

"This is a welcome move from a market perspective, as investors would otherwise have limited visibility on the performance of unlisted subsidiaries until the year end," said N Venkatram, managing partner- audit, Deloitte Haskins & Sells. Sebi has also made it compulsory for listed companies to publish their cash flow statement half yearly together with the six-month financial statement.

"Standalone financial statements do not reveal the true picture," said Dolphy D'Souza, senior partner, SR Batliboi & Co. "In many cases, it has been observed that the standalone financial statements may show a rosy picture, though the group may actually be in a big problem. In the case of infrastructure companies, standalone financial statements may be meaningless as actual infrastructure activities are carried out through numerous subsidiaries."

 

The regulator said it was revising Clause 41 of the listing agreement to align its rules to the new Companies Bill and has invited public comments on its discussion paper before September 13. "If the company publishes consolidated financial information, this disclosure would also be on a consolidated basis," Venkatram said.

 

Sebi also said foreign subsidiaries forming part of the consolidated financial statement would have to be audited. The move is aimed to ensure that overall at least 80% of the group is audited.