First Notes - 4 September 2018

First Notes - 4 September 2018

ICAI clarifies applicability of disclosure norms relating to Specified Bank Notes (SBNs)



The Ministry of Corporate Affairs (MCA) introduced a disclosure for Specified Bank Notes (SBNs) in the notes to account to balance sheet on 30 March 2017 following demonetisation.

Therefore, Schedule III of the Companies Act, 2013 (2013 Act) was amended[1]. According to the amendment every company is required to disclose, in the notes to account to balance sheet, the details of SBNs[2] held and transacted during the period from 8 November 2016 to 30 December 2016 in the following format:

  SBNs Other denomination notes Total
Closing cash in hand as on
8 November 2016
(+) Permitted receipts      
(-) Permitted payments      
(-) Amount deposited in banks      
Closing cash in hand as on
30 December 2016

Additionally, the auditor’s report had to include the auditor’s views and comments on the following matter:

  • Whether the company had provided requisite disclosures in its financial statements as to holdings as well as dealings in SBNs during the period from 8 November 2016 to 30 December 2016 and if so, whether these are in accordance with the books of accounts maintained by the company (Rule 11(d) of the Companies (Audit and Auditors) Amendment Rules)[3].

The revised disclosures (as given above) have been made applicable to financial statements/auditor’s report issued after 30 March 2017 and which include the period from 8 November 2016 to 30 December 2016.

New development

On 1 September 2018, the Institute of Chartered Accountants of India (ICAI) through an announcement clarified that the above disclosure requirements relating to SBNs (in the notes to account as well as in the auditor’s report) are not applicable for the Financial Year (FY) 2017-18 and subsequent years. Accordingly, consequent disclosures may be given in the financial statements/auditor’s reports.

The announcement is on the basis of the decision taken by the Corporate Laws and Corporate Governance Committee of ICAI (the committee) at its forty-first meeting held on 6 June 2018. The committee considered that the disclosure requirement was event specific. Additionally, the required disclosures were for the period falling under FY2016-17 (i.e. 8 November 2016 to 30 December 2016), therefore, these were relevant for FY2016-17 only.

Our comments

Many companies have finalised their financial results for the FY2017-18 and have pointed out that requirement relating to SBN is not relevant for the FY2017-18. Nonetheless, the clarification from ICAI is a welcome step and avoids a disclosure that is no longer relevant.

(1MCA notification no. G.S.R. 308(E) dated 30 March 2017.

2For the purpose of this disclosure, the term ‘SBN’ should have the same meaning as provided in the notification S.O. 3407(E) of the Ministry of Finance, dated 8 November 2016. The notification defines SBN as ‘bank notes of denominations of the existing series of the value of INR500 and INR1,000’.

3MCA notification no. G.S.R. 307(E) dated 30 March 2017.)

To access the text of the ICAI announcement, please click here.

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