Small and medium firms may have trouble meeting the tighter norms for disclosing financial results put out by the Indian capital market regulator Securities and Exchange Board of India (Sebi), accounting experts said. However, according to them, these changes mark a progressive move.
The amended disclosure norms require companies to more quickly and accurately declare financial results at the end of each quarter and year.
Previously, companies had two months to declare results to the stock exchanges; now they will have one. Also, companies only had to explain changes to their unaudited reports if there was a 20% difference in the figures. Now they will have to explain if there is a 10% or Rs10 lakh difference, whichever is higher.
“They are not prepared (for this), barring the blue-chip companies,” said Rajesh Sethi, audit partner at New Delhi-based tax and audit firm JC Bhalla & Co.
More specifically, the guidelines give the option to listed companies of declaring unaudited or audited quarterly and yearly financial results within one month, and if the unaudited choice is taken, then it must be followed up with an auditor review.
Neeta Phatarphekar, senior manager at audit and advisory firm PricewaterhouseCoopers Pvt. Ltd, said most companies would choose to do audited results after the first month.
Accounting experts said larger companies have already been declaring results within a month of the ending of the financial period and working diligently to ensure that unaudited results are the final figures.
Many companies today have computerized processes that will help them meet the new requirements if they don’t already do so. But other companies will have to work to tighten procedures. To lose a month’s time and the “elbow room” of being able to explain larger differences in figures will require better accounting practices.
Milind Sarwate, till recently chief financial officer at Marico Ltd, said the new norms would change nothing for the top 200-plus companies. However, “this will hit those companies who were misusing the system”.
While Sebi made the changes mostly to help investors, experts said the changes would also help the companies as they are simpler and will improve discipline.
“It is for their own good,” Sethi said. “If (you are) still on last year’s accounts, (you) can’t concentrate on the current year accounts,” he added.