Ch # 10.

Accounts and Annual Return Page 117

CH # 10 ACCOUNTS AND ANNUAL RETURN

ACCOUNTS

Books of Accounts to be kept by a Company

Book and paper / Book or Paper

Includes books of account, cost accounting records, deeds, vouchers, writings, documents,
minutes and registers maintained on paper or in electronic form.

Books of Accounts
Include records maintained in respect of
 all sums of money received and expended by a company and matters in relation to which
the receipts and expenditure take place;
 all sales and purchases of goods and services by the company;
 all assets and liabilities of the company; and
 items of cost in respect of production, processing, manufacturing or mining activities;

 A company must maintain proper books of accounts

(which fairly present the state of the affairs of the company and a fair record of all its
transactions)
 For companies engaged in production, processing, manufacturing or mining, specified
particulars of cost accounts (material/labour or other inputs) shall also be maintained
 Books and records may be in the form of hardcopy books or any computerized system
 Books of accounts for at least 10 years must be preserved
 Liquidator of company appointed for winding up of company is also required to maintain
the above books during its winding up.

Keeping the books

 Books must be kept at registered office of the company

 Directors may opt to keep these books at some other place
(Pass a resolution in directors meeting and intimate registrar within 7 days of that)
 If company has a branch office
- Proper books of that branch may be maintained at branch
- Proper summarized returns should reach registered office or other specified place
periodically.

Inspection of books of accounts by Directors

 Directors are entitled to inspect books during business hours.

 If some financial information is maintained outside country
- Copies shall be maintained and shall be make available for inspection by any director.
- Employees shall give full assistance to director for inspection
Ch # 10. Accounts and Annual Return Page 118

Inspection of books of accounts by Members

Members do not have absolute right to inspect books of accounts. However, Companies Act
2017, or directors or general meeting may authorize member(s) to inspect books of accounts.

Presentation of Financial Statements

Financial Statements
 Statement of financial position as at the end of the period;
 Statement of profit or loss and other comprehensive income
(or an income and expenditure statement in case of not for profit);
 Statement of changes in equity for the period;
 Statement of cash flows for the period;
 Notes, comprising a summary of significant accounting policies and other explanatory
information;
 Comparative information in respect of the preceding period; and
 Any other statement as may be prescribed;

Financial year
In relation to a company or any other body corporate, means the period in respect of which
any financial statement of the company or the body corporate, as the case may be, laid before
it in general meeting, is made up, whether that period is a year or not.

Time Limit

 Once in every calendar year, directors are required to present the financial statements, in a
general meeting of company, within 120 days of close of financial year
(not applicable to Single Member Companies)
 In case of first accounts of the company, it shall be presented in a general meeting within
16 months of date of incorporation
 Company can apply for 30 days extension in presenting accounts
- Listed company shall apply to SECP
- Other companies apply to registrar
 Company should not prepare accounts for more than12 months
(On application of company the registrar may extend this period)

Audit of financial statements

 Such accounts shall be audited and the auditor’s report shall accompany the accounts.
 The requirement of audit is not applicable to a private company having paid up capital not
exceeding Rupees 1 million or such higher amount as may be notified by SECP
 Ch # 10. Accounts and Annual Return Page 119

Sending copies of financial statements (before AGM)

 Copy of these financial statements along with auditor’s and directors’ report (+ chairman’s
review report; for listed) shall be sent to every member at least 21 days before meeting
[Link] members  A listed company shall dispatch at least 3 copies of these documents to SECP, registrar and
2. SECP, registrar and Stock
Stock exchange simultaneously with sending these to members.
exchange

3. electronically to SECP
 A copy of these documents should also be filed electronically to SECP by listed company
4. keep at registered office  Company shall also retain a copy at its registered office and every member shall be allowed
5. upload Report at website
to inspect such copy
 Reports shall be made available on website of company for time period as may be specified

Authentication of Financial Statements

 Directors authenticate financial statements in meeting by passing resolution.

 Members only receive accounts and can ask any questions in AGM.
By directors → resolution

Members → ask questions only  Chief executive and at least 1 director put their signatures on it.
CEO n 1 director → signs
(For listed companies CFO shall also sign the financial statements)
listed co. → also CFO

CEO → abroad→ 2 directors  If chief executive is out of Pakistan at the time of signing, then at least 2 directors shall sign
Priv. co. → paid up capital upto

1 mill. → affidavit
the financial statements
SMC → 1 director signs.  For private company having paid up capital up to Rs. 1 Million, financial statements shall
be accompanied by an affidavit by Chief Executive (if accounts signed by him) or by any
director (if accounts have been signed by 2 directors), that the financial statements have
been approved by the board
 Financial statements of a SMC shall be signed by 1 director.

Chief financial officer (CFO)

Means an individual appointed to perform such functions and duties as are customarily
performed by a CFO

Filing of Accounts (after AGM)

Send Approved copy → to registrar Approved
listed → within 30 days  Companies shall send 1 copy of its financial statements (adopted in AGM along with other
others → 15 days

priv. co. → no filling → if paid up

required reports & documents), signed as per the requirements of act, to registrar within
capital < 10 M - 30 days of AGM, in case of listed companies
F/S disapproved → tell registrar
- 15 days of AGM, in case of other companies.
 If general meeting does not adopt these accounts and reports, the fact shall be mentioned
to registrar along with such copies Approve
 This filing requirement shall not apply to a private company having paid up capital not
exceeding Rs. 10 million or such higher amount as may be notified by SECP
 Ch # 10. Accounts and Annual Return Page 120

QUARTERLY ACCOUNTS OF LISTED COMPANIES

 Every listed company shall prepare quarterly financial statements within the period of-
- 30 days of the close of 1st and 3rd quarters of its year of accounts; and
- 60 days of the close of 2nd quarter of its year of accounts:
If the company had a
 SECP may, on application by company, extend the period of filing 1 st quarter accounts for a late AGM approval last

period not exceeding 30 days (if company was allowed extension in previous year AGM) year (because SECP

allowed extension),

listed co. → 1st n 3rd quarter→ 30 then it becomes

days  Half yearly accounts (i.e. 2nd

Quarter) shall be subject to limited scope review by auditors of eligible for getting an

2nd → 60 days

1st quarter → 30 days extension

company in such manner, term and conditions as may be determined by ICAP and extension this year for

filing first quarter

max. approved by SECP. accounts.
2nd quarter → limited scope review

post → website → for members

electronically → SECP, SE n  Quarterly financial statements shall be

registrar

physically→requested→members→
- Posted on company’s website for information of its members
no fee (for such time as may be specified by SECP)
- Transmitted electronically to SECP, securities exchange and registrar within 30/60 days
- Dispatched in physical form, if so requested by any member, without any fee

 Requirements of approval & authentication of final accounts are also applicable to the
quarterly accounts Even though quarterly accounts are prepared for 3 months (not full year), they

still must be approved by the authorized people (like Board of Directors), and

properly signed/authenticated in the same legal/official way as annual accounts.

ANNUAL RETURN

 It is an overview of general information about company as on a specific date, giving details

of company’s officers, auditors, registered office address, members and share capital.
 Company having a share capital (Form A) and companies not having share capital (Form B)
shall once in each year, prepare and file with registrar an annual return containing Annual Return is a yearly

particulars in a specified form as on the

details →officer, auditor, reg. office
statement filed with the Registrar
address, members, share cap.

- Date of the AGM; or

by a company containing
As on→ AGM date or 31 dec if no
prescribed particulars as on the

- Last day of the calendar year, where no such meeting is held or if held is not concluded
AGM
date of the AGM, or where no
30 days from above date AGM is held or concluded, as on
listed→ may extend 15 days
 Annual return shall be filed with the registrar within 30 days from the above date the last day of the calendar year.

no change from last year → no

new return→listed→ inform (For listed company, registrar may for special reasons extend the period till 15 more days)
registrar→ other→capital upto 3
 All the particulars required to be submitted shall have been previously entered in one or Company jo data submit karti hai
mill→ no inform.

contravention → listed → level 2 more registers kept by the company for the purpose. (like shareholders, directors, etc.)

Woh sab pehle hi registers mein

other→ level 1
 No need to file return in case there is no change of particulars in the last annual return filed likha hota hai, Annual return bas

usi recorded information ko

- Inform the registrar in specified manner that there is no change of particulars (Form C) compile karke submit karta hai

- SMC and private companies having capital up to Rs 3 million need not to inform
 Any contravention of this section shall be an offence liable:
- For listed company, to a penalty of level 2
- For other company, to a penalty of level 1
 Ch # 10. Accounts and Annual Return Page 121

GROUP FINANCIAL STATEMENTS (CONSOLIDATED)

Requirements of Consolidated financial statements (Sec 228)

Holding company must present consolidated financial statements along with its individual financial statements.

 With financial statements of holding company having subsidiary/ subsidiaries at year end;
attach consolidated financial statements of group presented as a single enterprise
 Consolidated financial statements shall comply with disclosure requirement of 4th
Schedule and International Accounting Standards
 Where financial year of a subsidiary precedes holding’s financial year end by more than 90
holding→ attach separate +CFS

CFS→ apply 4th schedule n

IASs
days, such subsidiary shall make an interim closing on holding’s financial year end and
year end differ by 90

days→interim accounts of prepare financial statements for consolidation purposes.

subsidiary required
 Every auditor of holding company shall also report on consolidated financial statements
holding's auditor→ also report

on CFS and exercise all powers and duties of an auditor Consolidated accounts mein disclose

karna hota hai:

subs. auditor→ qualified

opinion→disclose in CFS
 Disclose in the consolidated financial statements:
problems
Agar subsidiary ke auditor ne

sign by → who signed F/S of - Any qualifications contained in auditors’ reports of subsidiary/subsidiaries; and qualification di ho

Ya koi important note / concern diya ho

holding

can exempt subsidiary on

- Any note or saving contained in such accounts to call attention to a significant matter 👉 Reason: user ko poora group risk

pata chale.v

application  Every consolidated financial statement shall be signed by the same persons by whom
contrav ention → lev el 2 penalty

priv. holding+subsidiary ≤ 1
individual financial statements of holding company required to be signed.
million → no consolidation  All provisions of accounts & filling shall apply to these consolidated accounts as well
required
 SECP may (on application of a holding company) direct that in relation to any subsidiary,
provisions of this section shall not apply to such extent as may be specified in the direction.
 Any contravention of this section shall be an offence liable to a penalty of level 2

This section shall not apply to a private company and its subsidiary if both have paid up capital
of not more than Rs 1 million.

Financial year of holding company and subsidiary (Sec 229)

 BOD of a holding Co shall ensure that financial year of each of its subsidiaries coincides
with its own financial year (except where there are good reasons against it)
 SECP may (on application of holding/subsidiary)
- Extend the financial year of any such company
- Grant such other relaxations as may be necessary while granting extension
 Ch # 10. Accounts and Annual Return Page 122
It is basically the directors’ summary explanation of how the company performed during the year and what its future outlook is.

DIRECTORS REPORT
 Board shall prepare a directors’ report for each financial year.
 Not applicable to a private company, not being a subsidiary of public company, having paid
up capital up to Rs. 3 million
 SECP may by general or special order, direct such class or classes of companies to prepare a
statement of compliance with such contents as may be specified.

Contents for every directors report

Directors shall make and attach to the accounts a report containing
 Statements regarding state of affairs of the company
 Particulars of any dividend recommended
 Particulars of any amount transferred/proposed to be transferred to any reserve account.
Additional contents for public company & their subsidiaries
 Names of persons who, at any time during the financial year, were directors of company.
 Any specific changes and commitments affecting the financial position of company,
occurring between financial year end date and the date of report.
 All material changes occurred during financial year which affect
- business of the company; or
- its holding company; or
- any of its subsidiaries; or
- any other company where it has made investments.
 Discuss the reservations, observations qualification etc. or any adverse remarks pointed
out by the auditors.
 State the earnings per shares (EPS) and reasons for incurring loss and also contain the
reasonable indication of future profit if any
 Pattern of shareholding shall also be circulated along with it
 Name and place of incorporation of its holding company
(if such holding company is incorporated outside Pakistan)
 Information regarding default in repayments of loans or interests on loans, if any.
 Remuneration package of each director and CEO (salary, benefits, bonuses, stock options,
pension and other incentives etc)
 Description of principal risks & uncertainties facing the company and shall contain the
comments in respect of adequacy of internal financial controls.
Additional contents for Listed Company (Business review of listed company)
Must at least cover the following:
 Main trends and factors likely to affect the future development, performance and position
of the company’s business;
 Impact of the company’s business on the environment;
 Activities undertaken by company in regard to corporate social responsibility during year;
 Directors’ responsibility in for adequacy of internal financial controls as may be specified
 Reasons for not declaring dividend if earning profits & future prospects of dividend, if any
Director’s Report and statement of compliance must be approved by board and signed by chief
executive officer and a director